1,200,000 Shares of Common Stock
of
XxxxXxxxxxx.xxx, Inc.
UNDERWRITING AGREEMENT
New York, New York
October , 1999
First Madison Securities, Inc.
Xxxxxxx/Xxxxxx Associates, L.P.
Westphalia Investments, Inc. and
EBI Securities Corporation
as Representatives of the Several Underwriters
c/o First Madison Securities, Inc.
000 Xxxx 00xx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
XxxxXxxxxxx.xxx, Inc., a Delaware corporation (the "Company"), confirms its
agreement with the underwriters named on Schedule A hereto for whom First
Madison Securities, Inc.("FMS"), Xxxxxxx/Xxxxxx Associates, L.P. ("JMA"),
Westpahlia
Investments, Inc. ("WP") and EBI Securities Corporation ("EBISC") are acting as
representatives (FMS, JMA, WP and EBISC are sometimes hereinafter referred to as
the "Representatives" and each individually as a "Representative") with respect
to the sale by the Company and the purchase by the Underwriters individually and
not severally, of the amount of shares set forth on Schedule A (an aggregate of
1,200,000 shares of the Company's common stock, par value $.002 per share
("Common Stock") and with respect to the grant by the Company to FMS
individually, and not as Representative, the option described in Section 2(b)
hereof to purchase all or any part of 180,000 additional shares for the purpose
of covering over-allotments, if any. The aforesaid 1,200,000 shares of Common
Stock (the "Firm Securities") and together with all or any part of the 180,000
additional shares of Common Stock subject to the overallotment option described
in Section 2(b) hereof (the "Overallotment Securities") are hereinafter
collectively referred to as the "Securities". The Company also proposes to
issue and sell to the Underwriters, an option (the "Underwriters' Purchase
Option") pursuant to the Underwriters' Purchase Option Agreement (the
"Underwriters' Purchase Option Agreement") for the purchase of an aggregate
of 120,000 additional shares of Common Stock (the "Underwriters' Option
Shares"). The Securities, the Underwriters' Purchase Option Agreement and
Underwriters' Option Shares are more fully described in the Registration
Statement (as defined in Subsection 1(a) hereof) and the Prospectus (as
defined in Subsection 1(a) hereof) referred to below. Unless the context
otherwise requires, all references to the "Company" shall include all
presently existing subsidiaries and any entities acquired by the Company on or
prior to the Closing Date (defined in Subsection 2(c) hereof). All
representations, warranties and opinions of counsel required hereunder shall
cover any such subsidiaries and acquired entities taken as a whole.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriter as of the date hereof,
and as of the Closing Date and any Overallotment Closing Date (as defined in
Subsection 2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, and an amendment or amendments thereto,
on Form SB-2 (No. 333- ) including any related preliminary prospectus (each
a "Preliminary Prospectus"), for the registration of the Securities under the
Securities Act of 1933, as amended (the "Act"), which registration statement and
any amendment or amendments have been prepared by the Company in conformity with
the requirements of the Act and the rules and regulations of the Commission
under the Act. Following execution of this Agreement, the Company will
promptly file (i) if the Registration Statement has been declared effective
by the Commission, (A) a Term Sheet (as defined in the Rules and Regulations
(as hereinafter defined)) pursuant to Rule 434 under the Act or (B) a
Prospectus under Rules 430A and/or 424(b) under the Act, in either case in
form satisfactory to the Underwriter or (ii) in the event the registration
statement has not been declared effective, a further amendment to
said registration statement in the form heretofore delivered to the Underwriter
and will not, before the registration statement becomes effective, file any
other amendment thereto unless the Underwriter shall have consented thereto
after having been furnished with a copy thereof. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective
(including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430A of the Rules and Regulations)
(as hereinafter defined), is hereinafter called the "Registration Statement"
and the form of prospectus in the form first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations, is hereinafter called
the "Prospectus." For purposes hereof, "Rules and Regulations" mean the rules
and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable.
(b) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Preliminary Prospectus, the
Registration Statement or Prospectus or any part thereof and no proceedings for
a stop order have been instituted or are pending or, to the best knowledge of
the Company, threatened. Each of the Preliminary Prospectus, the Registration
Statement and the Prospectus at the time of filing thereof conformed in all
material respects with the requirements of the Act and the Rules and
Regulations, and neither the Preliminary Prospectus, the Registration
Statement nor the Prospectus at the time of filing thereof, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein and necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
except that this representation and warranty does not apply to statements
made or statements omitted in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriter by or on
behalf of the Underwriter expressly for use in such Preliminary Prospectus,
Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date and each Overallotment Closing Date
(as hereinafter defined) and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Underwriter or a
dealer, the Registration Statement and the Prospectus will contain all material
statements which are required to be stated therein in compliance with the Act
and the Rules and Regulations, and will in all material respects conform to the
requirements of the Act and the Rules and Regulations; neither the Registration
Statement, nor any amendment thereto, at the time the Registration Statement or
such amendment is declared effective under the Act, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, not misleading, and
the Prospectus at the time the Registration Statement becomes effective, at the
Closing Date and at any Overallotment Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information supplied to the Company in writing by
or on behalf of the Underwriter expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is now, and at the Closing Date
and any Overallotment Closing Date will be, validly existing as a corporation in
good standing under the laws of the State of Delaware. The Company does not own,
directly or indirectly, an interest in any corporation, partnership, trust,
joint venture or other business entity; provided, that the foregoing shall
not be applicable to the investment of the net proceeds from the sale of the
Securities in short-term, low-risk investments as set forth under "Use of
Proceeds" in the Prospectus except to the extent that any failure of the
Company to comply with the foregoing does not have a material adverse effect
on the Company. The Company is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which its ownership
or leasing of its properties or the character of its operations require such
qualification to do business, except where the failure to so qualify would
not have a material adverse effect on the Company. The Company has all
requisite power and authority (corporate and other),
and has obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus except where
the failure to comply would not have a material adverse effect upon the Company;
the Company is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, state, local and foreign laws, rules and regulations
except where the failure to comply would not have a material adverse effect
upon the Company; and the Company has not received any notice of proceedings
relating to the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit which, singly or
in the aggregate, if the subject of an unfavorable decision ruling or
finding, would materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operation of the Company. The
disclosures, if any, in the Registration Statement concerning the effects of
federal, state, local, and foreign laws, rules and regulations on the
Company's business as currently conducted and as contemplated are correct in
all material respects and do not omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and will have the adjusted capitalization set forth therein on the Closing Date,
based upon the assumptions set forth therein, and the Company is not a party to
or bound by any instrument, agreement or other arrangement providing for the
Company to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as otherwise described in the
Prospectus. The Securities, the Underwriters' Purchase Option and the
Underwriters' Option Shares and all other securities issued or issuable by the
Company conform or, when issued and paid for, will conform in all respects to
all statements with respect thereto contained in the Registration Statement
and the Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company, or similar
contractual rights granted by the Company to subscribe for or purchase
securities. The Securities, the Underwriters' Purchase Option and the
Underwriters' Option Shares to be issued and sold by the
Company hereunder, and upon payment therefor, are not and will not be subject to
any preemptive or other similar rights of any stockholder to subscribe for or
purchase securities, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof and thereof, will be validly
issued, fully paid and non-assessable and will conform to the descriptions
thereof contained in the Prospectus; the holders thereof will not be subject to
any liability solely as such holders; all corporate action required to be taken
for the authorization, issuance and sale of the Securities, the Underwriters'
Purchase Option and the Underwriters' Option Shares has been duly and validly
taken; and the certificates, if any, representing the Securities and the
Underwriters' Option Shares will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof of the Securities to be sold to the
Underwriter by the Company hereunder, the Underwriter will acquire good and
marketable title to such Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever.
(f) The financial statements of the Company, together with the related
notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a prospective
change in the condition, financial or otherwise, or in the earnings, business
affairs, position, prospects, value, operation, properties, business, or results
of operation of the Company, whether or not arising in the ordinary course of
business, since the dates of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company,
conform in all material respects to the descriptions thereof contained in the
Registration Statement and in the Prospectus.
(g) Simon Xxxxxxx Xxxxx & Associates, whose report is filed with the
Commission as a part of the Registration Statement, is an independent certified
public accountant as required by the Act and the Rules and Regulations.
(h) The Company (i) has paid all federal, state, local, and foreign taxes
for which it is liable, including, but not limited to, withholding taxes and
taxes payable under Chapters 21 through 24 of the Internal Revenue Code of 1986
(the "Code"), (ii) has furnished all tax and information returns it is required
to furnish pursuant to the Code, and has established adequate reserves for such
taxes which are not due and payable, and (iii) does not have knowledge of any
tax deficiency or claims outstanding, proposed or assessed against it.
(i) The Company maintains insurance, which is in full force and effect, of
the types and in the amounts which it reasonably believes to be adequate for its
business, including, but not limited to, personal injury and product liability
insurance covering all personal and real property owned or leased by the Company
against fire, theft, damage and all risks customarily issued against.
(j) Except as disclosed in the Prospectus, there is no action, suit,
proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or to the knowledge of the
Company threatened against (or circumstances that may give rise to the same), or
involving the properties or business of the Company which: (i) questions the
validity of the capital stock of the Company or this Agreement or of any action
taken or to be taken by the Company pursuant to or in connection with this
Agreement; (ii) is required to be disclosed in the Registration Statement which
is not so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects); or (iii) might materially
affect the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and authority to enter into
this Agreement, the
Underwriters' Purchase Option Agreement, the Consulting Agreement (as described
in Section 4(x) hereof) and to consummate the transactions provided for in such
agreements; and this Agreement, the Underwriters' Purchase Option Agreement and
the Consulting Agreement have each been duly authorized, executed and delivered
by the Company. Each of this Agreement, the Underwriters' Purchase Option
Agreement and the Consulting Agreement, constitutes a legally valid and binding
agreement of the Company, subject to due authorization, execution and delivery
by the Underwriter, enforceable against the Company in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law). Neither the
Company's execution or delivery of this Agreement, the Underwriters' Purchase
Option Agreement, or the Consulting Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, nor the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto,
conflicts with or will conflict with or results or will result in any
material breach or violation of any of the terms or provisions of, or
constitutes or will constitute a material default under, or result in the
creation or imposition of any material lien, charge, claim, encumbrance,
pledge, security interest defect or other restriction
or equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of: (i) the
Certificate of Incorporation or By-Laws of the Company; (ii) any material
license, contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(l) No consent, approval, authorization or order of, and no filing with,
any court, regulatory body, government agency or other body, domestic or
foreign, is required for the performance by the Company of this Agreement and
the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' purchase and distribution of
the Firm Securities and Overallotment Securities to be sold by the Company
hereunder; or (ii) the issuance and delivery of the Underwriters' Purchase
Option or the Underwriters' Option Shares.
(m) All executed agreements or copies of executed agreements (whether
electronically scanned or otherwise) filed as exhibits to the Registration
Statement to which the Company is a party or by which the Company may be bound
or to which any of its assets, properties or businesses may be subject have been
duly and validly authorized, executed and delivered by the Company, and
constitute legally valid and binding agreements of the Company, enforceable
against it in accordance with their respective terms, except to the extent there
is no material adverse effect upon the Company. The descriptions contained in
the Registration Statement of contracts and other documents are accurate in all
material respects and fairly present the information required to be shown with
respect thereto by the Rules and Regulations and there are no material contracts
or other documents which are required by the Act or the Rules and Regulations to
be described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
exhibits which have been filed are materially or substantially complete and
correct copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set forth
in the Registration Statement and Prospectus, and except as may otherwise be
indicated or contemplated herein or therein, the Company has not: (i) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money in any material amount; (ii) entered into any transaction other
than in the ordinary course of business; (iii) declared or paid any dividend or
made any other distribution on or in respect of its capital stock; or (iv) made
any changes in capital stock, material changes in debt (long or short term) or
liabilities other than in the ordinary course of business; or (v) made any
material changes in or affecting the general affairs, management, financial
operations, stockholders equity or results of operations of the Company.
(o) No default exists in the due performance and observance of any material
term, covenant or condition of any license, contract, indenture, mortgage,
installment sales agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which any of
the Company may be bound or to which any of its property or assets (tangible
or intangible) of the Company is subject or affected except where such
default does not, and will not, have a material adverse effect upon the Company.
(p) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance in all material respects
with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours.
(q) Since its inception, the Company has not incurred any liability arising
under or as a result of the application of the provisions of the Act.
(r) Except as disclosed in the Prospectus, the Company does not presently
maintain, sponsor or contribute to, and never has maintained, sponsored or
contributed to, any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan " or a "multiemployer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37) respectively of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans").
Except as disclosed in the Prospectus, the Company does not maintain or
contribute, now or at any time previously, to a defined benefit plan, as defined
in Section 3(35) of ERISA.
(s) The Company is not in violation in any material respect of any domestic
or foreign laws, ordinances or governmental rules or regulations to which it is
subject.
(t) Except for the persons included in the Registration Statement as
Selling Security Holders, no holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the
Company or to require the Company to file a registration statement under the
Act.
(u) Neither the Company, nor, to the Company's best knowledge after due
inquiry, any of its employees, directors, stockholders or affiliates (within the
meaning of the Rules and Regulations) has taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(v) Except as described in the Prospectus, none of the patents, patent
applications, trademarks, service marks, trade names and copyrights, or licenses
and rights to the foregoing presently owned or held by the Company is in dispute
or are in any conflict with the right of any other person or entity within the
Company's current area of operations nor has the Company received notice of any
of the foregoing. The Company to its knowledge: (i) owns or has the right to
use, free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be
conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing; and (ii) except as set forth in the
Prospectus, is not obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner or licensee of,
or other claimant to, any patent, trademark, service xxxx trade name,
copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or
otherwise.
(w) The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all the material trade secrets,
trademarks, know-how (including unpatented and/or unpatentable proprietary
and confidential information) technical data and information ("Intellectual
Property") material to its operations.
(x) The Company has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property owned or leased by
it free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind whatsoever,
other than liens for taxes or assessments not yet due and payable.
(y) On or before the effective date of the Registration Statement, the
Company shall cause to be duly executed legally binding and enforceable
agreements pursuant to which each of the Company's officers and directors and
shareholders has agreed to be bound by the lock up[ and right of first refusal
of FMS as may be described in the Registration Statement. The Company will cause
its Transfer Agent, as defined below, to xxxx an appropriate legend, acceptable
in form to FMS and its counsel, on the face of stock certificates representing
all of such shares of Common Stock.
(z) The Company has not incurred any liability and there are no
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or any other
arrangements, agreements, understandings, payments or issuances with respect to
the Company or any of its officers, directors, employees or affiliates that may
adversely affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers,
Inc. ("NASD").
(a) The Firm Securities have been approved for quotation on the Over the
Counter bulletin Board or Nasdaq SmallCap Market of the Nasdaq Stock Market,
Inc. (as set forth in the Registration Statement) subject to official notice of
issuance.
(aa) Neither the Company nor any of its respective officers, employees,
agents or any other person acting on behalf of the Company, has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person
to any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have
had a materially adverse effect on the assets, business or operations of the
Company; and (c) if not continued in the future, might adversely affect the
assets, business, operations or prospects of the Company. The Company's
internal accounting controls are sufficient to cause the Company to comply
with the Foreign Corrupt Practices Act of 1977, as amended.
(bb) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any such
person or entity or the Company, has or has had, either directly or indirectly,
(i) a material interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, except with respect to the beneficial ownership
of not more than 1% of the outstanding shares of capital stock of any publicly-
held entity; or (ii) a beneficial interest in any material contract or agreement
to which the Company is a party or by which it may be bound or affected. Except
as set forth in the Prospectus under "Certain Transactions", there are no
existing agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, or principal stockholder of the Company, or
any affiliate or associate of any such person or entity.
(cc) Any certificate signed by any officer of the Company and delivered to
the Underwriter or to the Underwriters' counsel shall be deemed a representation
and warranty by the Company to the Underwriter as to the matters covered
thereby.
(dd) The Company has entered into an employment agreement with and has
obtained the life insurance policies on the lives of officers as described in
the Prospectus.
(ee) No securities of the Company have been sold by the Company
since its inception, except as disclosed in Part II of the Registration
Statement.
(ff) The minute books of the Company have been made available to
Underwriters' counsel and contain a complete summary of all meetings and actions
of the Board of Directors and Stockholders of the Company since its inception.
(gg) No officer, or director or to the Company's knowledge stockholder of
the Company has any affiliation or association with any member of the NASD.
2. Purchase, Sale and Delivery of the Securities and Agreement to Issue
Underwriters' Purchase Option.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriter, and the Underwriter agrees
to purchase from the Company, at the price per Security set forth below, the
Firm Securities.
(b) In addition, on the basis of the representations, warranties, covenants
and agreements, herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriter to purchase up
to an additional 180,000 shares of Common Stock. The option granted hereby will
expire 45 days after the date of this Agreement, and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the Firm
Securities upon notice by the Underwriter to the Company setting forth the
number of Overallotment Securities as to which the Underwriter is then
exercising the option and the time and date of payment and delivery for such
Overallotment
Securities. Any such time and date of delivery shall be determined by the
Underwriter, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as defined
in paragraph (c) below, unless otherwise agreed to between the Underwriter and
the Company. Nothing herein contained shall obligate the Underwriter to make any
over-allotments. No Overallotment Securities shall be delivered unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates for,
the Firm Securities shall be made at the offices of the Underwriter at 000 Xxxx
00xx Xxxxxx 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such other place as shall
be designated by the Underwriter. Such delivery and payment shall be made at
10:00 a.m. (New York City time) on ** __, 1999 or at such other time and date
as shall be designated by the Underwriter but not less than three (3) nor more
than five (5) business days after the effective date of the Registration
Statement (such time and date of payment and delivery being hereafter called
"Closing Date"). In addition, in the event that any or all of the Overallotment
Securities are purchased by the Underwriter, payment of the purchase price for,
and delivery of certificates for such Overallotment Securities shall be made at
the above-mentioned office or at such other place and at such time (such time
and date of payment and delivery being hereinafter called "Overallotment Closing
Date") as shall be agreed upon by the Underwriter and the Company on each
Overallotment Closing Date as specified in the notice from the Underwriter to
the Company. Delivery of the certificates for the Firm Securities and the
Overallotment Securities, if any, shall be made to the Underwriter against
payment by the Underwriter of the purchase price for the Firm Securities and the
Overallotment Securities, if any, to the order of the Company as the case may be
by certified check in New York Clearing House funds, certificates for the Firm
Securities and the Overallotment Securities, if any, shall be in definitive,
fully registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriter may request in
writing at least two (2) business days prior to Closing Date or the relevant
Overallotment Closing Date, as the case may be. The certificates for the Firm
Securities and the Overallotment Securities, if any, shall be made available to
the Underwriter at the above-mentioned office or such other place as the
Underwriter may designate for inspection, checking and packaging no later than
9:30 a.m. on the last business day prior to Closing Date or the relevant
Overallotment Closing Date, as the case may be.
The purchase price of the Securities to be paid by each of the
Underwriters, severally and not jointly, to the Company for the Securities
purchased under Clauses (a) and (b) above will be 90 % of the price paid by the
public as indicated on the front page of the Prospectus or $** per Share (which
price is net of the Underwriters' discount and commissions). The Company shall
not be obligated to sell any Securities hereunder unless all Firm Securities to
be sold by the Company are purchased hereunder. The Company agrees to issue and
sell the Securities to the several Underwriters in accordance Schedule A hereto.
(d) On the Closing Date, the Company shall issue and sell to FMS and its
designees, the Underwriters' Purchase Option at a purchase price of $120.00
which Underwriters' Purchase Option shall entitle the holders thereof to
purchase an aggregate of 120,000 shares of Common Stock. The Underwriters'
Purchase Option shall be exercisable for a period of four (4) years
commencing one (1) year from the effective date of the Registration Statement
at an initial exercise price equal to one hundred twenty percent (120%) of
the initial public offering price of the Firm securities. The Underwriters'
Purchase Option Agreement and form of Purchase Option Certificate shall be
substantially in the form filed as an Exhibit to the Registration Statement.
Payment for the Underwriters' Purchase Option shall be made on the Closing
Date. The Company has reserved and shall continue to reserve a sufficient
number of Shares for issuance upon exercise of the Underwriters' Purchase
Option.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Representatives deem advisable, but in no
event more than five (5) business days after such effective date, the
Underwriters shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus and otherwise in compliance with the Rules and
Regulations. The Representatives may allow such concessions and discounts upon
sales to other dealers as set forth in the Prospectus. The Representatives may
from time to time increase or decrease the public offering price after
distribution of the Securities has been completed to such extent as the
Representatives, in their sole discretion, deems advisable.
4. Covenants of the Company. The Company covenants and agrees with the
Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Exchange Act
within 25 days after the Closing Date except for Form 8-A or any amendment
thereto: (i) before termination of the offering of the Securities by the
Underwriters which the Representatives shall not previously have been advised
and furnished with a copy; or (ii) to which the Underwriter shall have
objected; or (iii) which is not in compliance with the Act, the Exchange Act
or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representatives and confirm by notice in writing: (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective;
(ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening of any proceeding, suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution or proceeding for that
purpose; (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of the
Securities for offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose; (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every
reasonable effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Underwriter
pursuant to Rule 424(b)(4)) not later than the Commission's close of
business on the earlier of
(i) the second business day following the execution and delivery of this
Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Representatives (and their counsel) notice
of its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish each Representative with copies of any such amendment or supplement
a reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file any such prospectus to which the Representatives or
Xxxxx X. Xxxxxxx, Esq. ("Representatives' counsel"), shall reasonably object.
(e) The Company shall cooperate in good faith with the Representatives, and
Representatives' counsel, at or prior to the time the Registration Statement
becomes effective, in endeavoring to qualify the Securities for offering and
sale under the securities laws of such jurisdictions as the Representatives may
reasonably designate, and shall making of such applications, and filing such
documents and shall furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representatives agree that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required
by the laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be delivered under
the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Representatives' counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will notify the Underwriter
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act, each such amendment or
supplement to be reasonably satisfactory to Underwriters' counsel, and the
Company will furnish to the Underwriters a reasonable number of copies of
such amendment or supplement.
(g) As soon as practicable, but in any event not later than 45 days after
the end of the 12-month period commencing on the day after the end of the fiscal
quarter of the Company during which the effective date of the Registration
Statement occurs (90 days in the event that the end of such fiscal quarter is
the end of the Company's fiscal year), the Company shall make generally
available to its security holders, in the manner specified in Rule 158(b) of
the Rules and Regulations, and to the Underwriter , an earnings statement
which will be in such form and detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the
effective date of the Registration Statement.
(h) During a period of five (5) years after the date hereof and provided
that the Company is required to file reports with the Commission under Section
12 of the Exchange Act, the Company will furnish to its stockholders, as soon as
practicable, annual reports (including financial statements audited by
independent public accountants), and will deliver to each Representative:
(i) as soon as they are available, copies of all reports (financial or
other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any securities
exchange;
(iii) every press release and every material news item or article of
interest to the financial community in respect of the Company and any future
subsidiaries or their affairs which was released or prepared by the Company;
(iv) any additional information of a public nature concerning the Company
and any future subsidiaries or their respective businesses which the Underwriter
may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4 received or
filed by the Company from time to time.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and
will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) For as long as the Company is required to file reports with the
Commission under Section 12 of the Exchange Act, the Company will maintain a
Transfer Agent for its Common Stock.
(j) The Company will furnish to each Representative or pursuant to any
Representative's direction, without charge, at such place as any Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as any Representative or Underwriter
may reasonably request.
(k) Neither the Company, nor its officers or directors, nor affiliates of
any of them (within the meaning of the Rules and Regulations) will take,
directly or indirectly, any action designed to, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation
of the price of any securities of the Company except as may be permitted
under the Exchange Act.
(l) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth under the
caption "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used directly or indirectly to acquire any securities issued by the Company.
(m) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall furnish to the Representatives as early as
practicable prior to each of the date hereof, the Closing Date and each
Overallotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as
stated in their letters to be furnished pursuant to Section 6(k) hereof.
(o) For a period of five (5) years from the Closing Date, the Company shall
furnish to the Representative at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Securities upon the
Representatives'request; (ii) a list of holders of Securities upon the
Representatives' request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Representatives'
request.
(p) Until a date which is five (5) years from the Closing Date shall use
its best efforts to cause one (1) individual selected by FMS to be elected to
the Board of Directors of the Company (the "Board"), if requested by FMS and
provided such individual is reasonably acceptable to and approved by the
Company. FMS'nominee, if elected, shall receive the same compensation as the
other non-employee members of the Board. Alternatively, FMS shall be entitled
to appoint an individual who shall be permitted to attend all meetings of the
Board and to receive all notices and other correspondence and communications
sent by the Company to members of the Board, and copies of all minutes
thereof. The Company shall reimburse FMS' designee for his or her out-of-
pocket expenses reasonably incurred and authorized in advance by the Company
in connection with his or her attendance of the Board meetings. To the extent
permitted by law, the Company agrees to indemnify and hold the designee (as
a director or observer) and FMS
harmless against any and all claims, actions, awards and judgements arising out
of his or her service as a director or an observer and the Company shall
maintain a liability insurance policy in an amount of not less than
$1,000,000 affording coverage for the action of its officer and directors, to
include such designee and FMS as an insured under such policy. FMS' nominee
shall, if a member of the Board, be a member of the Audit Committee of the
Board. FMS' nominee or designee, as the case may be, shall agree not to
disclose any non-public information and shall, if requested by the Company,
execute and deliver a non- disclosure agreement upon terms reasonably
acceptable to the Company. The Company reserves the right not to provide
information and to exclude such FMS' attendee from any
meeting or portion thereof if attendance at such meeting by such attendee would
compromise or adversely affect the attorney-client privilege between the Company
and its counsel, or would, in the good faith judgment of the Board, result in
conflict of interest situation. The Company shall use its reasonable efforts to
promptly bring to the attention of such attendee any agenda item that, in the
good faith judgment of the Board, would result in any trade secret, privileged
matter or conflict of interest arising during such meeting and the Board may
exclude such attendee (or alternatively, the attendee shall be entitled to
exclude himself or herself) from any deliberation or discussion of the Board
concerning such trade secret (if the observer has not executed a confidentiality
agreement), privileged matter or dissemination of such information. If such
observer in his or her good faith believes that an item to be discussed shall
result in a conflict, then such observer shall promptly bring such conflict to
the attention of the Chairman of the Board. In no event shall any provision of
this paragraph waive any obligation of confidentiality to the Company owed by
any such attendee or FMS.
(q) For a period equal to the lesser of (i) five (5) years from the date
hereof, or (ii) the sale to the public of the Underwriters' Option Shares, the
Company will not take any action or actions that may prevent or disqualify the
Company's use of Form S-1 or, if applicable, Form S-3 (or other appropriate
form) for the registration under the Act of the Underwriters' Option Shares.
(r) For a period of five (5) years from the date hereof, use its best
efforts at its cost and expense to maintain the listing of the Securities on the
Nasdaq SmallCap or National Market System or such other exchange on which the
securities are traded immediately after the Closing Date.
(s) As soon as practicable, but in no event more than 5 business days after
the effective date of the Registration Statement, file a Form 8-A with the
Commission providing for the registration under the Exchange Act of the
Securities.
(t) Following the Effective Date of the Registration Statement and for a
period of two (2) years thereafter, the Company shall, at its sole cost and
expense, prepare and file such blue sky trading applications with such
jurisdictions as the Representatives may reasonably request after consultation
with the Company, and on the Representatives' request, furnish the
Representatives with a secondary trading survey prepared by securities counsel
to the Company.
(u) The Company shall not amend or alter the terms of any written or oral
employment agreement between the Company and any executive officer in a manner
more favorable to such employee without the prior consent of the Underwriter,
which consent shall not be unreasonably withheld by the Underwriter. For a
period of three (3) years from the date hereof prior to the Company entering
into any oral or written employment agreement with any person who will, upon
commencement of such persons duties be deemed an executive officer, the
Company shall consult with the Representatives and the entire Board of
Directors as to the proposed terms of such employment.
(v) Until the completion of the distribution of the Securities, the Company
shall not without the prior written consent of the Representative, which consent
shall not be unreasonably withheld, issue, directly or indirectly, any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations.
(w) The Company will use its best efforts to maintain its registration
under the Exchange Act in effect for a period of five (5) years from the Closing
Date.
(x) On the Closing Date, the Company and FMS shall enter into a financial
consulting agreement, in the form filed as an Exhibit to the Registration
Statement, if any such agreement is so included.
(y) For a period of 12 months commencing on the Closing Date, except with
the written consent of the Representatives, will not issue or sell, directly or
indirectly, any shares of its capital stock, or sell or grant options, or
warrants or rights to purchase any shares of its capital stock, except pursuant
to (i) this Agreement, (ii) the Underwriters' Purchase Option, (iii) the
exercise of warrants and options of the Company heretofore issued and
described in the Prospectus, and (iv) the grant of options and the issuance
of shares issued upon exercise of options issued or to be issued under the
Company's stock option plan as described in the Prospectus (Stock Option Plan).
Except as discussed in the Prospectus, prior to the Closing Date, the Company
will not issue any options or warrants without the prior written consent of the
Representatives. The Company shall not, for a period of 12 months from the
Closing Date offer or sell any securities pursuant to Regulation S or similar
regulation without FMS' prior written consent.
(z) The Company will not file any registration statement relating to the
offer or sale of any of the Company's securities, including any registration
statement on Form S-8, during the 24 months following the Closing Date without
FMS' prior written consent.
(aa) Subsequent to the dates as of which information is given in the
Registration Statement and Prospectus and prior to the Closing Dates, except as
disclosed in or contemplated by the Registration Statement and Prospectus, (i)
the Company will not have incurred any liabilities or obligations, direct or
contingent, or entered into any material transactions other than in the ordinary
course of business; (ii) there shall not have been any change in the capital
stock, funded debt (other than regular repayments of principal and interest on
existing indebtedness) or other securities of the Company, any material adverse
change in the condition (financial or other), business, operations, income, net
worth or properties, including any material loss or damage to the properties of
the Company (whether or not such loss is insured against), which could
materially adversely affect the condition (financial or other), business,
operations, income, net worth or properties of the Company; and (iii) the
Company shall not pay or declare any dividend or other distribution on its
Common Stock or its other securities or redeem or repurchase any of its
Common Stock or other securities.
(bb) Except as disclosed in or contemplated by the Registration Statement
and Prospectus, the Company, for a period of 24 months following the Closing
Date, shall not redeem any of its securities, and shall not pay any dividends or
make any other cash distribution in respect of its securities in excess of the
amount of the Company's current or retained earnings derived after the Closing
Date without obtaining FMS' prior written consent, which consent shall not be
unreasonably withheld. FMS shall either approve or disapprove such contemplated
redemption of securities or dividend payment or distribution within ten (10)
business days from the date FMS receives written notice of the Company's
proposal with respect thereto or within ten (10) business days as of the date
that the Company provides FMS with such information relating to the
transaction as it shall reasonably request (whichever is later); a failure of
FMS to respond within the ten (10) business day period shall be deemed
approval of the transaction.
(cc) The Company maintains and will continue to 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 in order
to permit preparation of financial statements in accordance 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. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date and the
Overallotment Closing Date (to the extent not paid at the Closing Date) all its
expenses and fees (other than fees of Representatives' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation: (i) the fees and
expenses of accountants and counsel for the Company; (ii) all costs and expenses
incurred in connection with the preparation, duplication, mailing, printing and
filing of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing and delivery of this Agreement,
the Selected Dealer Agreements, Agreement Among Underwriters, Power of Attorney,
Underwriter's Questionnaire, and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriter in
quantities as hereinabove stated; (iii) the printing, engraving, issuance and
delivery of the Securities and Underwriters' Option Shares including any
transfer or other taxes payable thereon; (iv) disbursements and fees of
Representatives' counsel in connection with the qualification of the
Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, which Representatives'counsel fees (exclusive of filing fees
and disbursements) (this legal work shall be performed by the Company's
counsel at the Company's sole cost and expense; (v) advertising costs and
expenses, including but not limited to costs and expenses in connection with
one information meeting held in New York, New York, one
tombstone advertisement, at least 5 bound volumes of the Offering documents for
the Representative and its counsel and prospectus memorabilia; (vi) fees and
expenses of the transfer agent; (vii) the fees payable to the NASD; and (viii)
the fees and expenses incurred in connection with the listing of the Securities
on the Nasdaq SmallCap Market. All fees and expenses payable to the
Representative hereunder shall be payable at the Closing Date or Overallotment
Closing Date, as applicable; provided, however, the Company shall pay such fees
and costs in advance of the Closing Date if requested by the Representatives.
The Representatives shall be responsible for all of their own costs of counsel.
(b) If this Agreement is terminated by the Underwriter in accordance with
the provisions of Section 6, Section 10(a) or Section 11, the Company shall
reimburse and indemnify the Underwriter for up to $ __ ** out-of-pocket actual
expenses reasonably incurred in connection with the transactions contemplated
hereby including the fees and disbursements of counsel for the Underwriter of
which the Underwriter acknowledges $0 has been paid prior to the date hereof.
(c) The Company further agrees that, in addition to the expenses payable
pursuant to subsection (a) of this Section 5, it will pay to FMS a non-
accountable expense allowance equal to three percent (3%) of the gross proceeds
received by the Company from the sale of the Firm Securities, $0 of which has
been paid to date to FMS . The Company will pay the remainder of the non-
accountable expense allowance on the Closing Date by certified or bank cashier's
check or, at the election of FMS, by deduction from the proceeds of the offering
contemplated herein. In the event the Underwriter elect to exercise the over-
allotment option described in Section 2(b) hereof, the Company further agrees to
pay to FMS on the Overallotment Closing Date (by certified or bank cashier's
check or, at FMS' election, by deduction from the proceeds of the offering) a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Overallotment Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters, which are several and not joint, hereunder shall be subject to
the continuing accuracy of the representations and warranties of the Company
herein as of the Closing Date and each Overallotment Closing Date, if any, as
if they had been made on and as of the Closing Date or each Overallotment
Closing Date, as the case may be; the accuracy on and as of the Closing Date
or Overallotment Closing Date, if any, of the statements of officers of the
Company made pursuant to the provisions hereof; and the performance by the
Company on and as of the Closing Date and each Overallotment Closing Date, if
any, of each of its covenants and obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall have become effective not later than
5:30 P.M., New York time, on the date of this Agreement or such later date and
time as shall be consented to in writing by the Underwriter, and, at Closing
Date and each Overallotment Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated to the knowledge of the Company by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Representatives' counsel. If
the Company has elected to rely upon Rule 430A of the Rules and Regulations,
the price of the Securities and any price-related information previously
omitted from the effective Registration Statement pursuant to such Rule 430A
shall have been transmitted to the Commission for filing pursuant to Rule
424(b) of the Rules and Regulations within the prescribed time period, and
prior to Closing Date the
Company shall have provided evidence satisfactory to the Representatives of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Representatives shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representatives' opinion, and the opinion of its counsel
is material or omits to state a fact which, in the Representatives' opinion, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any supplement
thereto, contains an untrue statement of fact which, in the Representatives'
reasonable opinion, or the opinion of its counsel is material, or omits to state
a fact which, in the Representatives' reasonable opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) At the Closing Date and the Overallotment Closing Date, the
Underwriters shall have received the favorable opinion of Xxxxxxxxx & Weintsein,
LLP, counsel to the Company, dated the Closing Date, or Overallotment Closing
Date, as the case may be, addressed to the Underwriters and in form and
substance satisfactory to Representatives' counsel, to the effect that:
(i)(A) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware with
full corporate power and authority to own or lease its properties and to carry
on its business as set forth in the Registration Statement and Prospectus; (B)
to Counsel's knowledge the Company is duly qualified as a foreign corporation in
all jurisdictions in which by reason of maintaining an office in such
jurisdiction or by owning or leasing real property in such jurisdiction it is
required to be so qualified except where the failure to be so qualified would
have no material adverse effect upon the business, properties, results of
operations, conditions (financial or otherwise) affairs or properties of the
Company (a "Material Adverse Effect"); and (C) to the best of counsel's
knowledge, the Company has not received any notice of proceedings relating to
the revocation or modification of any such license or qualification
which revocation or modification would have a Material Adverse Effect upon the
Company.
(ii) The Registration Statement, each Preliminary Prospectus that has
been circulated and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements, schedules and other
financial and statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the requirements of
the Act and Regulations and the conditions for use of a registration statement
on Form SB-2have been satisfied by the Company.
(iii) To the best of such counsel's knowledge, except as described
in the Prospectus, the Company does not own an interest of a character required
to be disclosed in the Registration Statement in any corporation, partnership,
joint venture, trust or other business entity;
(iv) To the best of such counsel's knowledge, the Company has a duly
authorized, issued and outstanding capitalization as set forth in the Prospectus
as of the date indicated therein, under the caption "Capitalization". The
Securities, Underwriters' Purchase Option and the Underwriters' Option Shares
conform or upon issuance will conform in all material respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been duly authorized
and validly issued and all shares of capital stock are fully paid and non-
assessable; the holders thereof are not, except by reason of their own conduct
or acts, subject to personal liability by reason of being such holders, and to
the Counsel's knowledge none of such securities were issued in violation of the
preemptive rights of any holder of any security of the Company. The Securities
to be sold by the Company hereunder, the Underwriters' Purchase Option to be
sold by the Company under the Underwriters' Purchase Option Agreement and
Underwriters' Option Shares have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and conform or upon issuance will conform to the
description thereof contained in the Prospectus; are not, subject to the
Counsel's knowledge to any preemptive or other similar rights of any stockholder
of the Company; that, to such counsel's knowledge, the holders of the Securities
and Underwriters' Option Shares shall not be personally liable for the payment
of the Company's debts solely by reason of being such holders except as they may
be liable by reason of their own conduct or acts; and that the certificates
representing the Securities, Underwriters' Purchase Option and Underwriters'
Option Shares are in due and proper legal form. Upon delivery of the Securities
to the Underwriter against payment therefor as provided for in this Agreement,
the Underwriter (assuming they are bona fide purchasers within the meaning of
the Uniform Commercial Code) will acquire good title to the Securities, free and
clear of all liens, encumbrances, equities, security interests and claims.
(v) The Registration Statement has been declared effective under the
Act, and, if applicable, filing of all pricing information has been timely made
in the appropriate form under Rule 430A, and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and to the best of such counsel's knowledge, no
proceedings for that purpose have been instituted or are pending or threatened
or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A) there are
no material contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form SB-2
and the Rules and Regulations;
(vii) This Agreement, the Underwriters' Purchase Option Agreement and
the Financial Consulting Agreement have each been duly and validly authorized,
executed and delivered by the Company, and assuming that each is a valid and
binding agreement of the Underwriter , as the case may be, constitutes a legally
valid and binding agreement of the Company, enforceable as against the Company
in accordance with their respective terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law or pursuant to public policy).
(viii) Neither the execution or delivery by the Company of this
Agreement, the Underwriters' Purchase Option Agreement or any Financial
Consulting Agreement, nor its performance hereunder or thereunder, nor its
consummation of the transactions contemplated herein or therein, nor the conduct
of its business as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, nor the issuance of the Securities
pursuant to this Agreement, conflicts with or will conflict with or results or
will result in any material breach or violation of any of the terms or
provisions of, or constitutes or will constitute a material default under,
or result in the creation imposition of any material lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company except to
the extent such event will not have a Material Adverse Effect pursuant to the
terms of, (A) the Certificate of Incorporation or By-Laws of the Company, (B) to
the best knowledge of such counsel, any material indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument that is material to the Company
to which the Company is a party or by which it is bound or to which its
properties or assets (tangible or intangible) are subject, or any indebtedness,
or (C) to the best knowledge of such counsel, and except to the extent it would
not have a material adverse effect on the Company, any statute, judgment,
decree, order, rule or regulation applicable to the Company or any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, having jurisdiction over the Company or any of
its respective activities or properties.
(ix) No consent, approval, authorization or order, and no filing
with, any court, regulatory body, government agency or other body (other than
such as may be required under state securities laws or the NASD, as to which no
opinion need be rendered) is required in connection with the issuance by the
Company of the Securities pursuant to the Prospectus and the Registration
Statement, the performance of this Agreement, the Underwriters' Purchase Option
Agreement and the Financial Consulting Agreement by the Company, and the taking
of any action by the Company contemplated hereby or thereby, which has not been
obtained;
(x) Except as described in the Prospectus, to the best knowledge of
such counsel, the Company is not in breach of, or in default under, any material
term or provision of any indenture, mortgage, installment sale agreement, deed
of trust, lease, voting trust agreement, stockholders' agreement, note, loan or
credit agreement or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company is
a party or by which the Company may be bound or to which any of the property or
assets (tangible or intangible) of the Company is subject or affected; and the
Company is not in violation of any material term or provision of its Certificate
of Incorporation or By-Laws or in violation of any material franchise, license,
permit, judgment, decree, order, statute, rule or regulation material to the
Company business;
(xi) The statements in the Prospectus under the captions "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF SECURITIES STOCK," and "SHARES ELIGIBLE FOR
FUTURE SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations
or legal conclusions, are correct in all material respects;
(xii) To the best of such counsel's knowledge, no person,
corporation, trust, partnership, association or other entity holding securities
of the Company has the contractual right to include and/or register any
securities of the Company in the Registration Statement, require the Company to
file any registration statement or, if filed, to include any security in such
registration statement who has not been so included;
(xiii) the Securities are eligible for listing on the Nasdaq Small
Cap Market.
In addition, such counsel shall state that in connection with the
preparation of the Registration Statement and the Prospectus such counsel has
participated in conferences with officers and other representatives of the
Company, Underwriters of the independent public accountants for the Company at
which the contents of the Registration Statement, the Prospectus and related
matters were discussed and, although such counsel is not passing upon, has not
verified, and does not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement and
Prospectus and made no independent check or verification thereof, on the basis
of the foregoing no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto
at the time such Registration Statement or amendment became effective or the
Prospectus as of the date of such opinion contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Registration Statement or
Prospectus or with respect to statements or omissions made therein in reliance
upon information furnished in writing to the Company on behalf of the
Underwriter expressly for use in the Registration Statement or the
Prospectus). In rendering such opinion, such counsel may state that no
portion of the opinion relates, or is given with regard to any issues or
elements of any state or federal Intellectual Property Law, Patent Law,
Trademark Law, Environmental Law, the laws
and regulations regulating the sale, distribution and preparation of food, drugs
and pesticides, or the laws regulating international trade for the United
States, any of them, or any agencies deriving authority from either or both, and
all other foreign jurisdictions and their respective agencies.
In rendering such opinion, such counsel may rely, (A) as to matters
involving the application of laws other than the laws of the United States, the
corporate laws of Delaware and New York and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Representatives' counsel) of other counsel reasonably
acceptable to Representatives' counsel, familiar with the applicable laws of
such other jurisdictions, and (B) as to matters of fact, to the extent they deem
proper, on certificates and written statements of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company; provided, that copies of any such
statements or certificates shall be delivered to Representatives' counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Representatives and they are justified in relying thereon.
(d) At each Overallotment Closing Date, if any, FMS and any other
Underwriter purchasing such shares shall have received the favorable opinion of
counsel to the Company, each dated the Overallotment Closing Date, addressed to
them and in form and substance satisfactory to Underwriters' counsel confirming
as of the Overallotment Closing Date the statements made by such firm, in their
opinion, delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Overallotment Closing
Date, Representative' Counsel shall have been furnished such documents,
certificates and other legal opinions (including, without limitation, legal
opinions related to patent, trademark or Food and Drug matters) as he may
reasonably require and request for the purpose of enabling him to review or pass
upon the matters referred to in subsection (c) of this Section 6, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(f) Prior to the Closing Date and each Overallotment Closing Date, if any:
(i) there shall have been no material adverse change nor development involving
a prospective change in the condition, financial or otherwise, prospects or the
business activities of the Company, whether or not in the ordinary course of
business, from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the
latest date as of which the financial condition of the Company is set forth in
the Registration Statement and Prospectus which is materially adverse to the
Company; (iii) the Company shall not be in material default under any provision
of any instrument relating to any outstanding indebtedness for money borrowed,
except as described in the Prospectus; (iv) no material amount of the assets of
the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (v) no action, suit or proceeding, at law
or in equity, shall have been pending or to its knowledge threatened against the
Company, or affecting any of its properties or businesses before or by any court
or federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition or income of
the Company, except as set forth in the Registration Statement and Prospectus;
and (vi) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
(g) At the Closing Date and each Overallotment Closing Date, if any, the
Representatives shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Overallotment Closing Date, as
the case may be, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are, in all material respects, true and correct, as if made on and as
of the Closing Date or the Overallotment Closing Date, as the case may be, and
the Company has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or satisfied
at or prior to such Closing Date or Overallotment Closing Date, as the case may
be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending or, to the best of each of such person's knowledge,
are contemplated or to their knowledge threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and information
required to be included therein, and none of the Registration Statement, the
Prospectus nor any amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading except to the extent
any such material fact may be corrected in the Final Prospectus; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and except as otherwise
contemplated therein: (A) the Company has not incurred up to and including the
Closing Date or the Overallotment Closing Date, as the case may be, other than
in the ordinary course of its business, any material liabilities or obligations,
direct or contingent; (B) the Company has not paid or declared any dividends or
other distributions on its capital stock; (C) the Company has not entered into
any material transactions not in the ordinary course of business; (D) there has
not been any change in the capital stock or any increase in long-term debt or
any increase in the short-term borrowings (other than any increase in the
short-term borrowings in the ordinary course of business) of the Company;
(E) the Company has not sustained any material loss or damage to its property or
assets, whether or not insured; (F) there is no litigation which is pending
or threatened against the Company which is required to be set forth in an
amended or supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or affiliates shall
have taken, and the Company, its officers and affiliates will not take, directly
or indirectly, any action designed to, or which might reasonably be expected to,
cause or result in the stabilization or manipulation of the price of the
Company's securities to facilitate the sale or resale of the Shares.
References to the Registration Statement and the Prospectus in this
subsection (g) are to such documents as amended and supplemented at the date of
such certificate.
(h) By the Effective Date, the Underwriters shall have received clearance
from NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters shall have
received a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) to the
Underwriter, from Xxxxx Xxxxxxx Xxxxx & Associates:
(i) confirming that they are independent public accountants with
respect to the Company within the meaning of the Act and the applicable Rules
and Regulations;
(ii) stating that it is their opinion that the combined financial
statements and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations thereunder and
that the Underwriter may rely upon the opinion of Xxxxx Xxxxxxx Xxxxx &
Assocoiates with respect to the financial statements and supporting schedules
included in the Registration Statement;
(iii) stating that, on the basis of a limited review which included
a reading of the latest available unaudited interim combined financial
statements of the Company (with an indication of the date of the latest
available unaudited interim combined financial statements), a reading of the
latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company, consultations
with officers and other employees of the Company responsible for financial
and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
that would lead them to believe that (A) the unaudited combined financial
statements and supporting schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited combined
financial statements of the Company included in the Registration Statement, or
(B) at a specified date not more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in the capital stock or
long-term debt of the Company, or any decrease in the stockholders' equity or
net current assets or net assets of the Company as compared with amounts
shown in the financial statements included in the Registration Statement,
other than as set
forth in or contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or decrease, and (C)
during the period from June 1, 1999, to a specified date not more than five (5)
days prior to the effective date of the Registration Statement, there was any
decrease in net revenues, net earnings or increase in net earnings per common
share of the Company, in each case as compared with the corresponding period
beginning *? other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) setting forth, at a date not later than five (5) days prior to
the effective date of the Registration Statement, the amount of liabilities of
the Company (including a breakdown of commercial paper and notes payable to
banks);
(v) stating that they have compared specific dollar amounts, numbers
of Securities, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(vi) stating that they have not during the immediately preceding five
(5) year period brought to the attention of the Company's management any
"weakness", as defined in Statement of Auditing Standard No. 60 "Communication
of Internal Control Structure Related Matters Noted in an Audit, " in the
Company's internal controls;
(vii) stating that they have in addition carried out certain
specified procedures, not constituting an audit, with respect to certain pro
forma financial information which is included in the Registration Statement and
the Prospectus and that nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the applicable
accounting requirements of Rule ll-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of that information; and
(viii) statements as to such other matters incident to the
transaction contemplated hereby as any Representative may reasonably request.
At the Closing Date and each Overallotment Closing Date, the Underwriters
shall have received from Xxxxx Xxxxxxx Xxxxx & Associates, a letter, dated as of
the Closing Date, or Overallotment Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section, except that the specified date referred to
shall be a date not more than five days prior to Closing Date and, if the
Company has elected to rely on Rule 430A of the Rules and Regulations, to the
further effect that they have carried out procedures as specified in clause
(iii) of subsection (i) of this Section with respect to certain amounts,
percentages and financial information as specified by any Representative and
deemed to be a part of the Registration Statement pursuant to Rule 430A(b)
and have found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (iii).
(k) On each of Closing Date and Overallotment Closing Date, if any, there
shall have been duly tendered to the Underwriters for their accounts the
appropriate number of Securities against payment therefore.
(l) No order suspending the sale of the Securities in any jurisdiction
designated by the Underwriter pursuant to subsection (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Overallotment Closing
Date, if any, and no proceedings for that purpose shall have been instituted or
to its knowledge or that of the Company shall be contemplated.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Overallotment Closing Date, as
the case may be, is not so fulfilled, the Representatives may terminate this
Agreement or, if the Representatives so elect, they may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter, and
each person, if any, who controls any Underwriter ("controlling person") within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all losses, claims, damages, expenses or liabilities, joint or
several (and actions in respect thereof), whatsoever (including but not limited
to any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever), as such are incurred, to which such Underwriter or such
controlling person may become subject under the Act, the Exchange Act or any
other statute or at common law or otherwise or under the laws of foreign
countries arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in any Preliminary Prospectus (except
that the indemnification contained in this paragraph with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter or to
the benefit of any person controlling such Underwriter on account of any loss,
claim, damage, liability or expense arising from the sale of the Firm Securities
by such Underwriter to any person if a copy of the Prospectus, as amended or
supplemented, shall not have been delivered or sent to such person within the
time required by the Act, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus, as amended and supplemented, and
such correction would have eliminated the loss, claim, damage, liability or
expense),
the Registration Statement or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included Securities of the
Company issued or issuable upon exercise of the Underwriters' Purchase Option;
or (iii) in any application or other document or written communication (in this
Section 7 collectively called "application") executed by the Company or based
upon written information furnished by the Company in any jurisdiction in order
to qualify the Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, the Nasdaq Stock Market,
Inc. or any other securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), unless in any case above
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company with respect to any Underwriter by
or on behalf of such Underwriter expressly for use in any Preliminary
Prospectus, the Registration Statement or Prospectus, or any amendment
thereof or supplement thereto, in any post-effective amendment, new
registration statement or prospectus or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each Underwriter agrees, to indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the Registration
Statement, and each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act to the
same extent as the foregoing indemnity from the Company to the Underwriter
(i) with
respect to statements or omissions, or alleged statements or omissions if any,
made in any Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment thereof or supplement thereto in any post-effective amendment, new
registration statement or prospectus, or in any application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to such Underwriter by such Underwriter expressly for
use in such Preliminary Prospectus, the Registration Statement or Prospectus
or any amendment
thereof or supplement thereto or in any post-effective amendment, new
registration statement or prospectus, or in any such application, directly
related to the transactions effected by such Underwriter in connection with this
Offering; provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto, in any post-effective
amendment, new registration statement or prospectus or in any such application,
and (ii) for any claim, loss, damages or liability for violation or alleged
violations of any federal or state securities laws in the offer or sale of the
Securities; provided, further, that the liability of such Underwriter to the
Company shall be limited to the product of the Underwriters' discount or
commission for the Shares multiplied by the number of Shares sold by such
Underwriter hereunder. The Company acknowledges that the statements with respect
to the public offering of the Firm Securities set forth under the heading
"Underwriting" and the stabilization legend and the last paragraph of the cover
page in the Prospectus have been furnished by any Underwriter expressly for use
therein and any information furnished by or on behalf of the Underwriters filed
in any jurisdiction in order to qualify the Securities under state securities
laws or filed with the Commission, the NASD or any securities exchange
constitute the only information furnished in writing by or on behalf of any
Underwriter for inclusion in the Prospectus and the Underwriter hereby
confirm that such statements and information are true and correct and shall
be on each Closing Date and Overallotment Closing Date.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, suit or proceeding, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or
parties of the commencement thereof, the indemnifying party or parties will
be entitled to participate therein, and to the extent it may elect by written
notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, the indemnifying party may assume the defense thereof with
counsel reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing the indemnified party or parties shall have the right to employ its or
their own counsel in any such case but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not
have employed
counsel reasonably satisfactory to such indemnified party to have charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnifying party or parties shall have reasonably
concluded that there may be defenses available to it or them that are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel shall be borne by
the indemnifying parties. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. Anything in this Section 7 to the contrary notwithstanding,
an indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent; provided however, that such
consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 7 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
(A) in such proportion as is appropriate to reflect the relative benefits
received by each of the contributing parties, on the one hand, and the party to
be indemnified on the other hand, from the offering of the Securities or (B) if
the allocation provided by clause (A) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriter are the indemnified party the relative benefits
received by the Company on the one hand, and the Underwriter , on the other,
shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) bear to the total underwriting discounts
and commissions received by the Underwriter hereunder, in each case as set forth
in the table on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall
be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. 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. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each
case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect to which a claim for contribution may be made against another party
or parties under this subparagraph (d), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
8. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of the Company submitted pursuant hereto, shall be
deemed to be representations, warranties and agreements at the Closing Date and
the Overallotment Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Underwriter , the
Company, or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriter .
9. Effective Date. This Agreement shall become effective at 9:30 a.m., New York
City time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representatives, in their sole discretion, shall release the Securities for the
sale to the public, provided, however that the provisions of Sections 5, 7 and
10 of this Agreement shall at all times be effective. For purposes of this
Section 9, the Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Representatives of telegrams to
securities dealers releasing such Securities for offering or the release by the
Representatives for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) The Underwriter shall have the right to terminate this Agreement: (i)
if any calamitous domestic or international event or act or occurrence has
materially disrupted, or in the Underwriters' commercially reasonable opinion
will in the immediate future materially disrupt general securities markets in
the United States; or (ii) if trading on the New York Stock Exchange, the
American Stock Exchange, or in the over-the-counter market shall have been
suspended or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market
by the NASD or by order of the Commission or any other government authority
having jurisdiction; or (iii) if the United States shall have become involved in
a war or major hostilities; or (iv) if a banking moratorium has been declared by
a New York State or federal authority; or (v) if a moratorium in foreign
exchange trading has been declared; or if the Company shall have sustained a
material loss, whether or not insured, by reason of fire, flood, accident or
other calamity; or (vi) if there shall have been such material adverse change
in the conditions or prospects of the Company, involving a change not
contemplated by the Registration Statement, or (vii) if there shall have been
such material adverse change in general economic, political or financial
conditions as in the Underwriters' reasonable judgment would make it
inadvisable or impracticable to proceed with the offering, sale or delivery
of the Securities.
(b) Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 9 and 10 hereof), and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 shall not be in
any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. Default by the Company. If the Company shall fail at the Closing Date or any
Overallotment Closing Date, as applicable, to sell and deliver the number of
Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Overallotment Closing Date, the
Representatives may at the Representatives' option, by notice from the
Representatives to the Company, terminate the Underwriters' obligations to
purchase Securities from the Company on such date) without any liability on the
part of any non-defaulting party other than pursuant to Section 5 and Section 7
hereof. No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
12. Venue; Submission to Jurisdiction. The Company (a) agrees that any legal
suit, action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern
District of New York, (b) waives any objection which the Company may have now or
hereafter to the venue of any such suit, action or proceeding, and (c)
irrevocably consents to the jurisdiction of the New York State Supreme Court,
County of New York and the United States District Court for the Southern
District of New York in any such suit, action or procedure. Each of the
Company and each
Underwriter further agrees to accept and acknowledge service of any and all
process which may be served in any suit, action or proceeding in the New York
State Supreme Court, County of New York or the United States District Court for
the Southern District of New York, and agrees that service of process upon the
Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the company in any such suit,
action or proceeding. In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to
have been duly given if mailed, hand delivered by a bonded messenger service
or sent by recognized overnight courier. Notices to the Underwriters shall be
directed to First Madison Securities, Inc., as Representative, 000 Xxxx 00xx
Xxxxxx - 24thFloor (c/o Madison Venture Capital II, Inc.), Xxx Xxxx, Xxx Xxxx
00000, Attention Xxx Xxxxx, with a copy to Xxxxx X. Xxxxxxx, Esq., 0000 Xxxxx
Xxxxx Xxxx, Xxxxx Xxxxxx, Xxx Xxxx 00000. Notices to the Company shall be
directed to the Company at 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention
Xxx X. Xxxx, with a copy to Xxxxxxxxx & Xxxxxxxxx, L.L.P., 00 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxx Xxxxxxxxx, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and shall be
binding upon, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal Underwriters and assigns, and their respective heirs and legal
Underwriters and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
15. Applicable Law/Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York as
they are applied to agreements executed, delivered and to be performed entirely
within the State of New York.
16. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which taken together
shall be deemed to be one and the same instrument.
17. Waiver. The waiver by either party of the breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach.
18. Assignment. Except as otherwise provided within this Agreement, neither
party hereto may transfer or assign this Agreement without prior written
consent of the other party.
19. Titles and Captions. All article, section and paragraph titles or captions
contained in this Agreement are for convenience only and shall not be deemed
part of the context nor affect the interpretation of this Agreement.
20. Pronouns and Plurals. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the Person or Persons may require.
21. Entire Agreement. This Agreement contains the entire understanding between
and among the parties and supersedes any prior understandings and agreements
among them respecting the subject matter of this Agreement.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
the Company and the Underwriters.
Very truly yours,
XXXXXXXXXXX.XXX, INC.
By:___________________________
Name: Xxx X. Xxxx
Title: Chief Executive Officer
Confirmed and accepted as of the date first above written.
FIRST MADISON SECURITIES, INC. XXXXXXX/XXXXX ASSOCIATES, L.P.
By: By:_____________________________
Name: Xxx Xxxxx Name: Xxxxx Xxxxxxx
Title: President Title: President
WESTPHALIA INVESTMENTS, INC. EBI SECURITIES CORPORATION
By: By:
Name: Xxxxxx Penalozza Name:
Title: President Title:
SCHEDULE A
Name and address of Underwriter Number of Shares in
Commitment
