2,000,000 Shares
INTELLICELL CORP.
Common Stock
UNDERWRITING AGREEMENT
December 17, 1996
Sands Brothers & Co., Ltd.,
As Representative of the Several Underwriters
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Intellicell Corp., a Delaware corporation (the "Company"),
proposes to issue and sell to the underwriters named in Schedule A (the
"Underwriters") of this Underwriting Agreement (the "Agreement"), for whom you
are acting as representative (the "Representative"), 2,000,000 shares (the "Firm
Shares") of Common Stock, par value $.01 per share of the Company (the "Common
Stock"). In addition, the Company has agreed to grant to the Underwriters an
option (which may be exercised by the Representative, individually) to purchase
an additional 300,000 shares of Common Stock (the "Option Shares") for the
purposes set forth in Section 3 hereof. The Firm Shares and the Option Shares
are hereinafter collectively referred to as the "Shares."
The Company also proposes to issue and sell to you (for your
own account and not as Representative of the Several Underwriters) and/or your
designees, warrants (the "Representative's Warrants") to purchase an aggregate
of 200,000 shares of Common Stock at an exercise price of $5.50 per share, which
sale will be consummated in accordance with the terms and conditions of the form
of Representative's Warrant Agreement filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the
Representative's Warrants are hereinafter sometimes referred to as the "Warrant
Shares." The Shares, the Representative's Warrants and the Warrant Shares
(collectively, the "Securities") are more fully described in the Registration
Statement and the Prospectus, as defined below.
You have advised the Company that you and the other Underwriters desire
to purchase, severally, the Firm Shares and that you have been authorized by the
Underwriters to execute this agreement on their behalf. The Company confirms the
agreements made by it with respect to the purchase of the Firm Shares by the
several Underwriters on whose behalf you are signing this Agreement, as follows:
1. Purchase and Sale of Firm Shares. (a) Subject to the terms
and conditions of this Agreement, and upon the basis of the representations,
warranties, and agreements herein contained, the Company agrees to issue and
sell to the Underwriters, and each such Underwriter agrees, severally and not
jointly, to buy from the Company at $4.60 for each Firm Share, at the place and
time hereinafter specified, the number of Firm Shares set forth opposite the
names of the Underwriters in Schedule A attached hereto plus any additional Firm
Shares which such Underwriters may become obligated to purchase pursuant to the
provisions of Section 9 hereof.
2. Payment and Delivery; Representative's Warrants.
(a) Delivery to the Underwriters of and payment for the Firm
Shares shall take place at 10:00 a.m., New York Time, on the third full business
day (or, if the Firm Shares are priced, as contemplated in Rule 15c6-1(c) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after 4:30
p.m., New York Time, the fourth full business day) following the date of the
initial public offering, at the offices of the Representative, 00 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 or at such time on such other date, as may be agreed
upon by the Company and the Underwriters (such date hereinafter is referred to
as the "Closing Date").
(b) The Company will make the certificates for the Shares to
be purchased by the Underwriters hereunder available to you for inspection at
least 24 hours prior to the Closing Date or the Option Closing Date (which are
collectively referred to herein as the "Closing Dates"). The certificates shall
be in such names and denominations as you may request, at least two (2) full
business days prior to the Closing Dates. Time shall be of the essence and
delivery at the time and place specified in this Agreement is a further
condition to the obligations of each Underwriter.
Definitive certificates in negotiable form for the Firm Shares
to be purchased by the Underwriters hereunder will be delivered by the Company
to you for the accounts of the several Underwriters against payment of the
respective purchase prices therefor by the several Underwriters, by federal wire
transfer to the Company. The Representative's written confirmation of the
effectuation of such federal wire transfer, detailing the specific federal wire
number, shall be satisfactory evidence that payment of the purchase price for
the Firm Shares has been made for purposes of the Closing Date and, upon
presentation of such confirmation, the Company shall be required to deliver
certificates in negotiable form for the Firm Shares at such time.
In addition, in the event the Underwriters (or the
Representative, individually) exercise the option to purchase from the Company
all or any portion of the Option Shares pursuant to the provisions of Section 3
hereof, payment for such securities shall be made to the Company by the
effectuation of a federal wire transfer at the date of delivery of such
securities as required by the provisions of Section 3 hereof.
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It is understood that you, individually and not as
Representative of the several Underwriters, may (but shall not be obligated to)
make any and all payments required pursuant to this Section 2 on behalf of any
Underwriters whose check or checks shall not have been received by the
Representative at the time of delivery of the Firm Shares to be purchased by
such Underwriter or Underwriters. Any such payment by you shall not relieve any
such Underwriter or underwriters of any of its or their obligations hereunder.
It is also understood that you individually rather than all of the Underwriters
may (but shall not be obligated to) purchase the Option Shares (as hereinafter
defined).
It is understood that the several Underwriters propose to
offer the Firm Shares to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement becomes effective.
The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Shares by the Company to the Underwriters
shall be borne by the Company. The Company will pay and save each Underwriter
and any subsequent holder of the Shares harmless from and any and all
liabilities with respect to or resulting from any failure or delay in paying
Federal and state stamp and other transfer taxes, if any, which may be payable
or determined to be payable in connection with the original issuance or sale to
such Underwriter of Shares sold by such entity.
(b) On the Closing Date, the Company will sell the
Representative's Warrants to Sands Brothers, for its own account and not as
Representative of the several Underwriters, or to its designees. The
Representative's Warrants will be in the form of, and in accordance with, the
provisions of the Representative's Warrant Agreement attached as an exhibit to
the Registration Statement. The aggregate purchase price for the
Representative's Warrants is $100.00. The Representative's Warrants will be
restricted from sale, transfer, assignment or hypothecation for a period of one
year from the Effective Date, except to officers and partners of Sands Brothers.
Payment for the Representative's Warrants will be made to the Company by check
or checks payable to its order on the Closing Date against delivery of the
certificates representing the Representative's Warrants. The certificates
representing the Representative's Warrants will be in such denominations and
such names as Sands Brothers may request prior to the Closing Date.
3. Option to Purchase Option Shares.
(a) For the purposes of covering any overallotments
in connection with the distribution and sale of the Firm Shares as contemplated
by the Prospectus, the Company hereby grants an option to the several
Underwriters (which may be exercised, at its option, by the Representative,
individually) to purchase all or any part of the Option Shares from the Company.
This option may be exercised in whole or in part at anytime and from time to
time within 30 days after the effective date of the Registration Statement upon
written notice (each, an "Option Share Notice") by the Representative to the
Company setting forth the aggregate number of Option Shares to be purchased, the
names and denominations in which
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the certificates for such Option Shares are to be registered and the time and
date for such purchase. Such time and date shall be determined by the
Representative but shall be at least two and no more than five full business
days before the date specified for closing in the Option Share Notice (each an
"Option Closing Date"). Delivery of the Option Shares against payment therefor
shall take place at the offices of the Representative, 00 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000. The number of Option Shares to be purchased by each Underwriter,
if any, shall bear the same percentage to the total number of Option Shares
being purchased by the several Underwriters pursuant to this subsection (a) as
the number of Firm Shares such Underwriter is purchasing bears to the total
number of Firm Shares being purchased pursuant to subsection (a) of Section 1,
as adjusted, in each case by the Representative in such manner as the
Representative may deem appropriate. The purchase price to be paid for the
Option Shares will be the same price per Option Share as the price per Firm
Share set forth in Section 1 hereof.
(b) Payment for any Option Shares purchased will be
made to the Company by the effectuation of a federal wire transfer, against
receipt of the certificates for such securities by the Representative for the
respective accounts of the several Underwriters registered in such names and in
such denominations as the Representative may request. The Representatives'
written confirmation of the effectuation of such federal wire transfer,
detailing the specific federal wire number, shall be satisfactory evidence that
payment of the purchase price for the Option Shares has been made for purposes
of the Option Closing Date and, upon presentation of such confirmation, the
Company shall be required to deliver certificates in negotiable form for the
Option Shares at such time.
(c) The obligation of the Underwriters to purchase
and pay for any of the Option Shares is subject to the accuracy and completeness
(as of the date hereof and as of the Option Closing Date) in all material
respects of the representations and warranties of the Company herein, to the
accuracy and completeness of the statements of the Company or its officers made
in any certificate or other document to be delivered by the Company pursuant to
this Agreement, to the performance in all material respects by the Company of
its obligations hereunder, to the satisfaction by the Company of the conditions,
as of the date hereof and as of the Option Closing Date, and to the delivery to
the Underwriters of opinions, certificates and letters dated the Option Closing
Date substantially similar in scope to those specified in Section 6(b), (c), (d)
and (e) hereof, but with each reference to "Firm Shares," and "Closing Date" to
be, respectively, to the Option Shares and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and authority to own or lease and operate its
properties and to conduct its business as described in the Registration
Statement and to execute, deliver and perform this Agreement and the
Representative's Warrant Agreement and to consummate the transactions
contemplated hereby
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and thereby. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company. The Company has no subsidiaries (as defined in the
Rules and Regulations, as defined below) that are required to be listed as
subsidiaries in Exhibit 21 to the Registration Statement. Except as set forth in
the Prospectus, the Company (i) does not own, and at the Closing Date and, if
later, the Option Closing Date will not own, directly or indirectly, any shares
of stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any corporation, firm, partnership, joint venture,
association or other entity and (ii) is not, and at the Closing Date and, if
later, the Option Closing Date will not be, engaged in any discussions or a
party to any agreement or understanding, written or oral, regarding the
acquisition of an interest in any corporation, firm, partnership, joint venture,
association or other entity. Complete and correct copies of the certificate of
incorporation, the bylaws or other organizational documents of the Company and
all amendments thereto have been filed as Exhibits to the Registration
Statement.
(b) The Company has full corporate power and
authority to enter into this Agreement and the Representative's Warrants. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, and the Representative's
Warrant Agreement, when executed and delivered by the Company on the Closing
Date, will be valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, in each case subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and except that rights to indemnification and contribution hereunder and
thereunder may be limited by applicable law and public policy. The execution,
delivery and performance of this Agreement and the Representative's Warrant
Agreement by the Company, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the terms
of this Agreement and the Representative's Warrant Agreement do not and will
not, with or without the giving of notice or the lapse of time, or both, (i)
result in any violation of the certificate of incorporation or by-laws of the
Company; (ii) result in a breach of or conflict with any of the terms or
provisions of, or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to any indenture, mortgage, note, contract, commitment or other
agreement or instrument to which the Company is a party or by which the Company
or any of its properties or assets is or may be bound or affected; (iii) violate
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business which, in the case of clause (ii)
or (iii), that would have a material adverse effect on the financial condition,
results of operations, business or properties of the Company or the ability of
the Company to consummate the transactions contemplated hereby.
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(c) The Company has prepared in conformity with the
requirements of the Securities Act of 1933 (the"Act") and the rules and
regulations (the "Regulations") of the Securities and Exchange Commission (the
"Commission") and filed with the Commission a registration statement (File No.
333-15447 ) on Form S-1 and has filed one or more amendments thereto, covering
the registration of the Shares under the Act, including the related preliminary
prospectus or preliminary prospectuses (each thereof being herein called a
"Preliminary Prospectus") and a proposed final prospectus. Each Preliminary
Prospectus was endorsed with the legend required by Item 501(c)(5) of Regulation
S-K of the Regulations, including, if applicable, Rule 430A of the Regulations.
Such registration statement including any documents incorporated by reference
therein and all financial schedules and exhibits thereto, as amended at the time
it becomes effective, and the final prospectus included therein are herein,
respectively, called the "Registration Statement" and the "Prospectus," except
that, (i) if the prospectus filed by the Company pursuant to Rule 424(b) of the
Regulations differs from the Prospectus, the term "Prospectus" will also include
the prospectus filed pursuant to Rule 424(b), and (ii) if the Registration
Statement is amended or such Prospectus is supplemented after the effective date
of the Registration Statement (the "Effective Date") and prior to the Option
Closing Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus" shall include the Registration Statement as amended or
supplemented.
(d) Neither the Commission, nor to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
(e) The Registration Statement when it becomes
effective, the Prospectus (and any amendment or supplement thereto) when it is
filed with the Commission pursuant to Rule 424(b), and both documents as of the
Closing Date, as the case may be, will comply as to form with the Act and the
Regulations and will in all material respects conform to the requirements of the
Act and the Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, on such dates, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by or on behalf of the Underwriters in connection with the
Registration Statement or Prospectus or any amendment or supplement thereto by
the Underwriters expressly for use therein.
(f) To the best of the Company's knowledge, Xxxxxxx
X. Xxxxxx & Company, LLP, the accountants who have certified certain of the
financial statements filed and to be filed with the Commission as part of the
Registration Statement and the Prospectus, are independent public accountants
within the meaning of the Act and Regulations. The financial statements and
schedules and the notes thereto and the selected financial statements and
summary financial statements filed as part of the Registration Statement and
included in the
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Prospectus present fairly in all material respects the financial position of the
Company as of the dates thereof, and the results of operations and changes in
financial position of the Company for the periods indicated therein, in
conformity with generally accepted accounting principles (which, as applied to
the Company for the periods involved, are substantially identical in all
material respects) applied on a substantially consistent basis throughout the
periods involved except as otherwise stated in the Registration Statement and
the Prospectus.
(g) The Company had at the date or dates indicated in
the Prospectus a duly authorized and outstanding capitalization as set forth in
the Registration Statement and the Prospectus. Based on the assumptions stated
in the Registration Statement and the Prospectus, the Company will have on the
Closing Date referred to below the adjusted stock capitalization set forth
therein. Except as disclosed in the Registration Statement or the Prospectus, on
the Effective Date and on the Closing Date referred to below, there will be no
options to purchase, warrants or other rights to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of the Company's capital stock or any such warrants,
convertible securities or obligations. Except as set forth in the Prospectus, no
holders of any of the Company's securities have any rights, "demand,"
"piggyback" or otherwise, to have such securities registered under the Act.
(h) The descriptions in the Registration Statement
and the Prospectus of contracts and other documents are accurate and present
fairly the information required to be disclosed, and there are no contracts or
other documents required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement under the
Act or the Regulations which have not been so described or filed as required.
(i) The Company has filed with the appropriate
federal, state and local governmental agencies, and all foreign countries and
political subdivisions thereof, all tax returns, including, without limitation,
franchise tax and sales tax returns, which are required to be filed or has duly
obtained extensions of time for the filing thereof and has paid all taxes shown
on such returns and all assessments received by it to the extent that the same
have become due, except where the failure to file tax returns, obtain extensions
of time for filing or pay such taxes and assessment would not have a material
adverse effect on the financial position, results of operations, properties or
business of the Company; and the provisions for income taxes payable, if any,
shown on the financial statements filed with or as part of the Registration
Statement are sufficient for all accrued and unpaid foreign and domestic taxes,
whether or not disputed, and for all periods to and including the dates of such
financial statements. All payroll withholdings required to be made by the
Company with respect to employees have been made. Except as disclosed in writing
to the Underwriters, the Company has not executed or filed with any taxing
authority, foreign or domestic, any agreement extending the period for
assessment or collection of any income taxes and is not a party to any pending
action or proceeding by any foreign or domestic governmental agency for
assessment or collection of taxes; and no claims for assessment or collection of
taxes have been asserted against the Company.
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(j) The outstanding shares of Common Stock and
outstanding options and warrants to purchase shares of Common Stock have been
duly authorized and validly issued. The outstanding shares of Common Stock are
fully paid and nonassessable. The outstanding options and warrants to purchase
Common Stock constitute the valid and binding obligations of the Company,
enforceable in accordance with their terms, in each case subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and except that
rights to indemnification and contribution thereunder and under this Agreement
may be limited by United States or state securities laws or public policy
relating thereto. None of the outstanding shares of Common Stock or options or
warrants to purchase shares of Common Stock has been issued in violation of the
preemptive rights of any shareholder of the Company. None of the holders of the
outstanding Common Stock is subject to personal liability solely by reason of
being such a holder. The offers and sales of the outstanding Common Stock and
outstanding options and warrants to purchase Common Stock were at all relevant
times either registered under the Act, the applicable state securities or Blue
Sky laws or exempt from such registration requirements. The authorized Common
Stock and outstanding options and warrants to purchase Common Stock conform in
all material respects to the descriptions thereof contained in the Registration
Statement and Prospectus.
(k) The issuance and sale of the Securities have been
duly authorized and, when issued and delivered against payment therefor as
contemplated by this Agreement or by the Warrant Agreement, as the case may be,
the Securities will be validly issued, fully paid and nonassessable. The holders
of the Securities will not be subject to personal liability solely by reason of
being such holders and none of the Securities will be subject to preemptive
rights of any shareholder of the Company.
(l) The issuance and sale of the Representative's
Warrants have been duly authorized and, when issued, paid for and delivered
pursuant to the terms of this Agreement or the Representative's Warrant
Agreement, as the case may be, the Representative's Warrants will constitute
valid and binding obligations of the Company, enforceable as to the Company in
accordance with their terms, in each case subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except that rights to
indemnification and contribution thereunder and under this Agreement may be
limited by United States or state securities laws or public policy relating
thereto. A sufficient number of shares of Common Stock have been duly reserved
for issuance upon exercise of the Representative's Warrants in accordance with
the provisions of the Representative's Warrants. The Representative's Warrants
conform in all material respects to the descriptions thereof contained in the
Registration Statement and Prospectus.
(m) The Company is not in violation of, or in default
under, (i) any term or provision of its certificate of incorporation or by-laws;
(ii) any material term or provision or any financial covenants of any indenture,
mortgage, contract, commitment or other
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agreement or instrument to which it is a party or by which it or any of its
property or business is or may be bound or affected; or (iii) any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business, which, in the case of clause (ii) and (iii),
would have a material adverse effect on the financial condition, results of
operations, business or properties of the Company or the ability of the Company
to consummate the transactions contemplated hereby. The Company owns, possesses
or has obtained all governmental and other licenses, permits, certifications,
registrations, approvals or consents and other authorizations ("Permits")
necessary to own or lease, as the case may be, and to operate its properties,
and to conduct its business or operations as presently conducted, except where
the failure to own, possess or obtain such Permits would not have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company. All such Permits are outstanding and in good
standing, and there are no proceedings pending or, to the best of the Company's
knowledge, threatened, or any basis therefor, seeking to cancel, terminate or
limit such Permits.
(n) Except as set forth in the Prospectus, there are
no claims, actions, suits, proceedings, arbitrations, investigations or
inquiries before any governmental agency, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, pending, or, to the best of
the Company's knowledge, threatened against the Company or involving the
Company's properties or business which, if determined adversely to the Company,
would, individually or in the aggregate, have a material adverse effect on the
financial position, results of operations, properties, or business of the
Company or which question 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; nor, to the best of the Company's
knowledge, except as disclosed in the Prospectus, is there any reasonable basis
for any such claim, action, suit, proceeding, arbitration, investigation or
inquiry. There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, or the Company's properties or business is bound or subject which
would be material to the Company.
(o) The Company has not incurred any liability for
any finder's fees or similar payments in connection with the transactions herein
contemplated other than payments previously made to the Representative.
(p) (i) The Company has sufficient title and
ownership of, or license or other rights to, or have applied for, all patents,
patent applications, trademarks, trademark applications, service marks, service
xxxx applications, trade names, copyrights, trade secrets, information,
proprietary rights, technologies, know-how and processes (collectively,
"Intellectual Property") necessary for its business as now conducted and as
proposed to be conducted, as described in the Prospectus.
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(ii) Except as disclosed in the Prospectus,
no claims have been asserted by any person to the ownership or use of any
Intellectual Property or challenging or questioning the validity or
effectiveness of any such license or agreement and the Company has no knowledge
of any valid basis for any such claim. To the best of its knowledge, the use of
the Intellectual Property by the Company does not infringe on the rights of any
person and there are no pending or, to the knowledge of the Company, threatened
claims nor has it been alleged that the Intellectual Property is engaged in such
infringements. All of the trademark and trade name registrations, patents and
copyrights are in full force and effect. Other than potential sublicensees of
the Company, no other person has any right to use any Intellectual Property for
similar or related products in competition with the products of the Company and
no other person is infringing any of the Intellectual Property.
(iii) To the best of its knowledge, the
Company has taken reasonable steps sufficient to safeguard and maintain the
secrecy and confidentiality of its proprietary rights in, all of the unpatented
know how, technology, proprietary processes, formulae, and other information
owned by it.
(q) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company has not incurred any material liability or obligation (absolute or
contingent), except liabilities and obligations incurred in the ordinary course
of business, and has not sustained any material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree; and since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there have not been, and prior
to the Closing Date referred to below there will not be, any changes in the
capital stock or any material increases in the long-term debt of the Company or
any material adverse change in or affecting the general affairs, management,
financial condition, shareholders' equity, results of operations or prospects of
the Company, other than as set forth or contemplated in the Prospectus.
(r) The Company owns no real property. The Company
has good title to all material personal property (tangible and intangible) owned
by it, free and clear of all security interests, charges, mortgages, liens,
encumbrances and defects, except such as are described in the Registration
Statement and Prospectus or such as do not materially affect the value or
transferability of such property and do not interfere with the use of such
property made, or proposed to be made, by the Company. The leases, licenses or
other contracts or instruments under which the Company leases, holds or is
entitled to use any property, real or personal, are valid and subsisting and
neither the Company, nor, to the best of the Company's knowledge, any other
party is in default thereunder and, to the best of the Company's knowledge, no
event has occurred which, with the passage of time or the giving of notice, or
both, would constitute a default thereunder. The Company has not received any
notice of any violation of any applicable law, ordinance, regulation, order or
requirement relating to its owned or leased properties the violation of which
would have a material adverse effect on the Company.
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(s) Each material contract or other instrument
(however characterized or described) to which the Company is a party or by which
its properties or business is or may be bound or affected and to which reference
is made in the Prospectus has been duly and validly executed by the Company and,
assuming that such contracts or other instruments have been properly executed by
parties other than the Company, is in full force and effect in all material
respects and is enforceable against the parties thereto in accordance with its
terms, in each case subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally; and none of such contracts or instruments has
been assigned by the Company, and neither the Company nor, to the best of the
Company's knowledge, any other party is in default thereunder and, to the best
of the Company's knowledge, no event has occurred which, with the lapse of time
or the giving of notice, or both, would constitute a default thereunder.
(t) The employment agreements between the Company and
its officers and employees, described in the Registration Statement, are binding
and enforceable obligations upon the respective parties thereto in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity and public policy and subject to the possible finding by a court of
competent jurisdiction that the scope, time period or geographic range of any
post-employment non-competition restriction exceeds that required to protect the
Company's legitimate interests.
(u) Except as set forth in the Prospectus, the
Company has no employee benefit plans (including, without limitation, profit
sharing and welfare benefit plans) or deferred compensation arrangements that
are subject to the provisions of the Employee Retirement Income Security Act of
1974. To the best of the Company's knowledge, no labor problem exists with any
of the Company's employees or is imminent which could have a material adverse
affect on the Company.
(v) The Company has filed a registration statement
pursuant to Section 12(g) of the Exchange Act to register the Common Stock, has
filed an application to list the Shares on the NASDAQ SmallCap Market, and has
received notification that the listing has been approved, subject to notice of
issuance.
(w) The Company has adequately insured its properties
against loss or damage by fire or other casualty and maintains, in amounts which
it deems, in good faith, to be adequate, such other insurance, including but not
limited to, liability insurance, as is usually maintained by companies engaged
in the same or similar businesses located in its geographic area.
(x) Neither the Company nor, to its knowledge, any of
its officers, employees, agents or any other person acting on behalf of the
Company has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier,
-11-
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 to 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 material adverse effect on the assets, business or
operations of the Company; or (c) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company,
taken as a whole. The Company believes that its international accounting
controls are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(y) Except as set forth in Prospectus, no officer,
director, principal stockholder or partner of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the Rules
and Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficial interest
in any contract or agreement to which the Company is a party or by which it may
be bound or affected. Except as set forth in the Prospectus under "Certain
Transactions," there are no existing agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company, and any officer, director, Principal
Stockholder (i.e., holders of more than 5% of the Company's Common Stock) of the
Company, or any partner, affiliate or associate of any of the foregoing persons
or entities.
(z) Copies of the minutes of the Board of Directors
and Stockholders of the Company have been made available to the Underwriters and
are complete in all material respects of all meetings and actions of the
directors and stockholders of the Company since the time of its respective
incorporation, and accurately reflects all transactions referred to in such
minutes in all material respects.
(aa) The Company as of the effective date of the
Registration Statement maintains term key-man insurance on the life of Xx. Xxx
Xxxxx in the amount of $1,000,000, which policy names the Company as the sole
beneficiary thereof.
(ab) The Company, in all material respects, has
provided to Xxxxxxx Krooks Xxxx & Ball P.C., counsel to the Representative
("Representative's Counsel"), all applicable agreements, certificates,
correspondence and other items and documents requested by such counsel's due
diligence letter dated May 6, 1996.
-12-
Any certificate signed by an officer of the Company and
delivered to the Representative or to counsel for the Representative shall be
deemed to be a representation and warranty by the Company to the Representative
as to the matters covered thereby.
5. Certain Covenants of the Company. The Company covenants
with the several Underwriters as follows:
(a) The Company will not at any time, whether before
the Effective Date or thereafter during such period as the Prospectus is
required by law to be delivered in connection with the sales of the Firm Shares
by the several Underwriters, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Representative has not been
previously advised and furnished a copy, or to which the Representative shall
object in writing.
(b) The Company will use its best efforts to cause
the Registration Statement to become effective and will advise the
Representative immediately, and, if requested by the Representative, confirm
such advice in writing, (i) when the Registration Statement, or any
post-effective amendment to the Registration Statement or any supplemented
Prospectus is filed with the Commission; (ii) of the receipt of any comments
from the Commission; (iii) of any request of the Commission for amendment or
supplement to the Registration Statement or Prospectus or for additional
information and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Firm Shares for offering or sale in any
jurisdiction, or of the initiation of any proceedings for any of such purposes.
The Company use its reasonable best effort to prevent the issuance of any such
stop order or of any order preventing or suspending such use and to obtain as
soon as possible the lifting thereof, if any such order is issued.
(c) The Company will deliver to the several
Underwriters, without charge, from time to time until the Effective Date, as
many copies of each Preliminary Prospectus as the Underwriters may reasonably
request, and the Company hereby consents to the use of such copies for purposes
permitted by the Act. The Company will deliver to the several Underwriters,
without charge, as soon as the Registration Statement becomes effective, and
thereafter from time to time as requested, such number of copies of the
Prospectus (as supplemented, if the Company makes any supplements to the
Prospectus) as the Underwriters may reasonably request. The Company has
furnished or will furnish to the Representative two conformed copies of the
Registration Statement as originally filed and of all amendments thereto,
whether filed before or after the Registration Statement becomes effective, two
copies of all exhibits filed therewith and two conformed copies of all consents
and certificates of experts.
(d) The Company will comply with the Act, the
Regulations, the Exchange Act, and the rules and regulations thereunder so as to
permit the continuance of sales
-13-
of and dealings in the Firm Shares, and in any Option Shares which may be issued
and sold. If, at any time when a prospectus relating to such Firm or Option
Shares is required to be delivered under the Act, any event occurs as a result
of which the Registration Statement and Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it shall be
necessary to amend or supplement the Registration Statement and Prospectus to
comply with the Act or the regulations thereunder, the Company will promptly
file with the Commission, subject to Section 5(a) hereof, an amendment or
supplement which will correct such statement or omission or which will effect
such compliance.
(e) The Company will furnish such proper information
as may be required and otherwise cooperate in qualifying the Firm or Option
Shares for offering and sale under the securities or Blue Sky laws relating to
the offering or for sale in such jurisdictions as the Representative may
reasonably designate, provided that no such qualification will be required in
any jurisdiction where, solely as a result thereof, the Company would be subject
to service of general process or to taxation or qualification as a foreign
corporation doing business in such jurisdiction.
(f) The Company will make generally available to its
security holders, in the manner specified in Rule 158(b) under the Act, and
deliver to the Representative and its counsel as soon as practicable and in any
event not later than 45 days after the end of its fiscal quarter in which the
first anniversary date of the effective date of the Registration Statement
occurs, an earning statement meeting the requirements of Rule 158(a) under the
Act covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement.
(g) For a period of five years from the Effective
Date, the Company will deliver to the Representative and to Representative's
Counsel on a reasonably timely basis (i) a copy of each report or document,
including, without limitation, reports on Forms 8-K, 10-C, 10-K and 10-Q and
exhibits thereto, filed or furnished to the Commission, any securities exchange
or the National Association of Securities Dealers, Inc. (the "NASD"); (ii) as
soon as practicable, copies of any reports or communications (financial or
other) of the Company mailed to its security holders; (iii) as soon as
practicable, a copy of any Schedule 13D, 13G, 14D-1 or 13E-3 or Form 3, 4 and 5
received or prepared by the Company from time to time; and (iv) such additional
information concerning the business and financial condition of the Company as
the Representative may from time to time reasonably request and which can be
prepared or obtained by the Company without unreasonable effort or expense. The
Company will furnish to its shareholders annual reports containing audited
financial statements and such other periodic reports as it may determine to be
appropriate or as may be required by law.
(h) Neither the Company nor any person that is
controlled by the Company will take any action designed to or which might be
reasonably expected to cause or result in the stabilization or manipulation of
the price of the Firm Shares.
-14-
(i) If the transactions contemplated by this
Agreement are consummated, the Representative shall retain the Fifty Thousand
Dollars ($50,000) previously paid to it, and the Company will pay or cause to be
paid the following: all costs and expenses incident to the performance of the
obligations of the Company under this Agreement, including, but not limited to,
the fees and expenses of accountants and counsel for the Company, the
preparation, printing, mailing and filing of the Registration Statement
(including financial statements and exhibits), Preliminary Prospectuses and the
Prospectus, and any amendments or supplements thereto, the printing and mailing
of the Selected Dealer Agreement, the issuance and delivery of the Shares to the
several Underwriters; all taxes, if any, on the issuance of the Shares; the
fees, expenses and other costs of qualifying the Shares for sale under the Blue
Sky or securities laws of those states in which the Shares are to be offered or
sold, the cost of printing and mailing the "Blue Sky Survey" and fees and
disbursements of counsel in connection therewith (such fees only not to exceed
the sum of $25,000), including those of such local counsel as may have been
retained for such purpose; the filing fees incident to securing any required
review by the NASD; the cost of furnishing to the Underwriters copies of the
Registration Statement, Preliminary Prospectuses and the Prospectus as herein
provided; the costs of "bound volumes" for the Representative and its counsel,
the costs of placing a "tombstone" advertisement in such publication as the
Representative determines (the cost of such "tombstone" advertisement not to
exceed $10,000).
In addition, at the Closing Date or the Option
Closing Date, as the case may be, Sands Brothers will, in its individual rather
than its representative capacity, deduct from the payment for the Firm Shares or
any Option Shares purchased, two and one half percent (2.5%) of the gross
proceeds of the offering (less the sum of Fifty Thousand Dollars ($50,000)
previously paid to the Representative), as payment for the Representative's
nonaccountable expense allowance relating to the transactions contemplated
hereby.
(j) In the event the transactions contemplated hereby
are not consummated by reason of any action by the Representative (except if
such prevention is based upon a breach by the Company of any covenant,
representation or warranty contained herein or because any other condition to
the Representative's obligations hereunder required to be fulfilled by the
Company is not fulfilled) the Company shall be liable for the actual accountable
out-of-pocket expenses of the Representative, including legal fees. In the event
the transactions contemplated hereby are not consummated by reason of any action
of the Company or because of a breach by the Company of any covenant,
representation or warranty herein, the Company shall be liable only for the
actual accountable out-of-pocket expenses of the Representative, including legal
fees. In the event the transactions contemplated hereby are not consummated for
any reason, should the Representative's out-of-pocket expenses equal an amount
that is less than the $50,000 advance received, the remaining sum will be
returned to the Company.
(k) The Company will apply the net proceeds from the
sale of the Shares in the manner set forth in the Prospectus under "Use of
Proceeds" and shall file such
-15-
reports with the commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required in accordance with Rule
463 under the Act.
(l) During the twelve month period following the date
hereof, none of the Company's officers, directors or holders of five percent
(5%) or more of the shares of Common Stock (the "Principal Shareholders") will
offer for sale or sell or otherwise dispose of any securities of the Company
owned by them, directly or indirectly, in any manner whatsoever (including
pursuant to Rule 144 under the Act), and no holder of registration rights
relating to the securities of the Company will exercise any such registration
rights, in either case, without obtaining the prior written approval of the
Representative. The Company will deliver to the Representative the written
undertakings as of the date hereof of its officers, directors and Principal
Shareholders to this effect.
(m) 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 twelve (12) months
following the date hereof without the Representative's prior written consent.
(n) The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances 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.
(o) The Company will maintain the listing of the
Shares on the NASDAQ SmallCap Market for so long as the Shares remain qualified
for such listing.
(p) Intentionally omitted.
(q) Subject to the sale of the Firm Shares, for a
period of not less than three (3) years from the date hereof is received, the
Company will, at Representative's option and if so requested by Representative,
recommend and use its best efforts to elect one designee of Representative, at
the option of Representative, either as a member of or nonvoting advisor to its
Board of Directors; such designee, if elected or appointed, shall attend
meetings of the Board and receive no more or less compensation than is paid to
other non-management directors of the Company and shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings
including, but not limited to, food, lodging and transportation. The Company
agrees to indemnify and hold Representative and its designee harmless, to the
maximum extent permitted by law, against any and all claims, actions, awards and
judgments arising out of such designee's service as a director or advisor and in
the event the Company maintains a liability insurance policy affording coverage
for the acts of its
-16-
officers and directors, to include each of Representative and its designee as an
insured under such policy, to the extent not excessively expensive.
If the Representative does not exercise its option to
designate such member of or advisor to the Company's Board of Directors, the
Representative shall nonetheless have the right to send a representative (who
shall not be the same individual from meeting to meeting) to observe each
meeting of the Board of Directors. The Company agrees to give Representative
notice of each such meeting and to provide Representative with an agenda and
minutes of the meeting no later than it gives such notice and provides such
items to the directors.
(r) Subject to the sale of the Firm Shares, the
Representative shall have the right of first refusal with respect to future
public sales of debt and equity securities of the Company, any subsidiary or
successor to the Company or any Company securities held by any Principal
Shareholders (including purchasing for Sands Brothers' account or to sell for
the Principal's account any securities sold pursuant to Rule 144 under the Act)
for a one year period following the date hereof. It is understood that if such a
proposed financing is offered to Representative, Representative shall have
twenty (20) days (one (1) day in the event of a sale under Rule 144) in which to
determine whether or not to accept such offer and, if Representative refuses,
and provided that such a financing is consummated (a) with another underwriter
or placement agent upon the same terms and conditions as those offered to
Representative and (b) within six months after the end of the aforesaid thirty
(30) day period, this right of first refusal shall thereafter be forfeited and
terminated; provided, however, if the financing is not consummated under the
conditions of clauses (a) and (b) above, then the right of first refusal shall
once again be reinstated under the same terms and conditions set forth in this
paragraph.
(s) The Company hereby agrees, at its sole cost and
expense, to supply and deliver to the Representative, within a reasonable period
from the date hereof, four (4) bound volumes, including the Registration
Statement, as amended or supplemented, all exhibits to the Registration
Statement, the Prospectus and all other underwriting documents.
(t) Intentionally Omitted.
(u) The Company shall retain a transfer agent for the
shares of Common Stock, reasonably acceptable to the Representative, for a
period of five (5) years following the Effective Date. In addition, for a period
of three (3) years from the Effective Date, the Company, at its own expense,
shall cause such transfer agent to provide the Representative, if so requested
in writing, with copies of the Company's daily transfer sheets, and, when so
requested by the Representative, a current list of the Company's security
holders, including a list of the beneficial owners of securities held by a
depository trust company and other nominees.
-17-
(v) The Company shall, as soon as reasonably
practicable following the Closing Date, have applied for listing in Standard &
Poor's Corporation Records Service (including annual report information) or
Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial Manual not being sufficient
for these purposes) and shall use its best efforts to have the Company listed in
such manual and shall maintain such listing for a period of five (5) years from
the Effective Date.
(w) Intentionally omitted.
(x) Intentionally omitted.
(y) For a period of five (5) years following the
Effective Date, the Company shall continue to retain Xxxxxxx X. Xxxxxx &
Company, LLP (or a nationally recognized accounting firm acceptable to the
Representative) as the Company's independent public accountants and shall
promptly, upon the Company's receipt thereof, submit to the Representative
copies of such accountants' management reports and similar correspondence
between such accountants and the Company.
(z) For a period of five (5) years following the
Effective Date, the Company, at its expense, shall cause its then independent
certified public accountants, as described in Section 5(x) above, to read (but
not review or audit) the Company's financial statements for each of the first
three fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company's 10-Q quarterly report and the mailing
of quarterly financial information to shareholders.
(aa) For a period of twenty-five (25) days following
the Effective date, the Company will not issue press releases or engage in any
other publicity without the Representative's prior written consent, other than
normal and customary releases issued in the ordinary course of the Company's
business or those releases required by law.
6. Conditions of the Underwriters' Obligation to Purchase
Shares from the Company. The obligation of the several Underwriters to purchase
and pay for the Firm Shares which it has agreed to purchase from the Company is
subject (as of the date hereof and the Closing Date) to the accuracy in all
material respects of the representations and warranties of the Company herein,
to the accuracy of the statements of the Company or its officers made pursuant
hereto, to the performance in all material respects by the Company of its
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement will have become
effective not later than 10:30 A.M., New York City time, on the day following
the date of this Agreement, or at such later time or on such later date as the
Representative may agree to in writing; prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement will have been issued
and no proceedings for that purpose will have been initiated or will be
-18-
pending or, to the best of the Representative's or the Company's knowledge, will
be contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Representative's Counsel.
(b) At the Closing Date, there will have been
delivered to the Underwriters a signed opinion of Xxxxxx Xxxxxxxxxx LLP, counsel
for the Company, dated as of the Closing Date and the opinion of Hamburg,
Hanover, Xxxxxxx & Xxxxxx, substantially as set forth in Exhibit 6b.
(c) At the Closing Date (i) the Registration
Statement and the Prospectus and any amendments or supplements thereto will
conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
there will not have been any material adverse change in the financial condition,
results of operations or general affairs of the Company from that set forth or
contemplated in the Registration Statement and the Prospectus, except changes
which the Registration Statement and the Prospectus indicates might occur after
the Effective Date; (iii) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been no
material transaction, contract or agreement entered into by the Company, other
than in the ordinary course of business, which would be required to be set forth
in the Registration Statement and the Prospectus, other than as set forth
therein; and (iv) no action, suit or proceeding at law or in equity will be
pending or, to the best of the Company's knowledge, threatened against the
Company which is required to be set forth in the Registration Statement and the
Prospectus, other than as set forth therein, and no proceedings will be pending
or, to the best of the Company's knowledge, threatened against the Company
before or by any federal, state or other commission, board or administrative
agency wherein an unfavorable decision, ruling or finding would materially
adversely affect the business, property, financial condition or results of
operations of the Company, other than as set forth in the Registration Statement
and the Prospectus. At the Closing Date, there will be delivered to the several
Underwriters a certificate signed by the Chairman of the Board or the President
or a Vice President of the Company, dated the Closing Date, evidencing
compliance with the provisions of this Section 6(c) and stating that the
representations and warranties of the Company set forth in Section 4 hereof were
accurate and complete in all material respects when made on the date hereof and
are accurate and complete in all material respects on the Closing Date as if
then made; that the Company has performed all covenants and complied with all
conditions required by this Agreement to be performed or complied with by the
Company prior to or as of the Closing Date; and that, as of the Closing Date, no
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been initiated or, to his
knowledge, are contemplated or threatened. In
-19-
addition, the Representative will have received such other and further
certificates of officers of the Company as the Representative or
Representative's Counsel may reasonably request.
(d) At the time that this Agreement is executed and
at the Closing Date, the several Underwriters will have received a signed letter
from Xxxxxxx X. Xxxxxx & Company, LLP dated the date such letter is to be
received by the Underwriters and addressed to them, confirming that it is a firm
of independent public accountants within the meaning of the Act and Regulations
and stating that: (i) insofar as reported on by them, in their opinion, the
financial statements of the Company included in the Prospectus comply as to form
in all material respects with the applicable accounting requirements of the Act
and the applicable Regulations; (ii) on the basis of procedures and inquiries
(not constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus and the latest available unaudited interim financial statements of
the Company, if more recent than that appearing in the Registration Statement
and Prospectus, inquiries of officers of the Company responsible for financial
and accounting matters as to the transactions and events subsequent to the date
of the latest audited financial statements of the Company, and a reading of the
minutes of meetings of the shareholders, the Board of Directors of the Company
and any committees of the Board of Directors, as set forth in the minute books
of the Company, nothing has come to their attention which, in their judgment,
would indicate that (A) during the period from the date of the latest financial
statements of the Company appearing in the Registration Statement and Prospectus
to a specified date not more than three business days prior to the date of such
letter, there have been any decreases in net current assets or net assets as
compared with amounts shown in such financial statements or decreases in net
sales or increases in total or per share net loss compared with the
corresponding period in the preceding year or any change in the capitalization
or long-term debt of the Company, except in all cases as set forth in or
contemplated by the Registration Statement and the Prospectus, and (B) the
unaudited interim financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus, do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
Regulations or are not fairly presented in conformity with generally accepted
accounting principles and practices on a basis substantially consistent with the
audited financial statements included in the Registration Statement or the
Prospectus; and (iii) they have compared specific dollar amounts, numbers of
shares, numerical data, percentages of revenues and earnings, and other
financial information pertaining to the Company set forth in the Prospectus
(with respect to all dollar amounts, numbers of shares, percentages and other
financial information contained in the Prospectus, to the extent that such
amounts, numbers, percentages and information may be derived from the general
accounting records 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.
-20-
(e) There shall have been duly tendered to the
Representative certificates representing the Firm Shares to be sold on the
Closing Date.
(f) The NASD shall have indicated that it has no
objection to the underwriting arrangements pertaining to the sale of the Shares
by the Underwriters.
(g) No action shall have been taken by the Commission
or the NASD the effect of which would make it improper, at any time prior to the
Closing Date or the Option Closing Date, as the case may be, for any member firm
of the NASD to execute transactions (as principal or as agent) in the Shares,
and no proceedings for the purpose of taking such action shall have been
instituted or shall be pending, or, to the best of the Underwriters' or the
Company's knowledge, shall be contemplated by the Commission or the NASD.
(h) All proceedings taken at or prior to the Closing
Date or the Option Closing Date, as the case may be, in connection with the
authorization, issuance and sale of the Shares shall be reasonably satisfactory
in form and substance to the Representative and to Representative's Counsel, and
such counsel shall have been furnished with all such documents, certificates and
opinions as they may reasonably request for the purpose of enabling them to pass
upon the matters referred to in Section 6(c) hereof and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Company, the performance of any covenants of the Company, or
the compliance by the Company with any of the conditions herein contained.
If any of the conditions specified in this Section 6
have not been fulfilled, this Agreement may be terminated by the Representative
on notice to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each officer, director, partner, employee and agent of each
Underwriter, and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all attorneys' fees), to which
they or any of them may become subject, under the Act or otherwise, and will
reimburse, as incurred, the Underwriters and such persons for any legal or other
expenses reasonably incurred in connection with investigating, defending against
or appearing as a third party witness in connection with any losses, claims,
damages or liabilities, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in (A) the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, (B) any blue sky application or other document
executed by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other jurisdiction in
order to qualify any or all of the Firm or Options Shares
-21-
under the securities laws thereof (any such application, document or information
being hereinafter called a "Blue Sky Application"), or arise out of or are based
upon the omission or alleged omission to state in the Registration Statement,
any Preliminary Prospectus, Prospectus, or any amendment or supplement thereto,
or in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Underwriters specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto; provided, however,
that the indemnity agreement contained in this Section 7(a) with respect to any
Preliminary Prospectus will not inure to the benefit of any Underwriter (or to
the benefit of any other person that may be indemnified pursuant to this Section
7(a)) if (A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Shares which are the subject thereof from the
Representative or other indemnified person; (B) the Representative or other
indemnified person failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares to
such person; and (C) the Prospectus did not contain any untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
cause, claim, damage, expense or liability.
(b) Each Underwriter severally, but not jointly, will
indemnify and hold harmless the Company, each of its directors, each nominee (if
any) for director named in the Prospectus, each of its officers who have signed
the Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, from and against any losses, claims, damages or liabilities (which shall,
for all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, and will reimburse, as incurred, the Company and such
persons for any legal or other expenses reasonably incurred in connection with
investigating, defending against or appearing as a third party witness in
connection with any losses, claims, damages or liabilities, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to
-22-
the Company by you or by any Underwriter through you specifically for use in the
preparation thereof.
(c) Promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify in writing the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the indemnifying party and in the judgment of the
Representative, it is advisable for the Representative or such Underwriters or
controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such Underwriter or such controlling person, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall be
designated in writing by you). No settlement of any action against an
indemnified party shall be made without the consent of the indemnifying party,
which shall not be unreasonably withheld in light of all factors of importance
to such indemnifying party.
8. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) any Underwriter makes claim
for indemnification pursuant to Section 7 hereof 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 Section 7 provide for indemnification in
-23-
such case, or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in either
such case (after contribution from others) in such proportions that all such
Underwriters are responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per share appearing on the cover page of the Prospectus
bears to the public offering price appearing thereon, and the Company shall be
responsible for the remaining portion, provided, however, that (a) if such
allocation is not permitted by applicable law then the relative fault of the
Company and the Underwriters and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriters to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriters and their
respective controlling persons in the aggregate were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the first sentence of this Section 7
and (b) that the contribution of each contributing Underwriter shall not be in
excess of its proportionate share (based on the ratio of the number of Shares
purchased by such Underwriter to the number of Shares purchased by all
contributing Underwriters) of the portion of such losses, claims, damages or
liabilities for which the Underwriters are responsible. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. As used in this paragraph, the term "Underwriter"
includes any officer, director, or other person who controls an Underwriter
within the meaning of Section 15 of the Act, the word "Company" includes any
officer, director, or person who controls the Company within the meaning of
Section 15 of the Act. If the full amount of the contribution specified in this
paragraph is not permitted by law, then any Underwriter and each person who
controls any Underwriter shall be entitled to contribution from the Company, its
officers, directors and controlling persons to the full extent permitted by law.
The foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the Act other
than the Company and the Underwriters. No contribution shall be requested with
regard to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
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9. Substitution of Underwriters. If any Underwriters shall for
any reason not permitted hereunder cancel their obligations to purchase the Firm
Shares hereunder, or shall fail to take up and pay for the number of Firm Shares
set forth opposite their respective names in Schedule A hereto upon tender of
such Firm Shares in accordance with the terms hereof, then:
(a) If the aggregate number of Firm Shares which such
Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of
the total number of Firm Shares, the other Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase.
(b) If any Underwriter or Underwriters so default and
the agreed number of Firm Shares with respect to which such default or defaults
occurs is more than 10% of the total number of Firm Shares, the remaining
Underwriters shall have the right to take up and pay for (in such proportion as
may be agreed upon among them) the Firm Shares which the defaulting Underwriter
or Underwriters agreed but failed to purchase. If such remaining Underwriters do
not, at the First Closing Date, take up and pay for the Firm Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase, the time
for delivery of the Firm Shares shall be extended to the next business day to
allow the several Underwriters the privilege of substituting within twenty-four
hours (including nonbusiness hours) another underwriter or underwriters
satisfactory to the Company. If no such underwriter or underwriters shall have
been substituted as aforesaid, within such twenty-four hour period, the time of
delivery of the Firm Shares may, at the option of the Company, be again extended
to the next following business day, if necessary, to allow the Company the
privilege of finding within twenty-four hours (including nonbusiness hours)
another underwriter or underwriters to purchase the Firm Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted Underwriters to
take up the Firm Shares of the defaulting Underwriter or Underwriters as
provided in this Section, (i) the Company or the Representative shall have the
right to postpone the time of delivery for a period of not more than seven
business days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
made necessary, and (ii) the respective numbers of Firm Shares to be purchased
by the remaining Underwriters or substituted Underwriters shall be taken at the
basis of the underwriting obligation for all purposes of this Agreement.
If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the Firm Shares agreed
to be purchased by the defaulting Underwriters or substitute another underwriter
or underwriters as aforesaid, and the Company shall not find or shall not elect
to seek another underwriter or underwriters for such Firm Shares as aforesaid,
then this Agreement shall terminate.
-25-
If, following exercise of the option provided in Section 3(a) hereof,
any Underwriter or Underwriters shall for any reason not permitted hereunder
cancel their obligations to purchase Option Shares at the Option Closing Date,
or shall fail to take up and pay for the number of Option Shares, which they
become obligated to purchase at the Option Closing Date upon tender of such
Option Shares in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Shares of the defaulting Underwriters in the manner provided in Section 9(b)
hereof. If the remaining Underwriters or substituted Underwriters shall not take
up and pay for all such Option Shares, then the Underwriters shall be entitled
to purchase the number of Option Shares for which there is no default or, at
their election, the option shall terminate, the exercise thereof shall be of no
effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any nondefaulting Underwriter to the
Company, provided that the provisions of this Section 9 shall not in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
10. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriters contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained herein shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the Underwriters, the Company or any of its directors and
officers, or any controlling person referred to in said Sections, and shall
survive the delivery of, and payment for, the Shares.
11. Termination of Agreement.
(a) The Company, by written or telegraphic notice to
the Underwriter, or the Underwriter, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriter, after the Registration Statement becomes
effective, releases the Firm Shares for public offering. The time when the
Underwriter "releases the Firm Shares for public offering" for the purposes of
this Section 10 means the time when the Underwriter releases for publication the
first newspaper advertisement, which is subsequently published, relating to the
Firm Shares or the time when the Underwriters release for delivery to members of
a selling group copies of the Prospectus and an offering letter or an offering
telegram relating to the Firm Shares, whichever will first occur.
(b) This Agreement, including without limitation, the
obligation to purchase the Firm Shares and the obligation to purchase the Option
Shares after exercise of the option referred to in Section 3 hereof, are subject
to termination in the absolute discretion of the Representative, by notice given
to the Company prior to delivery of and payment for all
-26-
the Firm Shares or the Option Shares, as the case may be, if, prior to such
time, any of the following shall have occurred: (i) the Company withdraws the
Registration Statement from the Commission or the Company does not or cannot
expeditiously proceed with the public offering; (ii) the representations and
warranties in Section 4 hereof are not materially correct or covenants in
Section 5 hereof cannot be materially complied with; (iii) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange will
have been suspended; (iv) limited or minimum prices will have been established
on either such Exchange; (v) a banking moratorium will have been declared either
by United States federal or New York State authorities; (vi) any other
restrictions on transactions in securities materially affecting the free market
for securities or the payment for such securities, including the Firm Shares or
the Option Shares, will be established by NASDAQ, by the Commission, by any
other United States federal or state agency, by action of the Congress or by
Executive Order; (vii) trading in any securities of the Company shall have been
suspended or halted by any national securities exchange, the NASD or the
Commission; (viii) there has been a materially adverse change in the condition
(financial or otherwise), prospects or obligations of the Company; (ix) the
Company will have sustained a material loss, whether or not insured, by reason
of fire, flood, accident or other calamity; (x) any action has been taken by the
government of the United States or any department or agency thereof which, in
the reasonable judgment of the Underwriter, has had a material adverse effect
upon the market or potential market for securities in general; or (xi) the
market for securities in general or political, financial or economic conditions
will have so materially adversely changed that, in the reasonable judgment of
the Underwriter, it will be impracticable to offer for sale, or to enforce
contracts made by the Underwriter for the resale of, the Firm Shares or the
Option Shares, as the case may be.
(c) If this Agreement is terminated pursuant to
Section 6 hereof or this Section 11 or if the purchases provided for herein are
not consummated because any condition of the Underwriter's obligations hereunder
is not satisfied or because of any refusal, inability or failure on the part of
the Company to comply with any of the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company shall be unable to or does
not perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 10 of this
Agreement.
12. Information Furnished by the Underwriters to the Company.
It is hereby acknowledged and agreed by the parties hereto that for the purposes
of this Agreement, including, without limitation, Sections 4(e), 7(a), 7(b) and
8 hereof, the only information given by the Underwriters to the Company for use
in the Prospectus are the statements set forth on page 2 with respect to
stabilization, under the heading "Underwriting" and the identity of counsel to
the Underwriters under the heading "Legal Matters"], as such information appears
in any Preliminary Prospectus and in the Prospectus.
-27-
13. Notices and Governing Law. All communications hereunder
will be in writing and, except as otherwise provided, will be delivered at, or
mailed by certified mail, return receipt requested, or telegraphed to, the
following addresses: if to the Placement Agent, to 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Xxxx Xxxxxxxxx, Executive Vice President, with a copy to
Xxxxxxx Xxxxxx Xxxx & Ball, P.C., Attn: Xxxxxxxx X. Xxxxxxx, Esq., 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; if to the Company, addressed to it at 0000
Xxxxxxxxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000, Attention: Xxx Xxxxx, President,
with a copy to Xxxxxx Xxxxxxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxx X. Xxxxxxx, Esq.; or, in each case, to such other
address as the parties may hereinafter designate by like notice.
This Agreement shall be deemed to have been made and
delivered in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company (1) 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, (2) waives any objection
which the Company may have now or hereafter to the venue of any such suit,
action or proceeding, and (3) 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
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York State Supreme Court, County of New York, or in 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.
14. Parties in Interest. This Agreement is made solely for the
benefit of the several Underwriters, the Company and, to the extent expressed,
any person controlling the Company or any of the Underwriters, each officer,
director, partner, shareholder, employee and agent of the several Underwriters,
the directors of the Company, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns, and, no other person will acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" will not include any
purchaser of the Shares from any of the several Underwriters, as such purchaser.
15. Validity. In case any term of this Agreement will be held
invalid, illegal or unenforceable, in whole or in part, the validity of any
other terms of this Agreement will not in any way be affected thereby.
16. Entire Agreement. This Agreement contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof, and there are no representations, inducements, promises or agreements,
oral or otherwise, not embodied herein.
-28-
17. Counterparts. This Agreement may be executed in
counterparts and each of such counterparts will for all purposes be deemed to be
an original, and such counterparts together will constitute one and the same
instrument.
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If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Representative in accordance with its terms.
Very truly yours,
INTELLICELL CORP.
By: /s/ Xxx Xxxxx
-----------------
Name: Xxx Xxxxx
Title: President
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
SANDS BROTHERS & CO., LTD.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Xxxxxx X. Xxxxx, Co-Chairman
For itself and as Representative
of the several Underwriters
-30-
SCHEDULE A
Name of Underwriter Number of Firm Shares to be Purchased
------------------- -------------------------------------
Sands Brothers & Co., Ltd..............................................1,400,000
Bear, Xxxxxxx & Co. Inc...................................................60,000
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation.......................60,000
Xxxxxxx, Sachs & Co.......................................................60,000
Xxxxxx Brothers...........................................................60,000
X.X. Xxxxxxxx & Co........................................................30,000
Clearly Gull Xxxxxxx & XxXxxxxx Inc.......................................30,000
Cruttenden Xxxx Incorporated..............................................30,000
Xxxxxx/Xxxxxxx, Inc.......................................................30,000
Xxxxxx Xxxxxx Xxxxxxxx & Co...............................................30,000
Josepthal Lyon & Xxxx Incorporated........................................30,000
Xxxxxxx Bros, L.P.........................................................30,000
Ladenburg, Xxxxxxxx & Co. Inc.............................................30,000
Soundview Financial Group, Inc............................................30,000
Unterberg Harris..........................................................30,000
Wedbush Xxxxxx Securities.................................................30,000
Xxxxxxx, Xxxxxx & Xxxxxxxxx...............................................30,000
Total:.................................................................2,000,000
==========
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