COMMONWEALTH ASSOCIATES
1,600,000 Shares
SYSCOMM INTERNATIONAL CORPORATION
Common Stock
UNDERWRITING AGREEMENT
___________, 1997
Commonwealth Associates
As Representative of the
Several Underwriters
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
SysComm International Corporation, 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"), an aggregate of
1,600,000 shares (the "Stock") of Common Stock, $.01 par value (such class of
stock being herein called the "Common Stock"), of the Company. In addition, the
Company proposes to grant to the Underwriters (or, at its option, the
Representative, individually) the option referred to in Section 3(b) hereof to
purchase all or any part of an aggregate of 240,000 additional shares of Common
Stock, if and to the extent that you, as Representative, shall have determined
to exercise, on behalf of the Underwriters, the right to purchase such shares of
Common Stock. Unless the context otherwise indicates, the term "Stock" shall
include the 240,000 additional shares referred to above.
You have advised the Company that you and the other Underwriters desire
to purchase, severally, the Stock, 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 Stock by the several
Underwriters on whose behalf you are signing this Agreement, as follows:
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) A registration statement (File No. 333-______) on Form S-1
relating to the public offering of the Stock, including a form of
prospectus subject to completion, copies of which have heretofore been
delivered to you, has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"),
and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and
has been filed with the Commission under the Act and one or more
amendments to such registration statement may have been so filed. After
the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have
been amended, has been declared by the Commission to be effective under
the Act, a prospectus in the form most recently included in an
amendment to such registration statement (or, if no such amendment
shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and
approved by the Representative prior to the execution of this
Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under
the Act, an amendment to such registration statement, including a form
of prospectus, a copy of which amendment has been furnished to and
approved by the Representative prior to the execution of this
Agreement. As used in this Agreement, the term "Registration Statement"
means such registration statement, as amended at the time when it was
or is declared effective, including all financial schedules and
exhibits thereto and including any information omitted therefrom
pursuant to Rule 430A under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus" means each
prospectus subject to completion filed with such registration statement
or any amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); and the
term "Prospectus" means the prospectus first filed with the Commission
pursuant to Rule 424(b) under the Act, or, if no prospectus is required
to be filed pursuant to said Rule 424(b), such term means the
prospectus included in the Registration Statement; except that if such
registration statement or prospectus is amended or such prospectus is
supplemented, after the effective date of such registration statement
and prior to the Option Closing Date (as hereinafter defined), the
terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term
"Prospectus" shall include the prospectus as so supplemented, or both,
as the case may be.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When the Registration
Statement becomes
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effective and at all times subsequent thereto up to and on the Closing
Date (as hereinafter defined) or the Option Closing Date, as the case
may be, (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
to make statements therein not misleading; provided, however, that the
Company makes no representations, warranties or agreements as to
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the
Underwriters specifically for use in the preparation thereof. It is
understood that the statements set forth in the Prospectus on page 2
with respect to stabilization, under the heading "Underwriting" and the
identity of counsel to the Underwriters under the heading "Legal
Matters" constitute the only information furnished in writing by or on
behalf of the several Underwriters for inclusion in the Registration
Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority
(corporate and other) to own its properties and conduct its business as
described in the Prospectus and is duly qualified to do business as a
foreign corporation and is in good standing in all other jurisdictions
in which the nature of its business or the character or location of its
properties requires such qualification, except where failure to so
qualify will not materially adversely affect the Company's business,
properties or financial condition. The Company has no subsidiaries
other than those listed on Schedule B attached hereto (the
"Subsidiaries"). Except as set forth in Schedule B attached hereto, the
Company does not own any equity interest in any other corporation,
joint venture, partnership or other business entity, other than the
Subsidiaries. The Company owns all of the capital stock of each
Subsidiary free and clear of all liens, security interests and
encumbrances. Each Subsidiary is a corporation, duly organized, validly
existing and in good standing under the laws of the state of its
respective incorporation, with full power and authority, corporate and
other, to own or lease and operate its respective properties and to
conduct its respective business as described in the Registration
Statement. Each Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in
which the nature of its business or the character or location of its
properties requires such qualification, except where failure to so
qualify will not materially adversely affect such Subsidiary's
business, properties or financial condition.
(d) The authorized, issued and outstanding capital stock of
the Company as of March 31, 1997 is as set forth in the Prospectus
under "Capitalization"; the
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shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued and are fully paid
and non-assessable and have been issued in compliance with all federal
and state securities laws; except as set forth in the Prospectus, no
options, warrants or other rights to purchase, agreements or other
obligations to issue, or agreements or other rights to convert any
obligation into, any shares of capital stock of the Company have been
granted or entered into by the Company; and the capital stock conforms
to all statements relating thereto contained in the Registration
Statement and Prospectus.
(e) The Stock and the Common Stock to be issued upon exercise
of the common stock purchase warrants to be issued to the
Representative (the "Warrants") are duly authorized, and when issued,
paid for and delivered pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and free of
preemptive rights of any security holder of the Company. Neither the
filing of the Registration Statement nor the offering or sale of the
Stock as contemplated in this Agreement gives rise to any rights, other
than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock, except as described in the
Registration Statement.
(f) This Agreement, the Warrants and the Advisory Agreement
(to be delivered to you in accordance with Section 3(o) and 3(r),
respectively, hereof) have been duly and validly authorized, executed
and delivered by the Company. The Company has full power and lawful
authority to authorize, issue and sell the Stock to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is
required in connection with such authorization, execution and delivery
or with the authorization, issue and sale of the Stock or the Warrants,
except such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, neither the Company
nor any of its Subsidiaries is in violation, breach or default of or
under, and consummation of the transactions herein contemplated and the
fulfillment of the terms of this Agreement will not conflict with, or
result in a breach or violation of, any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any of the respective
properties or assets of the Company or any of its Subsidiaries pursuant
to the terms of any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or to which any of the respective properties or
assets of the Company or any of its Subsidiaries is subject, nor will
such action result in any violation of the provisions of the respective
articles of incorporation or the by-laws of the Company or any of its
Subsidiaries, as amended, or any statute or any
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order, rule or regulation applicable to the Company or any of its
Subsidiaries of any court or of any regulatory authority or other
governmental body having jurisdiction over the Company or any of its
Subsidiaries.
(h) Subject to the qualifications stated in the Prospectus,
the Company and each of its Subsidiaries has good and marketable title
to all respective properties and assets described in the Prospectus as
owned by the Company and each of its Subsidiaries, free and clear of
all liens, charges, encumbrances or restrictions, except such as are
not materially significant or important in relation to its respective
business; all of the material leases and subleases under which the
Company or any of its Subsidiaries is the lessor or sublessor of
properties or assets or under which the Company or any of its
Subsidiaries holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except
as described in the Prospectus, the Company and each of its
Subsidiaries is not in default in any material respect with respect to
any of the terms or provisions of any of such leases or subleases, and
no claim has been asserted by anyone adverse to rights of the Company
or any of its Subsidiaries as lessor, sublessor, lessee or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or any of its Subsidiaries to
continued possession of the leased or subleased premises or assets
under any such lease or sublease except as described or referred to in
the Prospectus; and the Company and each of its Subsidiaries owns or
leases all such properties described in the Prospectus as are necessary
to its respective operations as now conducted and, except as otherwise
stated in the Prospectus, as proposed to be conducted as set forth in
the Prospectus.
(i) Albrecht, Viggiano, Zureck & Company, P.C., who have given
their reports on certain financial statements filed and to be filed
with the Commission as a part of the Registration Statement, which are
incorporated in the Prospectus, are with respect to the Company,
independent public accountants as required by the Act and the Rules and
Regulations.
(j) The financial statements, together with related notes, set
forth in the Prospectus or the Registration Statement present fairly
the financial position and results of operations and changes in cash
flow of the Company and each of its Subsidiaries on the basis stated in
the Registration Statement, at the respective dates and for the
respective periods to which they apply. Said statements and related
notes have been prepared in accordance with generally accepted
accounting principles applied on a basis which is consistent during the
periods involved and the Rules and Regulations. The information set
forth under the captions "Dilution," "Capitalization" and "Selected
Financial Data" in the Prospectus fairly present, on the basis stated
in the Prospectus, the information included therein.
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(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, neither the
Company nor any of its Subsidiaries has incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of
business, or entered into any transaction not in the ordinary course of
business, which is material to the respective businesses of the Company
or any of its Subsidiaries, and there has not been any change in the
capital stock of, or any incurrence of short-term or long-term debt by,
the Company or any of its Subsidiaries or any issuance of options,
warrants or other rights to purchase the capital stock of the Company
or any of its Subsidiaries or any adverse change or any development
involving, so far as the Company can now reasonably foresee a
prospective adverse change in the respective conditions (financial or
other), net worth, results of operations, businesses, key personnel or
properties of the Company or any of its Subsidiaries which would be
material to the respective businesses or financial conditions of the
Company or any of its Subsidiaries and neither the Company nor any of
its Subsidiaries has become a party to, and neither the respective
businesses nor the properties of the Company or any of its Subsidiaries
has become the subject of, any material litigation whether or not in
the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action,
suit or proceeding to which the Company or any of its Subsidiaries is a
party before or by any court or governmental agency or body, which
might result in any material adverse change in the respective
conditions (financial or other), business prospects, net worths, or
properties of the Company or any of its Subsidiaries, nor are there any
actions, suits or proceedings related to environmental matters or
related to discrimination on the basis of age, sex, religion or race;
and no labor disputes involving the employees of the Company or any of
its Subsidiaries exist or are imminent which might materially adversely
affect the conduct of the respective businesses, properties or
operations or the financial conditions or results of operations of the
Company or any of its Subsidiaries.
(m) Except as disclosed in the Prospectus, the Company and
each of its subsidiaries has filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown
as due thereon; and there is no tax deficiency which has been or to the
knowledge of the Company might be asserted against the Company or any
of its Subsidiaries.
(n) The Company and each of its Subsidiaries has sufficient
licenses, permits and other governmental authorizations as are required
for the conduct of its respective business or the ownership of its
properties as described in the Prospectus and is in all material
respects complying therewith and owns or possesses adequate rights to
use all material trademarks, service marks, trade-names, trademark
6
registrations, service xxxx registrations, copyrights and licenses
necessary for the conduct of such business and none of the foregoing
are in dispute or are in conflict with the right of any other person or
entity. To the best knowledge of the Company, none of the activities or
business of the Company or any of its Subsidiaries are in violation of,
or cause the Company or any of its Subsidiaries to violate, any law,
rule, regulation or order of the United States, any state, county or
locality, or of any agency or body of the United States or of any
state, county or locality, the violation of which would have a material
adverse impact upon the respective conditions (financial or otherwise),
businesses, properties, prospective results of operations, or net worth
of the Company or any of its Subsidiaries.
(o) Neither the Company nor any of its Subsidiaries has
directly or indirectly, at any time (i) made any contributions to any
candidate for political office, or failed to disclose fully any such
contribution in violation of law or (ii) made any payment to any state,
federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the
Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes (including franchise, capital stock or other tax, other
than income taxes, imposed by any jurisdiction) if any, which are
required to be paid in connection with the sale and transfer of the
Stock to the several Underwriters hereunder will have been fully paid
or provided for by the Company and all laws imposing such taxes will
have been fully complied with.
(q) All contracts and other documents of the Company and each
of its subsidiaries which are, under the Rules and Regulations,
required to be filed as exhibits to the Registration Statement have
been so filed.
(r) Neither the Company nor any of its Subsidiaries has taken
and will not take, directly or indirectly, any action designed to
cause, or result in, or which has constituted or which might reasonably
be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock.
(s) Neither the Company nor any of its Subsidiaries has
entered into any agreement pursuant to which any person is entitled,
either directly or indirectly, to compensation from the Company for
services as a finder in connection with the public offering referred to
herein.
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(t) Except as previously disclosed in writing by the Company
to the representative, no officer, director or stockholder of the
Company or any of its Subsidiaries has any National Association of
Securities Dealers Inc. (the "NASD") affiliation.
(u) Neither the Company nor any of the Subsidiaries is and
upon receipt of the proceeds from the sale of the Stock will be, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
(v) Neither the Company nor any of its Subsidiaries has
distributed nor will distribute prior to the First Closing Date any
offering material in connection with the offering and sale of the Stock
other than the Prospectus, the Registration Statement and the other
materials permitted by the Act.
2. Purchase, Delivery and Sale of the Stock.
(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 $______ per share of Stock, at the
place and time hereinafter specified, the number of shares of Stock set
forth opposite the names of the Underwriters in Schedule A attached
hereto (the "First Stock"), plus any additional shares of Stock which
such Underwriters may become obligated to purchase pursuant to the
provisions of Section 9 hereof. The First Stock shall consist of
1,600,000 shares of Stock.
Delivery of the First Stock against payment therefor shall
take place at the offices of Commonwealth Associates, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (or at such other place as may be designated
by agreement between you and the Company) at 10:00 a.m., New York time,
on _____, 1997, or at such later time and date as you may designate,
such time and date of payment and delivery for the First Stock being
herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants, an option to
the several Underwriters (which may be exercised, at its option, by the
Representative, individually) to purchase all or any part of an
aggregate of an additional 240,000 shares of Stock, at the same price
per share of Stock, as the Underwriters shall pay for the First Stock
being sold pursuant to the provisions of subsection (a) of this Section
2 (such additional Stock being referred to herein as the "Option
Stock"). This option may be exercised within 30
8
days after the effective date of the Registration Statement upon notice
by the Representative to the Company advising as to the amount of
Option Stock as to which the option is being exercised, the names and
denominations in which the certificates for such Option Stock are to be
registered and the time and date when such certificates are to be
delivered. Such time and date shall be determined by the Representative
but shall not be earlier than four nor later than ten full business
days after the exercise of said option, nor in any event prior to the
First Closing Date, and such time and date is referred to herein as the
"Option Closing Date." Delivery of the Option Stock against payment
therefor shall take place at the offices of Commonwealth Associates,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The number of shares of
Option Stock to be purchased by each Underwriter, if any, shall bear
the same percentage to the total number of shares of Option Stock being
purchased by the several Underwriters pursuant to this subsection (b)
as the number of shares of Stock such Underwriter is purchasing bears
to the total number of the First Stock being purchased pursuant to
subsection (a) of this Section 2, as adjusted, in each case by the
Representative in such manner as the Representative may deem
appropriate. The option granted hereunder may be exercised only to
cover overallotments in the sale by the Underwriters of First Stock
referred to in subsection (a) above. In the event the Company declares
or pays a dividend or distribution on its Common Stock, whether in the
form of cash, shares of Common Stock or any other consideration, prior
to the Option Closing Date, such dividend or distribution shall also be
paid on the Option Stock at the Option Closing Date.
(c) The Company will make the certificates for the Stock to be
purchased by the Underwriters hereunder available to you for checking
at least two full business days prior to the First Closing Date or the
Option Closing Date (which are collectively referred to herein as the
"Closing Dates"). The certificates shall be in such names and
denominations as you may request, at least two 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 Stock 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 certified or bank cashier's checks in New York
Clearing House funds, payable to the order of the Company.
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 Stock pursuant to the
provisions of subsection (b) above, payment for such stock shall be
made to or upon the order of the Company by certified or bank cashier's
checks
9
payable in New York Clearing House funds at the offices of Commonwealth
Associates, at the time and date of delivery of such Stock as required
by the provisions of subsection (b) above, against receipt of the
certificates for such Stock by the Representative for the respective
accounts of the several Underwriters registered in such names and in
such denominations as the Representative may request.
It is understood that the several Underwriters propose to
offer the Stock to be purchased hereunder to the public upon the terms
and conditions set forth in the Registration Statement, after the
Registration Statement becomes effective.
3. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective. If required, the Company
will file the Prospectus and any amendment or supplement thereto with
the Commission in the manner and within the time period required by
Rule 424(b) under the Act. Upon notification from the Commission that
the Registration Statement has become effective, the Company will so
advise you and will not at any time, whether before or after the
effective date, file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have
been advised and furnished with a copy or to which you or your counsel
shall have objected in writing or which is not in compliance with the
Act and the Rules and Regulations. At any time prior to the later of
(A) the completion by all of the Underwriters of the distribution of
the Stock contemplated hereby (but in no event more than nine months
after the date on which the Registration Statement shall have become or
been declared effective) and (B) 25 days after the date on which the
Registration Statement shall have become or been declared effective
(the "Minimum Period"), the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements
to the Registration Statement or Prospectus which, in your opinion, may
be necessary or advisable in connection with the distribution of the
Stock.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any
comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request
made by the Commission for amendment of the Registration Statement or
for supplementing of the Prospectus or for additional information with
respect thereto, of the issuance by the Commission or any state or
regulatory body of any stop order or other order or threat thereof
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary
10
prospectus, or of the suspension of the qualification of the Stock for
offering in any jurisdiction, or of the institution of any proceedings
for any of such purposes, and will use its best efforts to prevent the
issuance of any such order, and, if issued, to obtain as soon as
possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the
Act. The Company authorizes the Underwriters and dealers to use the
Prospectus in connection with the sale of the Stock for such period as
in the opinion of counsel to the several Underwriters the use thereof
is required to comply with the applicable provisions of the Act and the
Rules and Regulations. In case of the happening, at any time within
such period as a Prospectus is required under this Act to be delivered
in connection with sales by an underwriter of any event of which the
Company has knowledge and which materially affects the Company or the
securities of the Company, or which in the opinion of counsel for the
Company or counsel for the Underwriters should be set forth in an
amendment of the Registration Statement or a supplement to the
Prospectus in order to make the statements therein not then misleading,
in light of the circumstances existing at the time the Prospectus is
required to be delivered to a purchaser of the Stock or in case it
shall be necessary to amend or supplement the Prospectus to comply with
law or with the Rules and Regulations, the Company will notify you
promptly and forthwith prepare and furnish to you copies of such
amended Prospectus or of such supplement to be attached to the
Prospectus, in such quantities as you may reasonably request, in order
that the Prospectus, as so amended or supplemented, will not contain
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not
misleading. The preparation and furnishing of any such amendment or
supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to
the Underwriters, except that in case any Underwriter is required, in
connection with the sale of the Stock, to deliver a Prospectus nine
months or more after the effective date of the Registration Statement,
the Company will upon request of and at the expense of the Underwriter,
amend or supplement the Registration Statement and Prospectus and
furnish the Underwriter with reasonable quantities of prospectuses
complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder in connection
with the offering and issuance of the Stock.
(b) The Company will use its best efforts to qualify to
register the Stock for sale under the securities or "blue sky" laws of
such jurisdictions as the
11
Representative may designate and will make such applications and
furnish such information as may be required for that purpose and to
comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to
execute a general consent to service of process in any jurisdiction in
any action other than one arising out of the offering or sale of the
Stock. The Company will from time to time, prepare and file such
statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriters may
reasonably request.
(c) If the sale of the Stock provided for herein is not
consummated for any reason caused by the Company, the Company shall pay
all costs and expenses incident to the performance of the Company's
obligations hereunder, including but not limited to, all of the
expenses itemized in Section 8, including the accountable expenses of
the Underwriters, including legal fees.
(d) The Company will use its best efforts to (i) cause a
registration statement under the Exchange Act to be declared effective
concurrently with the completion of this offering (and will notify the
Representative in writing immediately upon the effectiveness of such
registration statement), and (ii) if requested by the Representative,
to obtain and keep current a listing in the Standard & Poors or Xxxxx'x
Industrial OTC Manual.
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Exchange Act, the Company, at its
expense, will furnish to its stockholders an annual report (including
financial statements audited by independent public accountants), in
reasonable detail, and at its expense, will furnish to you during the
period ending five (5) years from the date hereof, (i) as soon as
practicable after the end of each fiscal year, a balance sheet of the
Company and any of its subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and cash flow of the
Company and any subsidiaries for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon
of independent accountants; (ii) as soon as practicable after the end
of each of the first three fiscal quarters of each fiscal year,
consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are available, a
copy of all reports (financial or other) mailed to security holders;
(iv) as soon as they are available, a copy of all non-confidential
reports and financial statements furnished to or filed with the
Commission of any securities exchange or automated quotation system on
which any class of securities of the Company is listed; and (v) such
other information as you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e)
above will be on a consolidated basis
12
to the extent the accounts of the Company and its subsidiary or
subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will deliver to you at or before the First
Closing Date two signed copies of the Registration Statement including
all financial statements and exhibits filed therewith, and of all
amendments thereto, and will deliver to the several Underwriters such
number of conformed copies of the Registration Statement, including
such financial statements but without exhibits, and of all amendments
thereto, as the several Underwriters may reasonably request. The
Company will deliver to or upon the order of the several Underwriters,
from time to time until the effective date of the Registration
Statement, as many copies of any Preliminary Prospectus filed with the
Commission prior to the effective date of the Registration Statement as
the Underwriters may reasonably request. The Company will deliver to
the Underwriters on the effective date of the Registration Statement
and thereafter for so long as a Prospectus is required to be delivered
under the Act, from time to time, as many copies of the Prospectus, in
final form, or as thereafter amended or supplemented, as the
Underwriters may from time to time reasonably request.
(h) The Company will make generally available to its security
holders and deliver to you as soon as it is practicable to do so but in
no event later than 90 days after the end of twelve months after its
current fiscal quarter, an earnings statement (which need not be
audited) covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement, which
shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of
the Stock for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect
to the sale of the Stock and the application of the proceeds therefrom
as may be required pursuant to Rule 463 under the Act.
(j) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the
Registration Statement, Preliminary Prospectus or Prospectus and take
any other action, which in the reasonable opinion of Todtman, Young,
Nachamie, Xxxxxxx & Spizz, P.C., counsel to the several Underwriters,
may be reasonably necessary or advisable in connection with the
distribution of the Stock, and will use its best efforts to cause the
same to become effective as promptly as possible.
(k) The Company will reserve and keep available that maximum
number of its authorized but unissued shares of Common Stock which are
issuable upon exercise of the Warrants outstanding from time to time.
13
(l) For a period of twelve months from the First Closing Date,
no officer, director, stockholder of the Company (the "Principal
Stockholders"), holders of options and/or warrants to purchase and/or
securities convertible into or exercisable for shares of Common Stock
(hereinafter, collectively, the "Securities") will offer, sell or
dispose of, directly or indirectly, any Securities without the prior
written consent of the Representative. In order to enforce this
covenant, the Company shall impose stop-transfer instructions with
respect to such Securities until the end of each such-period.
(m) Upon completion of this offering, the Company will make
all filings required, including registration under the Exchange Act, to
obtain the listing of its Common Stock on the Nasdaq National Market,
and will effect and use its best efforts to maintain such listing for
at least five (5) years from the date of this Agreement.
(n) The Company and each of the Principal Stockholders
represents that it or he has not taken and agree that it or he will not
take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in
the stabilization or manipulation of the price of the Stock or to
facilitate the sale or resale of the Stock.
(o) On the Closing Date, and simultaneously with the delivery
of the Stock, the Company shall execute and deliver to you,
individually and not as representative of the Underwriters, the
Warrants. The Warrants will be substantially in the form of the Stock
Purchase Warrant filed as an Exhibit to the Registration Statement.
(p) The Company will not grant additional options under its
1988 Stock Option Plan to purchase in excess 100,000 shares of Common
Stock. In addition, during the 18 month period commencing on the date
of this Agreement the Company will not, without the prior written
consent of the Representative, grant options to purchase shares of
Common Stock at a price less than the lesser of (i) the initial public
offering price of the Stock or (ii) the fair market value of the Common
Stock on the date of grant.
(q) Xxxx X. Xxxxxxxxxxx will be Chief Executive Officer of the
Company on the Closing Dates. The Company has obtained key person life
insurance on the lives of each of Xxxx X. Xxxxxxxxxxx and Xxxxxx X.
Xxxxx in an amount of not less than $1 million and will use its best
efforts to maintain such insurance until the end of the third
anniversary of the effective date of the Registration Statement or, if
such individual's employment is terminated prior to such date, to
maintain such insurance on his successor until the expiration of such
period. For a period of thirteen months from the First Closing Date,
the compensation of the executive officers of the Company (other than
bonuses granted in the discretion of the Compensation
14
Committee of the Board of Directors of the Company) shall not be
increased from the compensation levels disclosed in the Prospectus.
(r) On the Closing Date and simultaneously with the delivery
of the Stock the Company shall execute and deliver to you, individually
and not as representative of the Underwriters, a financial advisory and
consulting agreement with you, in the form previously delivered to the
Company by you (the "Advisory Agreement") along with payment of the fee
due thereunder, by certified or bank cashier's checks, in New York
Clearing House Funds, payable to the order of the Representative.
(s) For a period of five (5) years from the effective date of
the Registration Statement the Company (i) at its expense, shall cause
its regularly engaged independent certified public accountants to
review (but not audit) the Company's financial statements for each of
the first three (3) 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
stockholders and (ii) shall not change its accounting firm without the
prior written consent of the Chairman or the President of the
Representative.
(t) As promptly as practicable after the Closing Date, the
Company will prepare, at its own expense, hard cover "bound volumes"
relating to the offering, and will distribute at least four of such
volumes to the individuals designated by the Representative or counsel
to the several Underwriters.
(u) The Company shall, for a period of six years after the
date of this Agreement, submit such reports to the Secretary of the
Treasury and to stockholders, as the Secretary may require, pursuant to
Section 1202 of the Internal Revenue Code, as amended, or regulations
promulgated thereunder, in order for the Company to qualify as a "small
business" so that stockholders may realize special tax treatment with
respect to their investment in the Company.
(v) The Company shall not grant any additional registration
rights to any person which are exercisable prior to 13 months after the
First Closing Date.
(w) For a period of three years after the Closing Date, the
Company shall cause the transfer agent for the Company's Common Stock,
at its own expense, to provide the Representative, if so requested,
with copies of the Company's daily transfer sheets.
(x) For a period of three years after the Closing Date, the
Company shall maintain Albrecht, Viggiano, Zureck & Company, P.C. as
the regularly engaged independent certified public accounts to the
Company, and shall not effect a change
15
therefrom without the prior written consent of the Representative;
provided that no such consent shall be necessary if the new independent
certified public accountant to the Company is a firm which is a member
of the so-called "Big Six."
(y) The Representative shall have as preferential right for a
period of two (2) years from the effective date of the Registration
Statement to act as lead manager, placement agent or investment banker,
as the case may be, in (i) purchasing for its account or selling for
the account of the Company, or any subsidiary of or successor to the
Company (collectively referred to herein as the "Company"), or any of
the Company's stockholders owning at least five percent (5%) of the
Company's outstanding securities (either immediately preceding or after
the consummation of the sale of the Stock) ("Selling Stockholders"),
any securities of the Company with respect to which the Company or any
of its Selling Stockholders may seek a private or public offering, or
(ii) any merger, acquisition or disposition of assets of the Company
(hereinafter, the events specified in items (i) and (ii) shall
collectively be referred to as the "Transactions"), if the Company uses
a lead manager, placement agent or investment banker or person
performing any such function for a fee. The Company and its Selling
Stockholders will consult with the Representative with regard to any
such Transaction and will offer the Representative the opportunity to
purchase or sell any such securities on terms not more favorable to the
Company or its Selling Stockholders than they can secure elsewhere or,
in the case of a merger, acquisition or disposition of assets, to
participate as investment banker. If the Representative fails to accept
in writing such proposal made by the Company and/or its Selling
Stockholders within ten (10) business days after the receipt by the
Representative of a notice containing such proposal by certified mail
or private overnight courier addressed to the Representative, then the
Representative shall have no further claim or right with respect to the
Transaction contained in such notice. If, thereafter such proposal is
modified, the Company or its Selling Stockholders shall adopt the same
procedure as with respect to the original proposal. Should the
Representative not avail itself of such opportunity to act in a
Transaction, as specified above, this will not affect any preferential
rights for future Transactions. Any breach by the Company or any of the
Selling Stockholders of the Representative's rights of first refusal
shall be enforceable by the Representative through injunctive relief.
The Company represents and warrants that no other person or entity has
any rights to participate in any Transaction with respect to which the
Representative shall have preferential rights.
4. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Stock which they have
respectively agreed to purchase hereunder, are subject to the accuracy (as of
the date hereof, and as of the Closing Dates) of and compliance with the
respective representations and warranties of the Company herein, to the
performance by the Company of its obligations hereunder, and to the following
conditions:
16
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New
York time, on the day following the date of this Agreement, or at such
later time or on such later date as to which you may agree in writing;
on or prior to the Closing Dates no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that or a similar purpose shall have been instituted
or shall be pending or, to your knowledge or to the knowledge of the
Company, shall be contemplated by the Commission; any request on the
part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Todtman, Young,
Nachamie, Xxxxxxx & Spizz, P.C., counsel to the several Underwriters;
and no stop order shall be in effect denying or suspending
effectiveness of such qualification nor shall any stop order
proceedings with respect thereto be instituted or pending or
threatened. If required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule
424(b) under the Act.
(b) At the First Closing Date, you shall have received the
opinion, addressed to the Underwriters, dated as of the First Closing
Date, of Ruskin, Moscou, Xxxxx & Faltischek, P.C., counsel for the
Company, in form and substance satisfactory to counsel for the several
Underwriters, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with full corporate power and
authority to own its properties and conduct its business as
described in the Registration Statement and Prospectus and is
duly qualified or licensed to do business as a foreign
corporation and is in good standing in each other jurisdiction
in which the ownership or leasing of its properties or conduct
of its business requires such qualification;
(ii) each of the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its respective state of
incorporation, as set forth on Schedule B, with full corporate
power and authority to own its properties and conduct its
business as described in the Registration Statement and
Prospectus and is duly qualified or licensed to do business as
foreign corporations and is in good standing in each other
jurisdiction in which the ownership or leasing of its
properties or conduct of its business requires such
qualification;
(iii) to the best knowledge of such counsel, (a) the
Company and each of its Subsidiaries has obtained, or is in
the process of obtaining, all licenses, permits and other
governmental authorizations necessary to the conduct of its
respective business as described in the Prospectus, (b) such
17
licenses, permits and other governmental authorizations
obtained are in full force and effect, and (c) the Company and
each of its Subsidiaries are in all material respects
complying therewith;
(iv) the authorized capitalization of the Company as
of March 31, 1997 is as set forth under "Capitalization" in
the Prospectus; all shares of the Company's outstanding stock
requiring authorization for issuance by the Company's board of
directors have been duly authorized, validly issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; the outstanding shares of Common
Stock of the Company have not been issued in violation of the
preemptive rights of any stockholder and the stockholders of
the Company do not have any preemptive rights or other rights
to subscribe for or to purchase, nor are there any
restrictions upon the voting or transfer of any Common Stock;
the Stock conforms to the description thereof contained in the
Prospectus; the Stock has been duly authorized and, when
issued, paid for and delivered pursuant to this Agreement,
will be duly and validly issued, fully paid, non-assessable,
free of preemptive rights and no personal liability will
attach to the ownership thereof, to the best knowledge of such
counsel, all prior sales by the Company of the Company's
securities have been made in compliance with or under an
exemption from registration under the Act and applicable state
securities laws and the stockholders of the Company have no
recision rights with respect to any outstanding securities of
the Company; and, neither the filing of the Registration
Statement nor the offering or sale of the Stock as
contemplated by this Agreement gives rise to any registration
rights or other rights, other than those which have been
waived or satisfied for or relating to the registration of any
shares of Common Stock;
(v) each of this Agreement, the Warrants and the
Advisory Agreement have been duly and validly authorized,
executed and delivered by the Company and assuming due
execution by each other party thereto, constitutes a legal,
valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting
enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited
by applicable law);
(vi) the certificates evidencing the Stock are in due
and proper form; the Warrants will be exercisable for shares
of Common Stock of the Company in accordance with the terms of
the Warrants and at the prices therein
18
provided for; at all times during the term of the Warrants the
shares of Common Stock of the Company issuable upon exercise
of the Warrants will have been duly authorized and reserved
for issuance upon such exercise and such shares, when issued
upon such exercise in accordance with the terms of the
Warrants and at the price provided for, will be duly and
validly issued, fully paid and non-assessable;
(vii) such counsel knows of no pending or threatened
legal or governmental proceedings to which the Company or any
of its Subsidiaries is a party which would materially
adversely affect the respective businesses, properties,
financial conditions or operations of the Company or any of
its Subsidiaries; or which question the validity of the Common
Stock of the Company, the Stock, this Agreement, the Warrants
or the Advisory Agreement, or of any action taken or to be
taken by the Company pursuant to this Agreement, the Warrants
or the Advisory Agreement, and no such proceedings are known
to such counsel to be contemplated against the Company or any
of its Subsidiaries; there are no governmental proceedings or
regulations required to be described or referred to in the
Registration Statement which are not so described or referred
to;
(viii) neither the Company nor any of its
Subsidiaries is in violation of or default under, nor will the
execution and delivery of this Agreement, the Warrants or the
Advisory Agreement, and the incurrence of the obligations
herein or therein set forth and the consummation of the
transactions herein or therein contemplated, result in a
breach or violation of, or constitute a default under the
respective certificate or articles of incorporation or
by-laws, in the performance or observance of any material
obligations, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in
any contract, indenture, mortgage, loan agreement, lease,
joint venture or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective
properties are bound or in violation of any material order,
rule, regulation, writ, injunction, or decree of any
governmental instrumentality or court, domestic or foreign;
(ix) the Registration Statement has become effective
under the Act, and to the best of such counsel's knowledge,
(a) no stop order suspending the effectiveness of the
Registration Statement is in effect, and (b) no proceedings
for that purpose have been instituted or are pending before,
or threatened by, the Commission; the Registration Statement
and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom
as to which such counsel need express no opinion) comply as to
19
form in all material respects with the applicable requirements
of the Act and the Rules and Regulations;
(x) such counsel has participated in the preparation
of the Registration Statement and the Prospectus and nothing
has come to the attention of such counsel to cause such
counsel to have reason to believe that the Registration
Statement or any amendment thereto at the time it became
effective or as of the Closing Dates contained any untrue
statement of a material fact required to be stated therein or
omitted to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading or that the Prospectus or any supplement thereto
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make statements
therein, in light of the circumstances under which they were
made, not misleading (except, in the case of both the
Registration Statement and any amendment thereto and the
Prospectus and any supplement thereto, for the financial
statements, notes thereto and other financial information and
schedules contained therein, as to which such counsel need
express no opinion);
(xi) all descriptions in the Registration Statement
and the Prospectus, and any amendment or supplement thereto,
of contracts and other documents are accurate and fairly
present the information required to be shown, and such counsel
is familiar with all contracts and other document referred to
in the Registration Statement and the Prospectus and any such
amendment or supplement or filed as exhibits to the
Registration Statement, and such counsel does not know of any
contracts or documents of a character required to be
summarized or described therein or to be filed as exhibits
thereto which are not so summarized, described or filed;
(xii) no authorization, approval, consent, or license
of any governmental or regulatory authority or agency is
necessary in connection with the authorization, issuance,
transfer, sale or delivery of the Stock by the Company, in
connection with the execution, delivery and performance of
this Agreement by the Company or in connection with the taking
of any action contemplated herein, or the issuance of the
Warrants or the Common Stock underlying the Warrants, other
than registrations or qualifications of the Stock under
applicable state or foreign securities or Blue Sky laws and
registration under the Act;
(xiii) the statements in the Registration Statement
under the captions "Business", "Use of Proceeds",
"Management", and "Description of Common Stock" have been
reviewed by such counsel and insofar as they refer to
20
descriptions of agreements, statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions,
are correct in all material respects; and
(xiv) the Stock has been duly authorized for
quotation on the Nasdaq National Market.
Such opinion shall also cover such matters incident
to the transactions contemplated hereby as the Representative
or counsel for the several Underwriters shall reasonably
request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials
as to matters of fact; and may rely as to all matters of law
other than the law of the United States or of the State of
Delaware upon opinions of counsel satisfactory to you, in
which case the opinion shall state that they have no reason to
believe that you and they are not entitled to so rely.
(c) All corporate proceedings and other legal matters relating
to this Agreement, the Registration Statement, the Prospectus and other
related matters shall be satisfactory to or approved by Todtman, Young,
Nachamie, Xxxxxxx & Spizz, P.C., counsel to the several Underwriters,
and you shall have received from such counsel a signed opinion, dated
as of the First Closing Date, together with copies thereof for each of
the other Underwriters, with respect to the validity of the issuance of
the Stock, the form of the Registration Statement and Prospectus (other
than the financial statements and other financial data contained
therein), the execution of this Agreement and other related matters as
you may reasonably require. The Company shall have furnished to counsel
for the several Underwriters such documents as they may reasonably
request for the purpose of enabling them to render such opinion.
(d) You shall have received a letter prior to the effective
date of the Registration Statement and again on and as of the First
Closing Date from Albrecht, Viggiano, Zureck & Company, P.C.,
independent public accountants for the Company, substantially in the
form approved by you, and including estimates of the Company's revenues
and results of operations for the period ending at the end of the month
immediately preceding the effective date and results of the comparable
period during the prior fiscal year.
(e) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and
correct with the same effect as if made on and as of the Closing Dates
and the Company shall have performed all of its obligations hereunder
and satisfied all the conditions on its part to be satisfied at or
prior to such Closing Date, (ii) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all
statements which are
21
required to be stated therein in accordance with the Act and the Rules
and Regulations, and in all material respects conform to the
requirements thereof, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto shall contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (iii) there shall have been, since the
respective dates as of which information is given, no material adverse
change, or any development involving a prospective material adverse
change in the respective businesses, properties or conditions
(financial or otherwise), results of operations, capital stock,
long-term or short-term debt or general affairs of the Company or any
of its Subsidiaries from that set forth in the Registration Statement
and the Prospectus, except changes which the Registration Statement and
Prospectus indicate might occur after the effective date of the
Registration Statement, and the neither Company nor any of its
Subsidiaries shall have incurred any material liabilities or agreement
not in the ordinary course of business other than as referred to in the
Registration Statement and Prospectus; and (iv) except as set forth in
the Prospectus, no action, suit or proceeding at law or in equity shall
be pending or threatened against the Company or any of its Subsidiaries
which would be required to be set forth in the Registration Statement,
and no proceedings shall be pending or threatened against the Company
or any of its Subsidiaries before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would materially and adversely
affect the respective businesses, properties, conditions (financial or
otherwise), results of operations or general affairs of the Company or
any of its Subsidiaries, and (v) you shall have received, at the First
Closing Date, a certificate signed by each of the Chairman of the Board
or the President and the principal financial or accounting officer of
the Company, dated as of the First Closing Date, evidencing compliance
with the provisions of this subsection (e).
(f) Upon exercise of the option provided for in Section 3(b)
hereof, the obligations of the several Underwriters (or, at its option,
the Representative, individually) to purchase and pay for the Option
Stock referred to therein will be subject (as of the date hereof and as
of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective
at the Option Closing Date, and no stop order suspending the
effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been instituted or
shall be pending, or, to your knowledge or the knowledge of
the Company, shall be contemplated by the Commission, and any
reasonable request on the part of the Commission for
additional information shall have been complied
22
with to the satisfaction of Todtman, Young, Nachamie, Xxxxxxx
& Spizz, P.C., counsel to the several Underwriters.
(ii) At the Option Closing Date there shall have been
delivered to you as Representative the signed opinion of
Ruskin, Moscou, Xxxxx & Faltischek, P.C., counsel for the
Company, dated as of the Option Closing Date, in form and
substance satisfactory to Todtman, Young, Nachamie, Xxxxxxx &
Spizz, P.C., counsel to the several Underwriters, together
with copies of such opinions for each of the other several
Underwriters, which opinion shall be substantially the same in
scope and substance as the opinion furnished to you at the
First Closing Date pursuant to Section 4(b), except that such
opinion, where appropriate, shall cover the Option Stock.
(iii) At the Option Closing Date there shall have
been delivered to you a certificate of the Chairman of the
Board or the President and the principal financial or
accounting officer of the Company, dated the Option Closing
Date, in form and substance satisfactory to Todtman, Young,
Nachamie, Xxxxxxx & Spizz, P.C., counsel to the several
Underwriters, substantially the same in scope and substance as
the certificate furnished to you at the First Closing Date
pursuant to Section 4(e).
(iv) At the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory
to you from Albrecht, Viggiano, Zureck & Company, P.C., dated
the Option Closing Date and addressed to the Underwriters
confirming the information in their letter referred to in
Section 4(d) hereof and stating that nothing has come to their
attention during the period from the ending date of their
review referred to in said letter to a date not more than five
business days prior to the Option Closing Date, which would
require any change in said letter if it were required to be
dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the
Option Stock shall be satisfactory in form and substance to
you, and you and Todtman, Young, Nachamie, Xxxxxxx & Spizz,
P.C., counsel to the several Underwriters, shall have been
furnished with all such documents, certificates, affidavits
and opinions as you may request in connection with this
transaction in order to evidence the accuracy and completeness
of any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or
conditions contained herein.
23
(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, for members of the NASD to execute transactions (as
principal or agent) in the Common Stock and no proceedings for the
taking of such action shall have been instituted or shall be pending,
or, to the knowledge of the several Underwriters or the Company, shall
be contemplated by the Commission or the NASD. The Company represents
that at the date hereof it has no knowledge that any such action is in
fact contemplated by the Commission or the NASD. The Company shall
advise the several Underwriters of any NASD affiliation of any of its
officers, directors, stockholders or their affiliates.
If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement
and all obligations of the several Underwriters under this Agreement
may be cancelled at, or at any time prior to, each Closing Date by the
Representative. Any such cancellation shall be without liability of the
Underwriters to the Company or the Selling Stockholder.
5. Conditions of the Obligations of the Company. The obligation of the
Company to sell and deliver the Stock is subject to the following conditions:
(a) The Registration Statement shall have become effective not
later than 10:00 A.M. New York time, on the day following the date of
this Agreement, or on such later date as the Company and the
Representative may agree to in writing.
(b) At the Closing Dates, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued
under the Act or any proceedings therefor initiated or threatened by
the Commission.
If the conditions to the obligations of the Company provided
for in this Section have been fulfilled on the First Closing Date but
are not fulfilled after the First Closing Date and prior to the Option
Closing Date, then only the obligation of the Company to sell and
deliver the Stock on exercise of the option provided for in Section
2(b) hereof shall be affected.
24
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees), to which
such Underwriter or such controlling person may become subject, under
the Act or otherwise, and will reimburse, as incurred, such Underwriter
and such controlling 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 Stock 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 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.
(b) Each Underwriter severally, but not jointly, will
indemnify and hold the Company, each of the Company's directors, each
nominee (if any) for director of the Company named in the Prospectus,
each of the Company's officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the
meaning of the Act, 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,
insofar as such losses, claims, damages or liabilities (or actions in
respect
25
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, (i) in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through you
specifically for use in the preparation thereof and (ii) relates to the
transactions effected by the Underwriters in connection with the offer
and sale of the Stock contemplated hereby. This indemnity agreement
will be in addition to any liability which the Underwriters may
otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 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 pleaded 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
26
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.
7. 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 6 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 6 provide for indemnification in
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 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 (a) 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
27
Section 7 and (b) the contribution of each contributing Underwriter shall not be
in excess of its proportionate share (based on the ratio of the number of shares
of Stock purchased by such Underwriter to the number of shares of Stock
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 and 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.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the
sale of the Stock to the Underwriters is consummated, the Company will
pay all costs and expenses incident to the performance of this
Agreement by the Company including, but not limited to, the fees and
expenses of counsel to the Company; the costs of investigative reports
regarding the Company, its principal stockholders and/or its officers
and directors and each of its Subsidiaries; the costs and expenses
incident to the preparation, printing, filing and distribution under
the Act of the Registration Statement (including the financial
statements therein and all amendments and exhibits thereto),
Preliminary Prospectus and the Prospectus, as amended or supplemented,
the fee of the NASD in connection with the offering required by the
NASD relating to the offering of the Stock contemplated hereby; all
expenses, including reasonable fees and disbursements of counsel to the
Underwriters, in connection with the qualification of the Stock under
the state securities or blue sky laws which the Representative shall
designate; the cost of printing and furnishing to the several
Underwriters copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, this Agreement, the Selling Agreement,
Underwriters' Questionnaire, Underwriters' Power of Attorney and the
Blue Sky Memorandum, any fees relating to the listing of the Common
Stock on the Nasdaq National Market or other securities exchange, the
cost of printing the certificates representing the Stock, the fees of
the transfer agent, the cost of publication of at least three
"tombstones" of the offering
28
(at least one of which shall be in a national business newspaper and
one of which shall be in a major New York newspaper) and the cost of
preparing at least four hard cover "bound volumes" relating to the
offering for individuals designated by the Representative. The Company
shall pay any and all taxes (including any transfer, franchise, capital
stock or other tax imposed by any jurisdiction) on sales to the
Underwriters hereunder. The Company will also pay all cost and expenses
incident to the furnishing of any amended Prospectus or of any
supplement to be attached to the Prospectus as called for in Section
3(a) of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at
the First Closing Date pay to Commonwealth Associates in its individual
rather than representative capacity, a non-accountable expense
allowance of $___________ of which $50,000 has been paid. In the event
the overallotment option is exercised, the Company shall pay to
Commonwealth Associates at the Option Closing Date an additional amount
equal to 1.5% of the gross proceeds from the sale of Stock by the
Company on exercise of the overallotment option. 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 Underwriters'
obligations hereunder required to be fulfilled by the Company is not
fulfilled) the Company shall be liable for the accountable expenses of
the Underwriters, 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 for the
accountable expenses of the Underwriters, including legal fees.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Representative or from any
other person for services as a finder in connection with the proposed
offering, and the Company agrees to indemnify and hold harmless the
Representative and the other Underwriters, 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 costs of defense
and investigation and all attorneys' fees), to which the Company, the
Representative or such other Underwriter or person may become subject
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the claim of any person
(other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the proposed
offering by reason of such person's or entity's influence or prior
contact with the indemnifying party.
29
9. Substitution of Underwriters. If any Underwriters shall for any
reason not permitted hereunder cancel their obligations to purchase the First
Stock hereunder, or shall fail to take up and pay for the number of First Stock
set forth opposite their respective names in Schedule A hereto upon tender of
such First Stock in accordance with the terms hereof, then:
(a) If the aggregate number of shares of First Stock which
such Underwriter or Underwriters agreed but failed to purchase does not
exceed 10% of the total number of First Stock, the other Underwriters
shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the First Stock which such
defaulting Underwriter or Underwriters agreed but failed to purchase.
(b) If any Underwriter or Underwriters so default and the
agreed number of First Stock with respect to which such default or
defaults occurs is more than 10% of the total number of First Stock,
the remaining Underwriters shall have the right to take up and pay for
(in such proportion as may be agreed upon among them) the First Stock
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 First Stock which the defaulting
Underwriter or Underwriters agreed but failed to purchase, the time for
delivery of the First Stock 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 First Stock 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 First Stock which the
defaulting Underwriter or Underwriters agreed but failed to purchase.
If it can be arranged for the remaining Underwriters or substituted
Underwriters to take up the First Stock 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 First
Stock 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 First
Stock agreed to be purchased
30
by the defaulting Underwriters or substitute another underwriter or
underwriters as aforesaid, the Company shall not find or shall not
elect to seek another underwriter or underwriters for such First Stock
as aforesaid, then this Agreement shall terminate.
If, following exercise of the option provided in Section 2(b)
hereof, any Underwriter or Underwriters shall for any reason not
permitted hereunder cancel their obligations to purchase Option Stock
at the Option Closing Date, or shall fail to take up and pay for the
number of Option Stock, which they become obligated to purchase at the
Option Closing Date upon tender of such Option Stock in accordance with
the terms hereof, then the remaining Underwriters or substituted
Underwriters may take up and pay for the Option Stock 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 Stock, the Underwriters shall be entitled
to purchase the number of Option Stock 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. Effective Date. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness until
11:00 A.M., New York time on the first full business day following the effective
date of the Registration Statement, or at such earlier time after the effective
date of the Registration Statement as you in your discretion shall first
commence the initial public offering by the Underwriters of any of the Stock.
The time of the initial public offering shall mean the time of release by you of
the first newspaper advertisement with respect to the Stock, or the time when
the Stock is first generally offered by you to dealers by letter or telegram,
whichever shall first occur. This Agreement may be terminated by you at any time
before it becomes effective as provided above, except that Sections 3(c), 6, 7,
8, 13, 14, 15 and 16 shall remain in effect notwithstanding such termination.
11. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13,
14, 15 and 16 hereof, may be terminated at any time prior to the First
Closing Date, and the option referred to in Section 2(b) hereof, if
exercised, may be cancelled at any time prior to the Option Closing
Date, by you if in your judgment it is impracticable to offer for sale
or to enforce contracts made by the Underwriters for the resale of the
31
Stock agreed to be purchased hereunder by reason of (i) the Company
having sustained a material loss, whether or not insured, by reason of
fire, earthquake, flood, accident or other calamity, or from any labor
dispute or court or government action, order or decree; (ii) trading in
securities on the New York Stock Exchange, the American Stock Exchange,
the Nasdaq SmallCap Market or the Nasdaq National Market having been
suspended or limited; (iii) material governmental restrictions having
been imposed on trading in securities generally (not in force and
effect on the date hereof); (iv) a banking moratorium having been
declared by federal or New York state authorities; (v) an outbreak of
international hostilities or other national or international calamity
or crisis or change in economic or political conditions having
occurred; (vi) a pending or threatened legal or governmental proceeding
or action relating generally to either of the Company's or any of its
Subsidiaries businesses, or a notification having been received by the
Company or any of its Subsidiaries of the threat of any such proceeding
or action, which could materially adversely affect the Company or any
of its Subsidiaries; (vii) except as contemplated by the Prospectus,
the Company or any of its Subsidiaries are merged or consolidated into
or all or substantially all of the capital stock or assets of the
Company or any of its Subsidiaries are acquired by another company or
group or there exists a binding legal commitment for the foregoing or
any other material change of ownership or control occurs; (viii) the
passage by the Congress of the United States or by any state
legislative body, or federal or state agency or other authority of any
act, measure, rule or regulation, or the adoption of any orders, rules
or regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is reasonably
believed likely by the Representative to have a material impact on the
respective businesses, financial conditions or financial statements of
the Company or any of its Subsidiaries or the market for the securities
offered pursuant to the Prospectus; (ix) any adverse change in the
financial or securities markets beyond normal market fluctuations,
having occurred since the date of this Agreement, or (x) any material
adverse change having occurred, since the respective dates of which
information is given in the Registration Statement and Prospectus, in
the respective earnings, businesses, prospects or general conditions of
the Company or any of its Subsidiaries, financial or otherwise, whether
or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 11
or in Section 10, the Company shall be promptly notified by you, by
telephone or telegram confirmed by letter.
12. Warrants. At or before the First Closing Date, the Company will
sell to Commonwealth Associates (for its own account and not as Representative
of the several Underwriters), or its designees for a consideration of $160, and
upon the terms and
32
conditions set forth in the form of Warrant annexed as an exhibit to the
Registration Statement, Warrants to purchase an aggregate of 160,000 shares of
Common Stock of the Company. In the event of conflict in the terms of this
Agreement and the Warrants, the language of the Warrants shall control.
13. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its Principal Stockholder where appropriate, and
the Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
the Underwriters, the Company or any of its officers or directors or any
controlling person and will survive delivery of and payment of the Stock and the
termination of this Agreement.
14. Notice. Any communications specifically required hereunder to be in
writing, if sent to the Underwriters, will be mailed, delivered or telegraphed
and confirmed to them at Commonwealth Associates, 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 with a copy sent to Todtman, Young, Nachamie, Xxxxxxx & Spizz,
P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or if sent to the Company, will
be mailed, delivered or telegraphed and confirmed to it at 000 Xxxxxx Xxxxxxxxx,
Xxxxxxxxx, Xxx Xxxx 00000, with a copy sent to Ruskin, Moscou, Xxxxx &
Faltischek, P.C., 000 Xxx Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxx 00000.
15. Parties in Interest. The Agreement herein get forth is made solely
for the benefit of the several Underwriters, the Company and, to the extent
expressed, the Principal Stockholders and any person controlling the Company or
any of the several Underwriters and directors of the Company, nominees for
directors (if any) named in the Prospectus, its officers who have signed the
Registration Statement, and their respective executors, administrators,
successors, and assigns and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include any purchaser, as such purchaser, from any of the several
Underwriters of the Stock. All of the obligations of the Underwriters hereunder
are several and not joint.
16. Applicable Law. This Agreement will be governed by, and construed
in accordance with, the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
33
If the foregoing is in accordance with your understanding of our
agreement kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the several Underwriters in accordance
with its terms.
Very truly yours,
SYSCOMM INTERNATIONAL CORPORATION
By: _______________________________
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
COMMONWEALTH ASSOCIATES
By: _______________________________
Xxxxxxx Xxxxx, Managing Director
For itself and as
Representative of the
several Underwriters
34
SCHEDULE A
----------
Name of Underwriter Number of Shares of Stock to be Purchased
------------------- -----------------------------------------
Commonwealth Associates 1,600,000
TOTAL 1,600,000
=========
Total:____________
Schedule A-1
SCHEDULE B
----------
Subsidiary State of Incorporation
---------- ----------------------
Information Technology Services, Inc. New York
Schedule B-1
