UNDERWRITING AGREEMENT
______________, 1996
X.X. Xxxxxx & Co., Inc.
0000 Xx. Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Gentlemen:
NEW YORK HEALTH CARE, INC., a New York corporation (the "Company"),
confirms its agreement with X.X. Xxxxxx & Co., Inc. ("Xxxxxx," "you" or the
"Underwriter") with respect to the sale by the Company and the purchase by the
Underwriter 1,250,000 shares ("Shares") of the Company's Common Stock, $.01 par
value per share ("Common Stock"). Such Shares are hereinafter referred to as the
"Firm Shares."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also sell to the Underwriter up to an additional 187,500 Shares
for the purpose of covering over-allotments, if any. Such 187,500 Shares are
hereinafter referred to as the "Option Shares." The Company also proposes to
issue and sell to you warrants (the "Underwriter's Warrants") pursuant to the
Underwriter's Warrant Agreement (the "Underwriter's Warrant Agreement") for the
purchase of an additional 125,000 Shares. The Shares issuable upon exercise of
the Underwriter's Warrants are hereinafter referred to as the "Underwriter's
Securities." The Firm Shares, the Option Shares, the Underwriter's Warrants and
the Underwriter's Securities (collectively, hereinafter referred to as the
"Securities") are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each Underwriter
that:
(a) A registration statement (File No.333-08155) on Form SB-2 relating to
the public offering of the Securities, including a preliminary form of
prospectus, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity in all material respects with the
requirements of the Securities Act of 1933 (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") promulgated thereunder, and has been filed with
the Commission under the Act. "Preliminary Prospectus" shall mean each
prospectus filed pursuant to Rule 430 of the Rules and Regulations. The
registration statement (including all financial schedules and exhibits) as
amended at the time it becomes effective and the final prospectus included
therein are respectively hereinafter referred to as the "Registration
Statement," and the "Prospectus," except that (i) if the
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prospectus first filed by the Company pursuant to Rule 424(b) or Rule 430A of
the Rules and Regulations or otherwise utilized and not required to be so filed
shall differ from said prospectus as then amended, the term "Prospectus" shall
mean the prospectus first filed pursuant to Rule 424(b) or Rule 430A or so
utilized from and after the date on which it shall have been filed or utilized,
and (ii) 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 defined in Section 2(b), the
term "Registration Statement" shall include such registration statement as so
amended or supplemented, or both, as the case may be, and the term "Prospectus"
shall include the prospectus as so amended or supplemented, or both, as the case
may be.
(b) At the time the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined herein) and each
Option Closing Date (as defined herein), if any, and during such longer period
as the Prospectus may be required to be delivered in connection with sales by
the Underwriter or a dealer, (i) the Registration Statement and Prospectus will
in all material 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, in light of the circumstances in
which they were made, or necessary to make the 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 you or by or on
behalf of the Underwriter for use in the preparation thereof. It is understood
that the statements set forth in the Prospectus with respect to stabilization,
the material set forth in the second, fourth and twelfth paragraphs under the
heading "Underwriting" and the identity of counsel to the Underwriter under the
heading "Legal Matters" constitute the only information furnished in writing by
you, or by the Underwriter through you, for inclusion in the Registration
Statement and Prospectus, as the case may be.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of New York, 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 affect its business, properties or financial condition.
(d) The authorized capital stock of the Company as of the Effective Date is
set forth under "Capitalization" in the Prospectus. The 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; 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
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the Company. The Securities conform in all material respects to all statements
relating thereto contained in the Registration Statement and Prospectus.
(e) The Securities are duly authorized and, when issued, delivered and paid
for 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.
(f) This Agreement, the Underwriters' Warrant Agreement, the Financial
Consulting Agreement described in Subsection 3(s) (the "Financial Consulting
Agreement") and the Merger and Acquisition and Indemnification Agreements
described in Subsection 3(w) (collectively, "M/A Agreement") have been duly and
validly authorized, and this Agreement has been executed and delivered by the
Company and, assuming due execution by the Company with regard to the
Underwriter's Warrant, Financial Consulting and M/A Agreements and by the other
party or parties hereto and thereto, constitutes and will constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the rights of creditors
generally. The Company has full power and lawful authority to authorize, issue
and sell the Securities to be sold by it hereunder on the terms and conditions
set forth herein, and no consent, approval, authorization or other order of
anyone, including any governmental authority, is required in connection with the
authorization, issuance and sale of the Securities or the Underwriter's Warrant,
except such as may be required under the Act or state or corporate securities
laws, all of which have been duly obtained.
(g) The Company is not in violation, breach or default of or under, and the
consummation of the transactions herein contemplated, and the fulfillment of the
terms of this Agreement and the agreements described in Subsection 1(f) will not
conflict with, or, with or without giving the notice or the passage of time or
both, result in a breach 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 pursuant to the terms of, any indenture, mortgage, deed of trust,
loan agreement or other material agreement or instrument to which the Company is
a party or by which the Company may be bound or to which any of the property or
assets of the Company are subject, nor will such action result in any violation
of the provisions of the certificate of incorporation or the by-laws of the
Company, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental body
having jurisdiction over the Company, or any judgment or order of any court or
other tribunal by which the Company may be bound; in each case where the breach
or default would have a material adverse effect on the Company.
(h) Subject to the qualifications stated in the Prospectus, the Company has
good and marketable title to all properties and assets described in the
Prospectus as owned by it, free and clear of all liens, charges, encumbrances or
restrictions, or any other rights whatsoever of any other entity or person,
except such as are not materially significant or important in relation to its
business; all of the leases and subleases under which the Company is the lessor
or sublessor of
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properties or assets or under which the Company 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 is not in default with
respect to any of the terms or provisions of any of such leases or subleases
and, except as described in the Prospectus, no claim has been asserted by anyone
adverse to rights of the Company as lessor, sublessor, lessee or sublessee under
any of the leases or subleases to which it is a party, or affecting or
questioning the right of the Company 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 owns or leases all
such properties described in the Prospectus as are necessary to its operations
as now conducted.
(i) Except as set forth in the Prospectus, the Company owns or possesses
adequate rights to use all material patents, patent applications, trademarks,
xxxx registrations, copyrights and licenses necessary for the conduct of its
business and has not received any notice of conflict with the asserted rights of
others in respect thereof. All patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, franchises and
other intangible properties and assets (all of the foregoing being herein called
"Intangibles") that the Company owns or has pending, or under which it is
licensed are accurately described in the Prospectus. There is no right under any
Intangible, necessary to the business of the Company as presently conducted or
as the Prospectus indicates it contemplates conducting, except as accurately
described in the Prospectus. Except as set forth in the Prospectus, to the
knowledge of the Company, it has not infringed, is not infringing, and has not
received notice of infringement with respect to, asserted Intangibles of others,
except for such infringement or alleged infringement that has not had, or cannot
be reasonably expected to have, a material adverse effect on the financial
condition, results of operations, business, properties, assets or future
prospects of the Company. Except as accurately described in the Prospectus, to
the knowledge of the Company, there is no infringement by others of any of the
Intangibles of the Company. Except as accurately described in the Prospectus, to
the knowledge of the Company, there is no Intangible of any other entity or
person which has had or may in the future have a material adverse effect on the
financial condition, results of operations, business, properties, assets or
future prospects of the Company.
(j) To the knowledge of the Company, X. X. Xxxxxx & Co., LLP, who have
given their report on certain financial statements filed and to be filed with
the Commission as a part of the Registration Statement, which are included in
the Prospectus, are with respect to the Company independent public accountants
as required by the Act and the Rules and Regulations.
(k) The financial statements and schedules, 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 flows of the
Company on the basis stated in the Registration Statement, at the respective
dates and for the respective periods to which they apply. Said statements and
schedules and related notes have been prepared in accordance with generally
accepted accounting principles applied on a basis which is consistent during the
periods involved. To the knowledge of the Company, no other financial statements
are required by Form SB-2 or otherwise to be included in the Registration
Statement or the Prospectus. There has at no time
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been a material adverse change in the financial condition, results of
operations, business, properties, or assets of the Company from the latest
information set forth in the Registration Statement or the Prospectus, except as
properly described in the Prospectus; and, except as set forth in the
Prospectus, there is no fact known to the Company which could reasonably be
expected to have a material and adverse effect on the future prospects of the
Company (other than political or economic matters of general applicability or as
properly described in the Prospectus).
(l) Except as set forth in the Prospectus, subsequent to the respective
dates as of which information is given in the Registration Statement and
Prospectus, the Company has not 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
business of the Company, and there has not been any change in the capital stock
of, or any incurrence of long-term debt by, the Company or any issuance of
options (except for the issuance of options pursuant to the Company's
Performance Incentive Stock Option Plan), warrants or other rights to purchase
the capital stock of the Company or any adverse change or any development
involving, so far as the Company can now reasonably foresee, a prospective
adverse change in its condition (financial or other), net worth, results of
operations, business, management or properties which would be material to the
business or financial condition of the Company, and the Company has not become
party to, and neither the business nor the property of the Company has become
the subject of, any material litigation whether or not in the ordinary course of
business.
(m) Except as set forth in the Prospectus, there is not now pending nor, to
the knowledge of the Company, threatened, any action, suit or proceeding
(including those related to environmental matters, discrimination on the basis
of age, sex, religion or race, or any regulatory matters) to which the Company
is a party before or by any court or governmental agency or body, which could
result in any material adverse change in the condition (financial or other),
business prospects, net worth or properties of the Company; and no labor
disputes involving the employees of the Company exist which could be expected to
materially adversely affect the conduct of the business, property or operations
or the financial condition or earnings of the Company.
(n) Except as set forth in the Prospectus, the Company (i) has paid all
federal, state, local and foreign taxes for which it is liable to the extent
such taxes are due and payable, including, but not limited to, withholding taxes
and amounts payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has furnished all information returns it is
required to furnish pursuant to the Code, (ii) has established adequate reserves
for such taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(o) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are executed
in accordance with management's general or specific authorizations; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
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principles and to maintain accountability for assets; (C) access to assets is
permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(p) Except as set forth in the Prospectus, the Company has sufficient
licenses, permits and other governmental authorizations currently required for
the conduct of its business or the ownership of its property as described in the
Prospectus and is in all material respects complying therewith. To the best
knowledge of the Company, none of the activities or business of the Company is
in violation of, or could cause the Company to violate, any law, rule,
regulation or order of the United States, any state, county or locality, or of
any agency or locality, the violation of which would have a material adverse
impact upon the condition (financial or otherwise), business, property,
prospective results of operations or net worth of the Company.
(q) The Company has not, directly or indirectly, at any time (i) made any
contributions to any candidate for political office, or if made, failed to
disclose fully any such contribution made 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.
(r) On the Closing Dates (as defined in Section 2 (c)), 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 Securities to the Underwriter
hereunder will have been fully paid or provided for by the Company and all laws
imposing such taxes will have been fully complied with.
(s) Any contract, agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has been properly
described therein. Any contract, agreement, instrument, lease, or license
required to be filed as an exhibit to the Registration Statement has been filed
with the Commission as an exhibit to the Registration Statement.
(t) The Company has not 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 Common Stock to facilitate the sale or resale of the Securities
hereunder.
(u) The Company has no subsidiaries.
(v) Except as described in the Prospectus, there are no claims, payments,
issuances, arrangements or understandings, oral or written, for services in the
nature of a finder's or origination fee with respect to the sale of the
Securities hereunder or any other arrangements,
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agreements, understandings, payments or issuances with respect to the
Company or any of its officers, directors, stockholders, partners, employees or
affiliates that may affect the Underwriter' compensation, as determined by the
National Association of Securities Dealers, Inc. ("NASD").
(w) Neither the Commission nor, to the knowledge of the Company, the "blue
sky" or securities authority of any jurisdiction has issued an order (a "Stop
Order") suspending the effectiveness of the Registration Statement, preventing
or suspending the use of any Preliminary Prospectus, the Prospectus, the
Registration Statement, or any amendment or supplement thereto, refusing to
permit the effectiveness of the Registration Statement, or suspending the
registration or qualification of the Securities, nor, to the knowledge of the
Company, has any of such authorities instituted or threatened to institute any
proceedings with respect to a Stop Order.
(x) The Company has all requisite power and authority to execute, deliver,
and perform this Agreement. All necessary corporate proceedings of the Company
have been duly taken to authorize the execution, delivery and performance of
this Agreement by the Company. This Agreement has been duly authorized, executed
and delivered by the Company, is the legal, valid and binding obligation of the
Company, and is enforceable as to the Company in accordance with its terms
(subject to applicable bankruptcy, insolvency and other laws affecting
creditors' rights generally and except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws and public policy).
Except as described in the Prospectus, no consent, authorization, approval,
order, lien, certificate, or permit of or from, or declaration or filing with,
any federal, state, local or other governmental authority or any court or other
tribunal is required for the execution, delivery, or performance of this
Agreement by the Company (except filings under the Act which have been or will
be made before the Closing Date and such consents consisting only of consents
under "blue sky" or securities laws which have been obtained at or prior to the
date of this Agreement). No consent of any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding to which the Company
is a party, or to which any of its properties or assets are subject, is required
for the execution, delivery or performance or this Agreement; and the execution,
delivery, and performance of this Agreement will not violate, result in a breach
of, conflict with, or (with or without the giving of notice or the passage of
time or both) entitle any party to terminate or call a default under any such
material contract, agreement, instrument, lease, license, arrangement or
understanding, or violate or result in a breach of any term of the articles of
incorporation or by-laws of the Company, or violate, result in a breach of, or
conflict with, any law, rule, regulation, order, judgment, or decree binding on
the Company or to which any of its operations, businesses, properties, or assets
is subject.
(y) The Company has caused to be duly executed agreements ("Lock-up
Agreements") pursuant to which each of the Company's officers, directors and
stockholders has agreed (i) not to, directly or indirectly, offer to sell, sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or other
encumber or dispose of any shares of Common Stock or securities convertible
into, exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
Rules and Regulations or otherwise) or dispose of any beneficial interest
therein for a period of 24 months
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following the Closing Date without the prior written consent of the
Underwriter (provided, however, that as to transfer to immediate family members,
trusts for such family members or recognized charities, which tranferees execute
like Lock-up Agreements, such consent shall not be unreasonably withheld), and
(ii) during the five (5) year period following the Closing Date, to give the
Underwriter the right to purchase for its own account or sell for the account of
such persons, any securities sold by such persons pursuant to Rule 144. The
Company has no reason to believe that the Lock-up Agreements are not legally
binding upon, and enforceable against, the respective security holder
signatories thereto. The Company will cause the Transfer Agent to xxxx an
appropriate legend on the face of stock certificates representing all of such
securities and to place "stop transfer" orders on the Company's stock ledgers.
(z) The Common Stock has been approved for quotation on the National
Association of Securities Dealers, Inc. Automated Quotation System Small Cap
Market ("NASDAQ"), and approved for listing on the Boston Stock Exchange
("BSE"), subject to notice of issuance.
(aa) Except as set forth in the Prospectus, no officer, director, principal
stockholder or partner of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing agreements, arrangements, understandings or transactions,
or proposed agreements, arrangements, understandings or transactions, between or
among the Company, and any officer, director, principal stockholder of the
Company, or any partner, affiliate or associate of any of the foregoing persons
or entities required to be set forth in the Prospectus.
(bb) Any certificate signed by any officer of the Company and delivered to
the Underwriter or to Underwriter' Counsel (as defined herein) shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(cc) The minute book of the Company has been made available to the
Underwriter and contains a complete record in all material respects of all
meetings and actions of the directors and stockholders of the Company,
respectively, since the time of its respective incorporation and accurately
reflects all transactions referred to in such minutes in all material respects.
(dd) Except and to the extent described in the Prospectus, no holders of
any securities of the Company or of any options, warrants or other convertible
or exchangeable securities of the Company have the right to include any
securities issued by the Company in the Registration Statement or in any other
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and except as described in the
Registration
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Statement, no person or entity holds any price protection anti-dilution rights
with respect to any securities of the Company.
(ee) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance in all material respects
with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours. There are no pending investigations involving the Company, by
the U.S. Department of Labor, or any other governmental agency responsible for
the enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company, or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company.
(ff) Except as described in the Prospectus, the Company does not maintain,
sponsor or contribute to any program or arrangement that is an "employee pension
benefit plan," an "employee welfare benefit plan," or a "multiemployer plan" as
such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). The Company does not maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of ERISA. No
ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, which could subject the Company to any tax penalty on prohibited
transactions and which has not adequately been corrected. Each ERISA Plan is in
compliance with all material reporting, disclosure and other requirements of the
Code and ERISA as they relate to any such ERISA Plan. Determination letters have
been received from the Internal Revenue Service with respect to each ERISA Plan
which is intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
(gg) The Company has as of the effective date of the Registration Statement
(A) entered into employment agreements with Xxxxx Xxxxx and Xxxxx Xxxxxxxxx
providing for annual salaries of $175,000 and $140,000 respectively, each on
terms and conditions satisfactory to the Representative, and (B) purchased
"key-man" insurance on the lives of Xxxxx Xxxxx and Xxxxx Xxxxxxxxx which name
the Company as the sole beneficiary on terms and conditions satisfactory to the
Representative.
(hh) Immediately prior to the effective date of the Registration Statement
there shall be no more than an aggregate of 2,593,750 shares of Common Stock
issued and outstanding (including any and all (A) securities with equivalent
rights as the Common Stock, (B) Common
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Stock or such equivalent securities, issuable upon the exercise of options,
warrants and other contract rights, and (C) securities convertible directly or
indirectly into Common Stock or such equivalent securities, and excluding the
Underwriter's Warrant).
2. Purchase, Delivery and Sale of the Shares.
(a) Subject to the terms and conditions of this Agreement, and upon the
basis of the representations, warranties and agreements herein contained, the
Company agrees to issue and sell to the Underwriter, and the Underwriter agrees
to buy from the Company, at $3.60 per Share at the place and time hereinafter
specified, the Firm Shares.
Delivery of the Firm Shares against payment therefor shall take place at
the offices of X.X. Xxxxxx & Co., Inc., 0000 Xx. Xxxx Xxxxxx, Xxxxxxxxx, 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 ___________, 1996, or at such
later time and date as you may designate, such time and date of payment and
delivery for the Firm Shares being herein called the "First Closing Date." Time
shall be of the essence and delivery at the time and place specified in this
subsection (a) is a further condition to the obligations of the Underwriter
hereunder.
(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 Underwriter to purchase
all or any part of an aggregate of 187,500 additional Shares at the same price
per Share as the Underwriter shall pay for the Firm Shares being sold pursuant
to the provisions of subsection (a) of this Section 2 (such additional Shares
being referred to herein as the "Option Shares"). This option may be exercised
within 45 days after the Effective Date upon notice by you to the Company
advising it as to the amount of Option Shares as to which the option is being
exercised, the names and denominations in which the certificates for such Option
Shares are to be registered and the time and date when such certificates are to
be delivered. Such time and date shall be determined by you but shall not be
earlier than four and not 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 Shares against payment therefor shall take place at the offices of X.X.
Xxxxxx & Co., Inc., 0000 Xx. Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (or at such
other place as may be designated by agreement between you and the Company). Time
shall be of the essence and delivery at the time and place specified in this
subsection (b) is a further condition to the obligations of the Underwriter
hereunder.
The Option granted hereunder may be exercised only to cover over-allotments
in the sale by the Underwriter of Firm Shares referred to in subsection (a)
above.
(c) The Company will make the certificates for the Shares to be purchased
by the Underwriter hereunder available to you for inspection 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
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"Closing Dates" and individually as a "Closing Date"), as the case may be. The
certificates shall be in such names and denominations as you may request, at
least two full business days prior to the relevant Closing Dates. Time shall be
of the essence and the availability of the certificates at the time and place
specified in this Agreement is a further condition to the obligations of the
Underwriter.
Definitive certificates in negotiable form for the Shares to be purchased
by the Underwriter hereunder will be delivered by the Company to you for the
account of the Underwriter against payment of the purchase price by you, for the
account of the Underwriter, at your option, by certified or bank cashier's
checks in New York Clearing House funds or by wire transfer, payable to the
order of the Company or up to three designees of the Company.
In addition, in the event the Underwriter exercises the option to purchase
from the Company all or any portion of the Option Shares pursuant to the
provisions of subsection (b) above, payment for such Option Shares shall be made
to or upon the order of the Company by you, for the account of the Underwriter,
at your option, by certified or bank cashier's checks payable in New York
Clearing House funds or by wire transfer, at the offices of X.X. Xxxxxx & Co.,
Inc. at the time and date of delivery of such Option Shares as required by the
provisions of subsection (b) above, against receipt of the certificates for such
Option Shares by you, for the account of the Underwriter, registered in such
names and in such denominations as you may request.
It is understood that the Underwriter propose to offer the Shares to be
purchased hereunder to the public upon the terms and conditions set forth in the
Registration Statement, after the Registration Statement becomes effective.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriter Underwriter's Warrants, for an aggregate purchase price of $5.00,
which warrants shall entitle the holders thereof to purchase an aggregate of
125,000 shares of Common Stock. The Underwriter's Warrants shall be exercisable
for a period of four (4) years commencing one (1) year from the effective date
of the Registration Statement at a price equaling one hundred twenty percent
(120%) of the initial public offering price of the Shares. The Underwriter's
Warrant Agreement and form of Warrant Certificate shall be substantially in the
form filed as Exhibit 4.2 to the Registration Statement. Payment for the
Underwriter's Warrants shall be made on the Closing Date.
3. Covenants of the Company
The Company covenants and agrees with the Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and, upon notification from the Commission that
the Registration Statement has become effective, will so advise you and will not
at any time, whether before or after the Effective
-11-
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 counsel for the Underwriter 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 the
Underwriter of the distribution of the Securities contemplated hereby (but in no
event more than nine months after the Effective Date) and (B) 25 days after the
Effective Date, 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 reasonable opinion, may be necessary or advisable
in connection with the distribution of the Securities.
Promptly after you or the Company is advised thereof, you will advise the
Company or the Company will advise you, as the case may be, 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 orders or other order suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering in any jurisdiction, or the institution of any proceedings for any of
such purposes, and the Company 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
Underwriter and selected dealers to use the Prospectus in connection with the
sale of the Securities for such period as in the opinion of counsel for the
Underwriter 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 the Act to be delivered in
connection with sales by an underwriter or dealer, of any event of which the
Company has knowledge and which materially affects the Company or the
Securities, or which in the opinion of counsel for the Company or counsel for
the Underwriter should be set forth in an amendment to 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 Securities, or
in case it shall be necessary to amend or supplement the Prospectus to comply
with the Act 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 facts 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
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amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriter, except that in case the Underwriter are
required, in connection with the sale of the Securities, to deliver a Prospectus
nine months or more after the Effective Date, 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 (the "Exchange Act"), and the rules and
regulations promulgated thereunder in connection with the issuance and offering
of the Securities.
(b) The Company will use its best efforts to qualify or register the
Securities for sale under the securities or "blue sky" laws of such
jurisdictions as you may designate and will make such applications and the
Company will furnish such information to counsel for the Underwriter as may be
required for that purpose and to comply with such laws, provided that 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 process in any
jurisdiction in any action other than one arising out of the offering or sale of
the Securities. 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 you may reasonably request.
(c) If the sale of the Securities provided for herein is not consummated
due to the Company's breach of any representation or warranty or condition
contained in this Agreement, or because of the Company's actions or failure to
take such actions as are reasonably required hereunder, and the Underwriter is
prepared, and desires at its option, to perform in accordance with the terms
herein, the Company shall pay all costs and expenses incident to the performance
of the Company's obligations hereunder in accordance with Section 8 hereof.
(d) The Company will furnish to you as early as practicable prior to the
Closing Date and any Additional Closing Date, as the case may be, but no less
than two full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company which have been read by
the Company's independent certified public accountants, as stated in their
letters to be furnished pursuant to Section 4(e) hereof.
(e) For so long as the Company is a reporting company under either Section
12(b), Section 12(g) or Section 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 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 subsidiaries as at the end of such fiscal
year, together with statements of income, stockholders' equity and cash flows of
the Company and any subsidiaries as at the end of such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of independent public accountants; (ii) as soon as they are available, a copy of
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all quarterly financial statements; (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; 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 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. The Company will
deliver to or upon your order, from time to time until the Effective Date as
many copies of any Preliminary Prospectus filed with the Commission prior to the
Effective Date as the Underwriter may reasonably request. The Company will
deliver to you on the Effective Date 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
Underwriter 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 12 months after the end of its current fiscal quarter,
an earnings statement (which need not be audited) covering a period of at least
12 consecutive months beginning after the Effective Date which shall satisfy the
requirements of Section 11(a) of the Act.
(i) 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
opinion of Morse, Zelnick, Rose & Lander, L.L.P., counsel to the Underwriter,
may be reasonably necessary or advisable in connection with the distribution of
the Securities and will use its best efforts to cause the same to become
effective as promptly as possible.
(j) Prior to the Effective Date, the persons identified in Paragraph 1(y)
shall have executed the Lock-up Agreements described therein. You shall have
received written waivers of demand and/or piggy back registration rights, if
any, from all the holders thereof prior to the Effective Date of the
Registration Statement.
(k) The Company shall upon the initial filing of the Registration Statement
make all filings required to obtain approval for listing for quotation of the
Securities on the National Association of Securities Dealers, Inc. ("NASDAQ")
National Market System and shall use its best efforts to maintain such listing
for at least five years from the date of this Agreement. In the event that the
Securities do not initially qualify for listing on the NASDAQ National Market
-14-
System, such Securities shall be listed on the NASDAQ SmallCap System. Within
ten days after the Effective Date, the Company shall cause the Company to be
listed in Xxxxx'x OTC Industrial Manual and shall use its best efforts to cause
such listings to be maintained for five years from the date of this Agreement.
(l) The Company represents that it has not taken, and agrees that it 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 Common Stock or Securities or
to facilitate the sale or resale of the Common Stock or Securities.
(m) During the 90-day period commencing as of the First Closing Date, the
Company will not, without your prior written consent, which consent shall not be
unreasonably withheld, grant options to purchase shares of Common Stock at a
price less than the closing bid price of the Common Stock on the Effective Date.
Furthermore, during the 24-month period commencing on the Effective Date no
options shall be granted by the Company to its officers or directors pursuant to
any stock option plan unless such option is either (a) not exercisable during
such 24-month period, or (b) the shares issuable upon exercise of such option
are subject to a lock-up agreement with the Underwriter restricting the sale of
such shares during such 24 month period.
(n) Prior to the Closing Date or any Additional Closing Date, as the case
may be, the Company will not issue any press release or other communication
directly or indirectly and will hold no press conference with respect to the
Company, or its financial condition, results of operations, business,
properties, or assets, or this offering, without your prior written consent,
which consent will not be unreasonably withheld.
(o) During the period of the offering, and for a period of twelve (12)
months from the Effective Date, the Company will not sell or otherwise dispose
of any securities of the Company, except for shares of Common Stock issuable
upon exercise of options, warrants or convertible securities outstanding on the
Effective Date or options authorized for grant under stock option plans as of
the Effective Date, without your prior written consent, which consent shall not
be unreasonably withheld. During the period of the offering, and for a period of
twenty-four (24) months from the Effective Date, the Company will not sell or
otherwise dispose of any securities of the Company pursuant to Regulation S
under the Act without your prior written consent.
(p) The Company will reserve and keep available that number of its
authorized but unissued shares of Common Stock, which are issuable upon exercise
of the Underwriter's Warrant outstanding from time to time.
(q) Within ninety (90) days from the First Closing Date, the Company shall
deliver to you, at the Company's expense, six bound volumes in form and content
acceptable to you, containing the Registration Statement and all exhibits filed
therewith, and all amendments thereto, and all other correspondence, filings,
certificates and other documents filed and/or delivered in connection with this
offering.
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(r) On or prior to the Effective Date, the Company shall retain a public
relations firm, reasonably acceptable to you, for a period of two years from the
Effective Date or such other firm reasonable acceptable to you.
(s) On or prior to the Closing Date, the Company shall enter into the
Financial Consulting Agreement with you for a period of two years pursuant to
which you will consult with the Company or corporate financing and other
financial service matters for a fee of $72,000 payable in full on the Closing
Date.
(t) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. Except as described in the Prospectus, no portion
of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(u) For a period of three (3) years from the Closing Date, the Company
shall, as the Underwriter may reasonably request, but not more often than
monthly, furnish to the Underwriter at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock (ii) the list of
holders of all of the Company's securities.
(v) For a period of three (3) years from the date of the Prospectus, the
Underwriter shall have the right, but not the obligation to designate one
nominee for director of the Company, and the principal stockholders of the
Company shall agree that they shall vote their shares for the election of such
nominee, or, at any time during such period you may, alternatively and at your
sole discretion, designate a non-voting observer receive notice of and to attend
all meetings of the Company's Board of Directors. Such individual, whether a
director or an observer, shall be reimbursed for all reasonable out-of-pocket
expenses incurred in connection with his attendance at meetings of the Board and
shall be compensated for his attendance in the same manner as the Company
compensates its non-employee directors.
(w) For a period of two (2) years from the date of the Prospectus, pursuant
to the M/A Agreement, the Company shall, if it participates in any merger,
consolidation or other transaction which the Underwriters have brought to the
Company (including an acquisition of assets or stock for which it pays, in whole
or in part, with shares of the Company's Common Stock or other securities) pay
for the Underwriters' services an amount equal to 5% of the first $3,000,000 of
value paid or received in the transaction, 2 1/2% of any consideration paid over
$3,000,000 and not greater than $5,000,000 and 2% of all such value above
$5,000,000; in addition, during such two-year period, if someone other than the
Underwriters brings such a merger, consolidation or other transaction to the
Company, and the Underwriters render advice in connection therewith, then upon
consummation of the transaction the Company shall pay to the Underwriters as a
fee the aforesaid amount or as otherwise agreed to between the Company and the
Underwriters.
(x) The Company will cause a Registration Statement under the Exchange Act
to be declared effective concurrently with the completion of the offering of the
Securities.
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(y) During the three (3) year period from the Closing Date, you shall have
the right of first refusal (the "Right of First Refusal") to purchase for your
own account or to act as underwriter or agent for any and all public or private
offerings of the securities of the Company, or any successor to or subsidiary of
the Company or other entity in which the Company has an equity interest,
(collectively referred to herein as the "Company") by the Company (the
"Subsequent Company Offering") or any secondary offering of the Company's
securities by the stockholders of the Company as of the date of this Agreement
(the "Secondary Offering"). Accordingly, if during such period the Company
intends to make a Subsequent Company Offering or the Company receives
notification from any of such stockholders of its securities of such holder's
intention to make a Secondary Offering, the Company shall notify you in writing
of such intention and of the proposed terms of the offering. The Company shall
thereafter promptly furnish you with such information concerning the business,
condition and prospects of the Company as you may reasonably request. If within
thirty (30) business days of the receipt of such notice of intention and
statement of terms you do not accept in writing such offer to act as underwriter
or agent with respect to such offering upon the terms proposed, the Company and
each of the Principal Stockholders shall be free to negotiate terms with other
underwriters with respect to such offering and to effect such offering on such
proposed terms within six (6) months after the end of such 30 business days.
Before the Company and/or any of such stockholders shall accept any modified
proposal from such underwriter, your preferential right shall be reinstated and
the same procedure with respect to such modified proposal as provided above
shall be adopted. The failure by you to exercise your Right of First Refusal in
any particular instance shall not affect in any way such right with respect to
any other Subsequent Company Offering or Secondary Offering. By execution of
this Agreement, each of such stockholders agrees to be bound by the terms of
this Section 3(m) concerning any proposed Secondary Offering of the Company's
securities.
4. Conditions of Underwriter's Obligations.
The obligations of the Underwriter to purchase and pay for the Shares
hereunder are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations, warranties and
covenants of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective and you shall
have received notice thereof not later than 4:00 p.m., New York time, on the
date 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 the Closing Dates, no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that or any similar purpose shall have been
instituted or shall be pending or, to the knowledge of the Underwriter 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, Tally, Xxxxxxx & Xxxxxx
LLP, counsel to the Underwriter; and no stop order shall be in effect
-17-
denying or suspending effectiveness of the Registration Statement nor shall any
stop order proceedings with respect thereto be instituted or pending or
threatened under the Act.
(b) At the First Closing Date, you shall have received the opinion, dated
as of the First Closing Date, of Scheichet & Xxxxx, P. C., counsel for the
Company, in form and substance satisfactory to counsel for the Underwriter, to
the effect that:
(i) the Company has been duly organized and is validly existing as a
corporation in good standing under the laws of its state of incorporation
and is duly authorized to transact business as a foreign corporation in
good standing in each other jurisdiction in which the ownership or leasing
of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified and in good
standing would not have a material adverse effect on the Company; to such
counsel's knowledge, the Company does not own an equity interest in any
other corporation, partnership, joint venture, trust or other business
entity;
(ii) to the best knowledge of such counsel, (a) the Company has
obtained, or is in the process of obtaining, all licenses, permits and
other governmental authorizations necessary to the conduct of its business
as described in the Prospectus, and (b) such obtained licenses, permits and
other governmental authorizations are in full force and effect, and the
Company is in all material respects complying therewith;
(iii) the authorized capitalization of the Company is as set forth
under "Capitalization" in the Prospectus; all of the Company's outstanding
securities requiring authorization for issuance by the Company's Board of
Directors have been duly authorized and validly issued, are fully paid and
non-assessable and conform in all material respects to the description
thereof contained in the Prospectus; the outstanding securities of the
Company have not been issued in violation of the preemptive rights of any
stockholder, under the New York Business Corporation Law or the Company's
certificate of incorporation or by-laws and the stockholders of the Company
do not have any statutory preemptive rights or, to the best of such
counsel's knowledge, other than as set forth in the Prospectus, other
rights to subscribe for or to purchase, and there are no restrictions upon
the voting of any of the Common Stock; the Shares, the Common Stock and the
Underwriter's Warrant conform to the respective descriptions thereof
contained in the Prospectus; the Securities to be issued as contemplated in
the Registration Statement have been duly authorized and, when issued and
paid for, will be non-assessable and free of preemptive rights under the
New York Business Corporation Law or the Company's certificate of
incorporation or by-laws, and, to the best of such counsel's knowledge,
contractual preemptive rights, and no personal liability will attach to the
ownership thereof; a sufficient number of shares of Common Stock have been
reserved for issuance upon exercise of the Underwriter's Warrant (without
regard to the anti-dilution provisions thereof) and upon such issuance upon
exercise in accordance with the terms of the Underwriter's Warrant, when
the purchase price is paid, will be fully paid, non-assessable
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and free of preemptive rights under the New York Business Corporation or
the Company's certificate of incorporation or by-laws and, to the best of
such counsel's knowledge, contractual preemptive rights, and no personal
liability will attach to the ownership thereof; and to the best of such
counsel's knowledge, except as set forth in the Prospectus, neither the
filing of the Registration Statement nor the offering or sale of the
Securities 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 the Securities;
(iv) this Agreement, the Financial Consulting Agreement, the M/A
Agreement and the Underwriter's Warrant have been duly and validly
authorized, executed and delivered by the Company and, assuming due
execution and delivery by you, all of such agreements are, or when duly
executed will be, the valid, legally binding and enforceable obligations of
the Company except (i) as limited by applicable bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights, or (ii) as
limited by general principles of equity; provided, however, that no opinion
need be expressed as to the enforceability of the indemnity provisions
contained in Section 6 or the contribution provisions contained in Section
7 of this Agreement;
(v) the certificates evidencing the shares of Common Stock are in
valid and proper form;
(vi) except as disclosed in the Prospectus, such counsel knows of no
pending legal or governmental proceedings to which the Company is a party
which could materially adversely affect the business, property, financial
condition or operations of the Company or which question the validity of
the Securities, this Agreement, the Financial Consulting Agreement, the M/A
Agreement or the Underwriter's Warrant, or of any action taken or to be
taken by the Company pursuant to this Agreement, the Financial Consulting
Agreement, the M/A Agreement or the Underwriter's Warrant; except as
disclosed in the Prospectus, no such proceedings are known to such counsel
to be threatened against the Company; and there are no governmental
proceedings or regulations known to such counsel required to be described
or referred to in the Registration Statement which are not so described or
referred to;
(vii) to the knowledge of such counsel, the Company is not in
violation of or default under this Agreement, the Financial Consulting
Agreement, the M/A Agreement or the Underwriter's Warrant, and the
execution and delivery hereof and thereof and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated will not result in a violation
of, or constitute a default under, the certificate of incorporation or
by-laws of the Company, or, to the best of such counsel's knowledge, in the
performance or observation of any material obligation, agreement, covenant
or condition contained in any bond, debenture, note or other evidence of
indebtedness or in any contract, indenture, mortgage, loan agreement,
lease,
-19-
joint venture or other agreement or instrument to which the Company is a
party or, to the best of such counsel's knowledge, in a violation of any
material order, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or foreign
applicable to the Company or to which it is subject;
(viii) the Registration Statement has become effective under the Act,
and to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement is in effect, no proceedings for that purpose
have been instituted or are pending before, or threatened by, the
Commission and the Registration Statement and the Prospectus (except for
the financial statements and other financial and statistical data contained
therein, or omitted therefrom, as to which such counsel need express no
opinion) comply as to form in all material respects with the applicable
requirements of the Act and the Rules and Regulations;
(ix) during the course of the preparation of the Registration
Statement, such counsel has participated in conferences with officers and
other representatives of the Company, the Underwriter and independent
public accountants of the Company, at which conferences the contents of the
Registration Statement and the Prospectus contained therein and related
matters were discussed and, although such counsel need not pass upon and
does not assume any responsibility for the adequacy, accuracy, completeness
or fairness of the statements contained in the Registration Statement and
the Prospectus contained therein (except as specified in such counsel's
opinion), solely on the basis of the foregoing without independent check
and verification, no facts have come to such counsel's attention which lead
it to believe that the Registration Statement or any amendment thereto, at
the time the Registration Statement or amendment became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading or the Prospectus or any amendment or supplement thereto, at
the time they were filed pursuant to Rule 424(b) or at the date hereof,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances under which they were
made, not misleading (except that no view need be expressed as to (i)
financial information and statistical data and information included in the
Registration Statement or the Prospectus, (ii) information included in the
Registration Statement or the Prospectus which was furnished by or on
behalf of the Underwriter, or (iii) information included in the second
paragraph of the "Underwriting" section of the Prospectus).
(x) all descriptions in the Registration Statement and the Prospectus,
and any amendment or supplement thereto, of contracts and other documents
are accurate and complete in all material respects and such counsel is
familiar with the contracts and other documents 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
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counsel does not know of any contracts or documents of a character required
to be summarized (other than real property leases) or described therein or
to be filed as exhibits thereto which are not so summarized, described or
filed; each of the Preliminary Prospectus, the Registration Statement, and
the Prospectus and any amendments or supplement thereto (other than the
financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations.
(xi) except as described in the Prospectus, 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 Securities 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 Underwriter's Warrant or the shares of Common Stock
underlying the Underwriter's Warrant, other than registration or
qualification of the Securities under applicable state or foreign
securities or blue sky laws (as to which such counsel need express no
opinion) and registration under the Act;
(xii) the statements in the Registration Statement under the captions
"Business," "Use of Proceeds," "Management - Executive Compensation" (other
than the data contained in the Executive Compensation table), "Principal
Shareholders," "Certain Transactions," "Description of Securities" and
"Shares Eligible for Future Sale" have been reviewed by such counsel and,
insofar as they refer to statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions, are correct in all
material respects;
(xiii) to the knowledge of such counsel, except as described in the
Prospectus, no holders of Common Stock or other securities of the Company
have any registration rights with respect to Common Stock, except as
described in the Prospectus or which have been validly waived or satisfied.
All registration rights known to such counsel have been so described and
have been validly waived or satisfied with respect to the transaction
contemplated hereby;
(xiv) the Company is not required, and will not be required as a
result of this offering, to be registered as an "investment company" under
the Investment Company Act of 1940, as amended.
(xv) the properties and business of the Company conform to the
description thereof contained in the Registration Statement and the
Prospectus;
(xvi) the Company is not in breach of, or in default under, any term
or provision of any license, contract, indenture, mortgage, installment
sale agreement, deed of trust,
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lease, voting trust agreement, stockholders' agreement, partnership
agreement, note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the
Company may be bound or to which the property or assets (tangible or
intangible) of the Company is subject or affected, which could materially
adversely affect the Company; and the Company is not in violation of any
term or provision of its Certificate of Incorporation or By-Laws, or in
violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation the result of which would materially and
adversely affect the condition, financial or otherwise, or the earnings,
business affairs, position, shareholders' equity, value operation,
properties, business or results of operations of the Company.
(xvii) the Company owns or possesses, free and clear of all liens or
encumbrances and rights thereto or therein by third parties, the requisite
licenses or other rights to use all trademarks, service marks, copyrights,
service names, trade names, patents, patent applications and licenses
necessary to conduct its business (including, without limitation any such
licenses or rights described in the Prospectus as being owned or possessed
by the Company), and to the best of such counsel's knowledge after
reasonable investigation, there is no claim or action by any person
pertaining to, or proceeding, pending, or threatened, which challenges the
exclusive rights of the Company with respect to any trademarks, service
marks, copyrights, service names, trade names, patents, patent applications
and licenses used in the conduct of the Company's business (including,
without limitations, any such licenses or rights described in the
Prospectus as being owned or possessed by the Company).
(xviii) except as described in the Prospectus, the Company does not
(A) maintain, sponsor, or contribute to any ERISA Plans, (B) maintain or
contribute now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA, and (C) has never completely or
partially withdrawn from a "multiemployer plan"; and
(xix) the Securities have been approved for listing on the Nasdaq
SmallCap Market and the BSE, and the Company's Registration Statement on
Form 8-A under the Exchange Act has become effective.
(xx) to such counsel's knowledge, the persons listed under the caption
"PRINCIPAL SECURITY HOLDERS" in the Prospectus are the respective
"beneficial owners" (as such phrase is defined in Regulation 13d-3 under
the Exchange Act) of the securities set forth opposite their respective
names thereunder as and to the extent set forth therein;
(xxi) to such counsel's knowledge, except as described in the
Prospectus, no person, corporation, trust, partnership, association or
other entity has the right to include and/or register any securities of the
Company in the Registration Statement, require the
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Company to file any registration statement or, if filed, to include any
security in such registration statement;
(xxii) to such counsel's knowledge, except as described in the
Prospectus, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Units hereunder or the financial consulting
arrangement between the Representative and the Company, if any, or any
other arrangements, agreements, understandings, payments or issuances that
may affect the Underwriters' compensation, as determined by the NASD;
(xxiii) the Lock-up Agreements are legal, valid and binding
obligations of the parties thereto, enforceable against each such party and
any subsequent holder of the securities subject thereto in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and
the application of equitable principles in any action, legal or equitable);
and
(xxiv) all action under the Act necessary to make the public offering
and consummate the sale of the Securities as provided in this Agreement has
been taken by the Company. The provisions of the Certificate of
Incorporation and By-laws of the Company comply as to form in all material
respects with the Act and the Rules and Regulations.
Such opinion shall also cover such matters incident to the transactions
contemplated hereby as you or counsel for the Underwriter 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 matters relating to New York and United States health care and third
party reimbursement laws and regulations on the opinion of Xxxxxxx & Xxxxxxxxxx,
P. C. and may be limited to the laws of the United States and the State of New
York.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus, and other related matters
shall be reasonably satisfactory to or approved by, Morse, Zelnick, Rose &
Lander, L.L.P., counsel to the Underwriter.
(d) At the First Closing Date, you shall have received the opinion, dated
as of the First Closing Date, of Xxxxxxx & Xxxxxxxxxx, P. C. with respect to all
matters governed by New York and United States health care and third party
reimbursement laws and regulations in form and substance satisfactory to counsel
for the Underwriter.
(e) At the time this Agreement is executed and at the Closing Date and any
Additional Closing Date, as the case may be, you shall have received a letter,
addressed to the Underwriter
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and in form and substance satisfactory to you, with reproduced copies or signed
counterparts thereof for each of the Underwriter, from X. X. Xxxxxx & Co. LLP,
dated the date of delivery:
(i) confirming that they are, and during the period covered by their
report(s) included in the Registration Statement and the Prospectus they
were, independent certified public accountants with respect to the Company
within the meaning of the Act and the public Regulations and stating that
the response to Item 10 of the Registration Statement is correct insofar as
it related to them;
(ii) stating that, in their opinion, the financial statements and
schedules of the Company included in the Registration Statement examined by
them comply in form in all material respects with the applicable accounting
requirements of the Act and the Regulations;
(iii) stating that, on the basis of procedures (but not an examination
made in accordance with generally accepted auditing standards) consisting
of a reading of the latest available unaudited interim financial statements
of the Company (with an indication of the date of the latest available
unaudited interim financial statements), a reading of the latest available
minutes of the stockholders and Board of Directors of the Company and
committees of such board, inquiries to certain officers and other employees
of the Company responsible for financial and accounting matters, and other
specified procedures and inquiries, nothing has come to their attention
that caused them to believe that (A) the unaudited financial statements and
schedules of the Company included in the Registration Statement and
Prospectus do not comply in form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and the
related published rules and regulations under either such act or are not
fairly presented in conformity with generally accepted accounting
principles (except to the extent that certain footnote disclosures
regarding any stub period may have been omitted in accordance with the
applicable rules of the Commission under the Exchange Act) applied on a
basis consistent with that of the audited financial statements appearing
therein, (B) any unaudited financial information of the Company included in
the Prospectus was not determined on a basis substantially consistent with
the corresponding information in the audited statements of operations, (C)
there was any change in the capital stock or debt of the Company or any
decrease in the net current assets or stockholders' equity of the Company
as of the date of the latest available monthly financial statements of the
Company or as of a specified date not more than five business days prior to
the date of such letter, each as compared with the amounts shown in the
September 30, 1996 balance sheet included in the Registration Statement and
Prospectus, other than as properly described in the Registration Statement
and Prospectus or any change or decrease (which shall be set forth therein)
which you in your sole discretion shall accept, or (D) there was any
decrease in revenue, net earnings, or net earnings per share of Common
Stock of the Company during the period of September 30, 1996 to the date of
the latest available monthly financial statements of the Company or to a
specified date not more than five
-24-
business days prior to the date of such letter, each as compared with the
corresponding prior year period, other than as properly described in the
Registration Statement and Prospectus or any decrease (which shall be set
forth therein) which you in your sole discretion shall accept; and
(iv) stating that they have compared specific numerical data and
financial information pertaining to the Company set forth in the
Registration Statement, each Preliminary Prospectus, and the Prospectus, if
applicable, which have been specified by you prior to the date of this
Agreement, to the extent that such data and information may be derived from
the general accounting records of the Company, and excluding any questions
requiring an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries, and other
appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the
letter, and found them to be in agreement.
(f) At each of the Closing Dates, (i) the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects with the same effect as if made on and as of such Closing
Date, 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
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall 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 statements of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; (iii) there shall have been, since the
respective dates as of which information is given, no material adverse change in
the business, properties, condition (financial or otherwise), results of
operations, capital stock, long-term or short-term debt or general affairs of
the Company 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, and the Company shall not have
incurred any material liabilities or entered into any 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 shall be pending or threatened against the
Company which would be required to be disclosed in the Registration Statement,
and no proceedings shall be pending or threatened against the Company before or
by any commission, board or administrative agency in the United States or
elsewhere, wherein an unfavorable decision, rule or finding would materially and
adversely affect the business, property, condition (financial or otherwise),
results of operations or general affairs of the Company. In addition, you shall
have received, at the First Closing Date, a certificate signed by the Chief
Executive Officer 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 (f).
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(g) Upon exercise of the option provided for in Section 2(b) hereof, the
obligations of the Underwriter to purchase and pay for the Option Shares
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, 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 the knowledge of the Underwriter 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 with to the reasonable satisfaction of Morse,
Zelnick, Rose & Lander, L.L.P., counsel to the Underwriter;
(ii) at the Option Closing Date there shall have been delivered to you
the opinion of Scheichet & Xxxxx, P. C., counsel to the Company, and
Xxxxxxx & Xxxxxxxxxx, P.C., dated as of the Option Closing Date, in form
and substance reasonably satisfactory to , Tally, Xxxxxxx & Xxxxxx
LLP, counsel to the Underwriter, which opinion shall be substantially the
same in scope and substance as the opinion furnished to you at the First
Closing Date pursuant to Sections 4(b) and 4(d) hereof, respectively,
except that such opinion, where appropriate, shall cover the Option Shares
rather than the Firm Shares. If the First Closing Date is the same as the
Option Closing Date, such opinions may be combined;
(iii) at the Option Closing Date, there shall have been delivered to
you a certificate of the Chief Executive Officer and the principal
financial or accounting officer of the Company dated the Option Closing
Date, in form and substance satisfactory to , Tally, Xxxxxxx &
Xxxxxx LLP, counsel to the Underwriter, substantially the same in scope and
substance as the certificate furnished to you at the First Closing Date
pursuant to Section 4 (f) hereof;
(iv) at the Option Closing Date, there shall have been delivered to
you a letter in form and substance satisfactory to you from X. X. Xxxxxx &
Co., LLP, dated the Option Closing Date and addressed to you, confirming
the information in each of their letters referred to in Section 4(e) hereof
as of the date thereof and stating that, without any additional
investigation required, 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 (5) 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 Shares shall be
reasonably satisfactory in form and substance to you, and you and Morse,
Zelnick, Rose & Lander, L.L.P., counsel to the Underwriter, shall have been
furnished with all such documents, certificates and opinions as you may
request in connection with this transaction in order to evidence the
accuracy
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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.
(h) If any of the conditions herein provided for in this Section shall not
have been completely fulfilled in all material respects as of the date
indicated, this Agreement and all obligations of the Underwriter under this
Agreement may be canceled at, or at any time prior to, each Closing Date by your
notifying the Company of such cancellation in writing or by telegram at or prior
to the applicable Closing Date. Any such cancellation shall be without liability
of the Underwriter to the Company, except as otherwise provided herein.
(i) The Company shall have entered into the Financial Consulting Agreement
with the Underwriter providing for the non-refundable payment to the
Underwriter, commencing on the Closing Date, of a three thousand dollar ($3,000)
per month retainer for a period of 24 months, all of which shall be payable in
advance at the Closing.
(k) The Company shall have entered into the M/A Agreement with the
Underwriter in final form and substance satisfactory to the Underwriter and its
counsel.
5. Conditions of the Obligations of the Company.
The obligation of the Company to sell and deliver the Shares is subject to
the following conditions:
(a) The Registration Statement shall have become effective not later than
4:00 p.m. New York time, on the date following the date of this Agreement, or on
such later date or time as the Company and you may agree in writing.
(b) On the Closing Dates, no stop order 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 Option Shares on exercise of
the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Underwriter, each
officer, director, employee and agent of the Underwriter and each person, if
any, who controls the Underwriter, within the meaning of the Act, from and
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys' fees), joint or
several,
-27-
to which the Underwriter or such controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon 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 thereof 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 Securities 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
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, in
light of the circumstances in which they were made; 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 through you by or on behalf of the Underwriter
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. This indemnity will be in addition to any liability which
the Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the Company, each
of its directors, each nominee (if any) for director named in the Prospectus,
each of its officers who have signed the Registration Statement, and each
person, if any, who controls the Company, within the meaning of the Act, from
and against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable 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 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 untrue statement or 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 any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or omission or alleged untrue statement or omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through you by or on behalf of the
Underwriter and with respect to the Underwriter specifically for use in
preparation thereof, provided that such written information or omissions only
pertain to disclosures in the Preliminary Prospectus, the Registration Statement
or Prospectus directly relating to the transactions effected by the Underwriter
in connection with this Offering. The Company acknowledges that the statements
with respect to the public offering of the Securities set forth under the
heading
-28-
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriter expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriter for
inclusion in the Prospectus. This indemnity will be in addition to any liability
which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof,
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent that it
may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that the fees and expenses of such counsel shall
be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the named parties to any such action (including any impleaded parties)
include both such Underwriter or such controlling person and the indemnifying
party, and the indemnified party or parties shall have reasonably concluded that
the indemnified party or parties have one or more legal defenses available to it
which are in conflict to those available to the indemnifying party (in which
case the indemnifying party shall not have the right to assume the defense of
such action on behalf of such indemnified party or parties, 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). The indemnifying party shall be free to settle any claim or action
in respect to which indemnity may be sought against it pursuant to this Section;
provided, however, that the indemnifying party shall not settle any such claim
or action if such settlement would result in the imposition against the
indemnified party or parties of a judgment, decree or order in the nature of
equitable relief without the consent of the indemnified party, which shall not
be unreasonably withheld in light of all factors of importance to such
indemnified party.
-29-
7. Contribution.
In order to provide for just and equitable contribution under the Act in
any case in which (i) the indemnified party makes claims 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 the Underwriter,
then the Company and each person who controls the Company, in the aggregate, and
the 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 the Underwriter is
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 per Share appearing thereon, and Company shall be responsible for the
remaining portion; provided, however, that if such allocation is not permitted
by applicable law, then the relative fault of the Company and the Underwriter
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 Underwriter, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriter to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this Section 7 and that the contribution of the Underwriter shall not be in
excess of its proportionate share of the portion of such losses, claims, damages
or liabilities for which the Underwriter is 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 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 each Underwriter and
each person who controls each Underwriter shall be entitled to contribution from
the Company 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
Underwriter. No contribution shall be requested with regard to the settlement of
any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
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8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of the
Shares to the Underwriter 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 and of the
Company's accountants; 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), each Preliminary Prospectus and the Prospectus, as amended or
supplemented, the fee of the National Association of Securities Dealers, Inc.
("NASD") in connection with the filing required by the NASD relating to the
offering of the Securities contemplated hereby; all expenses, including
reasonable fees and disbursements of counsel to the Underwriter, in connection
with the qualification of the Securities under the state securities or Blue Sky
Laws which you shall designate; the cost of printing and furnishing to the
Underwriter copies of the Registration Statement, each Preliminary Prospectus,
the Prospectus, this Agreement, the Selling Agreement and the Blue Sky
Memorandum; the cost of printing the certificates representing the Shares and
Warrants, the expenses of Company due diligence meetings and presentations, and
the expense (which shall not exceed $10,000) of placing one or more "tombstone"
advertisements as directed by you. 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 Underwriter hereunder. The Company will also pay
all costs 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 you the balance of a non-accountable expense allowance of
$150,000, of which $______ has been paid. In the event the over-allotment option
is exercised in part or in full, the Company shall pay to you at the Option
Closing Date, as a non-accountable expense allowance, an amount equal to 3% of
the gross proceeds received upon exercise of the over-allotment option. In the
event the proposed offering is terminated for any reason, the Underwriter shall
return any portion of the $______ advanced by the Company not previously
expended in connection with the proposed offering for actual accountable
out-of-pocket expenses. If the proposed offering is not completed due to the
Company's breach of any representation, warranty, covenant or condition
contained in this Agreement, or because of the Company's actions or failure to
take such actions as are reasonably required hereunder, and the Underwriters are
prepared to perform in accordance with the terms herein, the Company shall be
liable for all of the Underwriter's actual accountable out-of-pocket expenses,
including reasonable legal fees.
(c) No person is entitled either directly or indirectly to compensation
from the Company, from the Underwriter 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 each Underwriter, and the Underwriter agree to
indemnify and hold harmless, severally and not jointly, the Company from and
against any losses, claims, damages or liabilities, joint or several (which
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shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all attorneys' fees) to which
the indemnified party 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.
9. Effective Date.
The Agreement shall become effective upon its execution, except that you
may, at your option, delay its effectiveness until 4:00 p.m., New York time, on
the first full business day following the Effective Date, or at any such earlier
time after the Effective Date as you in your discretion shall first commence the
initial public offering by the Underwriter of any of the Shares. The time of the
initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Securities, or the time when the
Securities are first generally offered by the Underwriter 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, 12, 13, 14 and 15 shall remain in effect notwithstanding
such termination.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13, 14 and 15,
may be terminated at any time prior to the First Closing Date, and the option
referred to in Section 2 (b), if exercised, may be canceled, 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 Underwriter for the resale of
the Shares 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 or the American Stock Exchange having been suspended or
limited, (iii) material governmental restrictions having been imposed on trading
in securities generally which are 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 major international hostilities or other
national or international calamity having occurred, (vi) the passage by the
Congress of the United States or by any state legislative body of similar
impact, of any act or measure, 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
you to have a material adverse impact on the business, financial condition or
financial statements of the Company, (vii) any material adverse change in the
financial or securities markets beyond normal fluctuations in the United States
having occurred since the date of this Agreement, or (viii) any material adverse
change having occurred, since the respective dates for which information is
given in the Registration Statement and Prospectus, in
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the earnings, business, prospects or general condition of the Company, 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 10 or in Section 9, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
11. Underwriter's Warrant.
On the First Closing Date, the Company will issue to you, for total
consideration of $5.00 and upon the terms and conditions set forth in the form
of Underwriter's Warrant annexed as an exhibit to the Registration Statement, an
Underwriter's Warrant to purchase, in the aggregate, one Share for each ten Firm
Shares sold in the Offering. In the event of conflict in the terms of this
Agreement and the Underwriter's Warrant, the language of the Underwriter's
Warrant shall control.
12. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations, warranties and
other statements of the Company or its Affiliates, where appropriate, and the
Underwriter, 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
Underwriter, the Company or any of its officers or directors or any controlling
persons and will survive delivery of and payment for the Shares and the
termination of this Agreement.
13. Notice.
All communications hereunder will be in writing and, except as otherwise
expressly provided herein, if sent to the Underwriter, will be mailed, delivered
or telecopied and confirmed to it at X.X. Xxxxxx & Co., Inc. 0000 Xx. Xxxx
Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000, with a copy sent to Morse, Zelnick, Rose &
Lander, L.L.P., 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000, or if sent
to the Company, will be mailed, delivered, or telecopied and confirmed to it at
0000 XxXxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, with a copy sent to Scheichet &
Xxxxx, P. C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
14. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of the
Underwriter, the Company and, to the extent expressed, the Affiliates, any
person controlling the Company, or the Underwriter, and directors of the
Company, nominees for directors of the Company (if any) named in the Prospectus,
the officers of the Company who have signed the Registration Statement, and
their respective executors, administrators, successors and assigns, and no other
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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 Underwriter.
15. 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.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it shall become a binding
agreement between the Company and you, as Underwriter, in accordance with its
terms.
Yours very truly,
NEW YORK HEALTH CARE, INC.
By:________________________________
Officer
Dated: ______________, 1996
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
X.X. XXXXXX & CO., INC.
By:________________________________
Authorized Officer
Dated: ______________, 1996
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