EXHIBIT 1.1
Form of
Converted Organics Inc.
UNDERWRITING AGREEMENT
dated ____________, 2006
XXXXXXX INVESTMENT COMPANY, INC.
UNDERWRITING AGREEMENT
[______________], 2006
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Ladies and Gentlemen:
Introductory. Converted Organics Inc., a Delaware corporation (the
"Company") proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [___] Units, each Unit
consisting of (i) one share of the Company's common stock ("Common Stock"), (ii)
one Class A warrant to purchase one share of Common Stock (each a "Class A
Warrant" and, collectively, the "Class A Warrants"), and (iii) one Class B
warrant, to purchase one share of Common Stock (each a "Class B Warrant" and,
collectively, the "Class B Warrants" and, together with the Class A Warrants,
the "Warrants"). The Warrants are to be issued under the terms of a Warrant
Agreement (the "Warrant Agreement") by and between the Company and
[______________], as warrant agent (the "Warrant Agent"), substantially in the
form most recently filed as an exhibit to the Registration Statement
(hereinafter defined). The [___] Units to be sold by the Company are
collectively called the "Firm Units." In addition, the Company has granted to
the Underwriters an option to purchase up to an additional [___] Units (the
"Optional Units"), as provided in Section 2. The Firm Units and, if and to the
extent such option is exercised, the Optional Units, are collectively called the
"Units." Xxxxxxx Investment Company, Inc. has agreed to act as representative of
the several Underwriters (in such capacity, the "Representative") in connection
with the offering and sale of the Units.
The Company confirms its agreement with the Underwriters as follows:
SECTION 1. Representations and Warranties of the Company.
The Company represents, warrants and covenants to each Underwriter as
follows:
(a) Filing of the Registration Statement. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") a
registration statement on Form SB-2 (File No. 333-_________), which contains a
form of prospectus to be used in connection with the public offering and sale of
the Units. Such registration statement, as amended, including the financial
statements, exhibits and schedules thereto, and the documents incorporated by
reference in the prospectus contained in the registration statement at the time
such registration statement became effective, in the form in which it was
declared effective by the Commission under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), and including any required
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A, Rule 430B or Rule 430C under the Securities Act, or pursuant to the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder (collectively, the "Exchange Act"), is called the "Registration
Statement." Any registration statement filed by the Company pursuant to Rule
462(b) under the Securities Act is called the "Rule 462(b) Registration
Statement," and from and after the date and time of filing of the Rule 462(b)
Registration Statement the term "Registration Statement" shall include the Rule
462(b) Registration Statement. Such prospectus, in the form first filed pursuant
to Rule 424(b) under the Securities Act after the date and time that this
Agreement is executed and delivered by the parties hereto (the "Execution
Time"), or, if no filing pursuant to Rule 424(b) under the Securities Act is
required, the form of final prospectus relating to the Units included in the
Registration Statement at the effective date of the Registration Statement, is
called the "Prospectus." All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, the Company's preliminary
prospectus included in the Registration Statement (each a "preliminary
prospectus"), the Prospectus, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("XXXXX"). Any
reference herein to any preliminary prospectus or the Prospectus or any
supplement or amendment to either thereof shall be deemed to refer to and
include any documents incorporated by reference therein as of the date of such
reference.
(b) Compliance with Registration Requirements. The Registration Statement
has been declared effective by the Commission under the Securities Act. The
Company has complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order preventing
or suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement is in effect and no proceedings for such purpose have
been instituted or are pending or, to the best knowledge of the Company, are
contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied or will
comply in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to XXXXX (except as may be permitted by
Regulation S-T under the Securities Act), was identical in content to the copy
thereof delivered to the Underwriters for use in connection with the offer and
sale of the Units other than with respect to any artwork and graphics that were
not filed. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times until the expiration of the prospectus
delivery period required under Section 4(3) of the Securities Act, complied and
will comply in all material respects with the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. The Prospectus (including any Prospectus wrapper), as
amended or supplemented, as of its date and at all subsequent times until the
Underwriters have completed their distribution of the offering of the Units, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in
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reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by the Representative expressly for use
therein, it being understood and agreed that the only such information furnished
by the Representative consists of the information described as such in Section 8
hereof. There are no contracts or other documents required to be described in
the Prospectus or to be filed as exhibits to the Registration Statement that
have not been described or filed as required.
(c) Disclosure Package. The term "Disclosure Package" shall mean (i) the
preliminary prospectus, as amended or supplemented, (ii) the issuer free writing
prospectuses as defined in Rule 433 of the Securities Act (each, an "Issuer Free
Writing Prospectus"), if any, identified in Schedule B hereto, (iii) the pricing
terms set forth in Schedule C to this Agreement, and (iv) any other free writing
prospectus that the parties hereto shall hereafter expressly agree in writing to
treat as part of the Disclosure Package. As of ____ _.m. (Eastern time) on the
date of this Agreement (the "Initial Sale Time"), the Disclosure Package did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding sentence
does not apply to statements in or omissions from the Disclosure Package based
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representative specifically for use therein, it being
understood and agreed that the only such information furnished by or on behalf
of any Underwriter consists of the information described as such in Section 8
hereof.
(d) Company Not Ineligible Issuer. (i) At the time of filing the
Registration Statement and (ii) as of the date of the execution and delivery of
this Agreement (with such date being used as the determination date for purposes
of this clause (ii)), the Company was not and is not an Ineligible Issuer (as
defined in Rule 405 of the Securities Act), without taking account of any
determination by the Commission pursuant to Rule 405 of the Securities Act that
it is not necessary that the Company be considered an Ineligible Issuer.
(e) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus
includes any information that conflicts with the information contained in the
Registration Statement, including any document incorporated by reference therein
that has not been superseded or modified. The foregoing sentence does not apply
to statements in or omissions from any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by any
Underwriter through the Representative specifically for use therein, it being
understood and agreed that the only such information furnished by any
Underwriter consists of the information described as such in Section 8 hereof.
(f) Offering Materials Furnished to Underwriters. The Company has delivered
to the Representative five complete manually signed copies of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Representative have reasonably
requested for each of the Underwriters.
(g) Distribution of Offering Material by the Company. The Company has not
distributed and will not distribute, prior to the later of each Subsequent
Closing Date (as defined
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below) and the completion of the Underwriters' distribution of the Units, any
offering material in connection with the offering and sale of the Units other
than a preliminary prospectus, the Prospectus, any Issuer Free Writing
Prospectus reviewed and consented to by the Representative, and the Registration
Statement.
(h) The Underwriting Agreement. This Agreement has been duly authorized (to
the extent applicable), executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms, except as
rights to indemnification hereunder may be limited by applicable law and except
as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(i) Authorization of the Common Stock; Validity of Warrants and Warrant
Agreement.
(i) The Common Stock included in the Units to be purchased by the
Underwriters from the Company (including units purchasable on exercise of
the Underwriters' overallotment option described in Section ____ and the
Representative's Warrants described in Section ____) has been duly
authorized and reserved for issuance and sale pursuant to this Agreement
and, in the case of Common Stock issuable on exercise of the
Representative's Warrants, the terms thereof and, when so issued and
delivered by the Company, will be validly issued, fully paid and
nonassessable.
(ii) The Warrants included in the Units to be purchased by the Underwriters
from the Company have been duly and validly authorized by all required
corporate actions and will, when issued and delivered by the Company
pursuant to this Agreement, be validly executed and delivered by, and will
be valid and binding agreements of, the Company, enforceable in accordance
with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(iii) The Representative's Warrants have been duly and validly authorized
by all required corporate actions and will, when issued and delivered by
the Company pursuant to this Agreement, be validly executed and delivered
by, and will be valid and binding agreements of, the Company, enforceable
in accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles.
(iv) The Common Stock issuable on exercise of the Warrants has been duly
authorized and reserved for issuance and sale pursuant to their terms and,
when issued and delivered by the Company pursuant to such warrants, will be
validly issued, fully paid and nonassessable.
(v) The Warrant Agreement has been duly and validly authorized by all
required corporate actions of the Company and will, when executed and
delivered (and assuming
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due and valid execution by the Warrant Agent) constitute a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(vi) Each of the Warrants and the Representative's Warrants will, when
issued, possess rights, privileges, and characteristics as represented in
the most recent form of Warrant Agreement or Representative's Warrants, as
the case may be, filed as an exhibit to the Registration Statement.
(j) No Applicable Registration or Other Similar Rights. Except as fairly
and accurately described in the Registration Statement, there are no persons
with registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by this Agreement, except for such rights as have been duly waived.
(k) No Material Adverse Change. Except as otherwise disclosed in the
Disclosure Package, subsequent to the respective dates as of which information
is given in the Disclosure Package: (i) there has been no material adverse
change, or any development that could reasonably be expected to result in a
material adverse change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company (any such change
is called a "Material Adverse Change"); (ii) the Company has not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company in
respect of its capital stock.
(l) Independent Accountants. Xxxxxx, Xxxxxxx & Xxxxx, LLP, who have
expressed their opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) filed with the
Commission as a part of the Registration Statement and included in the
Disclosure Package and the Prospectus, is an independent registered public
accounting firm as required by the Securities Act and the Exchange Act.
(m) Preparation of the Financial Statements. Each of the historical [and
pro-forma] financial statements filed with the Commission as a part of or
incorporated by reference in the Registration Statement, and included or
incorporated by reference in the Disclosure Package and the Prospectus, presents
fairly the information provided as of and at the dates and for the periods
indicated. Such financial statements comply as to form with the applicable
accounting requirements of the Securities Act and have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included or incorporated by reference in the Registration
Statement. Each item of historical or pro-form financial data relating to the
operations, assets or liabilities of the Company and its predecessor set forth
in summary form in each of the preliminary prospectus and the Prospectus fairly
presents such information on a basis consistent with that of
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the complete financial statements contained in the Registration Statement. The
other financial and statistical information and data included in the
Registration Statement, or included or incorporated by reference into the
Disclosure Package or the Prospectus, is accurately presented and, in the case
of financial information and data, prepared on a basis consistent with such
financial statements and/or the books and records of the Company and its
subsidiaries.
(n) Incorporation and Good Standing; Subsidiaries. The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Disclosure Package and the Prospectus and to enter
into and perform its obligations under this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in good standing
in New Jersey and in each other jurisdiction in which such qualification is
required except for such jurisdictions where the failure to so qualify or to be
in good standing would not, individually or in the aggregate, result in a
Material Adverse Change. The Company does not own or control, directly or
indirectly, any corporation, association or other entity, other than
______________________.
(o) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the each of the
Disclosure Package and the Prospectus under the caption "Capitalization" (other
than for subsequent issuances, if any, pursuant to employee benefit plans
described in each of the Disclosure Package and the Prospectus or upon exercise
of outstanding options or warrants described in the Disclosure Package and
Prospectus, as the case may be). The Common Stock conforms, and, when issued and
delivered as provided in this Agreement, the Class A Warrants, the Class B
Warrants and the Representative's Warrants will comply in all material respects
to the description thereof contained in the each of the Disclosure Package and
Prospectus. All of the issued and outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable and have
been issued in compliance with federal and state securities laws. None of the
outstanding shares of Common Stock were issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. There are no authorized or outstanding
options, warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company other than those accurately
described in the Disclosure Package and the Prospectus. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted thereunder, set forth or incorporated by
reference in each of the Disclosure Package and the Prospectus accurately and
fairly presents the information required to be disclosed with respect to such
plans, arrangements, options and rights. All of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable and are owned directly by the
Company, free and clear of all liens, encumbrances, equities or claims, except
for such liens or encumbrances on such capital stock to secure indebtedness of
the Company's Subsidiaries as described in the Disclosure Package or the
Prospectus.
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(p) Quotation. The Units the Common Stock and the Warrants have been
approved for quotation on the Nasdaq Capital Market under the symbol "____" and
on the Boston Stock Exchange under the symbol "____."
(q) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. Neither the Company nor any of its subsidiaries is in
violation of its charter or by-laws or in default (or, with the giving of notice
or lapse of time, would be in default) ("Default") under any indenture,
mortgage, loan or credit agreement, note, contract, franchise, lease or other
instrument to which it is a party or by which it or it may be bound (including,
without limitation, such agreements and contracts filed as exhibits to the
Registration Statement or to which any of the property or assets of the Company
or any of its subsidiaries is subject (each, an "Existing Instrument")), except
for such Defaults as would not, individually or in the aggregate, result in a
Material Adverse Change. The Company's execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby and by
the Disclosure Package and the Prospectus (i) have been duly authorized by all
necessary corporate action and will not result in any violation of the
provisions of the charter or by-laws of the Company, (ii) will not conflict with
or constitute a breach of, or Default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, or require the consent of any other party to, any Existing
Instrument, except for such conflicts, breaches, Defaults, liens, charges or
encumbrances as would not, individually or in the aggregate, result in a
Material Adverse Change and (iii) will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company. No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental or regulatory authority or
agency, is required for the Company's execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby and by
the Disclosure Package and the Prospectus, except the registration or
qualification of the Units under the Securities Act and applicable state
securities or blue sky laws and from the National Association of Securities
Dealers, Inc. (the "NASD").
(r) No Material Actions or Proceedings. Except as otherwise disclosed in
the Disclosure Package and the Prospectus, there are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company's
knowledge, threatened (i) against or affecting the Company or any of its
subsidiaries, (ii) which have as the subject thereof any officer or director (in
such capacities) of, or property owned or leased by, the Company or (iii)
relating to environmental or discrimination matters, where in any such case (A)
there is a reasonable possibility that such action, suit or proceeding might be
determined adversely to the Company and (B) any such action, suit or proceeding,
if so determined adversely, would reasonably be expected to result in a Material
Adverse Change or adversely affect the consummation of the transactions
contemplated by this Agreement. No material labor dispute with the employees of
the Company or any of its subsidiaries exists or, to the best of the Company's
knowledge, is threatened or imminent except for such disputes as would not,
individually or in the aggregate, result in a Material Adverse Change.
(s) Intellectual Property Rights. The Company owns or possesses adequate
rights or licenses to use all patents, patent applications, trademarks, trade
names, copyrights, domain names, licenses, approvals, trade secrets and other
similar rights (collectively, "Intellectual Property Rights") reasonably
necessary to conduct its businesses as proposed to be conducted as
7
set forth in the Disclosure Package and the Prospectus; and the expected
expiration of any of such Intellectual Property Rights would not result in a
Material Adverse Change. The Company has not received any notice of infringement
or conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Change. The Company is not a party to or bound by
any options, licenses or agreements with respect to the Intellectual Property
Rights of any other person or entity that are required to be set forth in the
Disclosure Package and the Prospectus and are not described in all material
respects. None of the technology employed by the Company has been obtained or is
being used by the Company in violation of any contractual obligation binding on
the Company or, to the Company's knowledge, any of its officers, directors or
employees or otherwise in violation of the rights of any persons.
(t) All Necessary Permits, etc. Except as otherwise disclosed in the
Disclosure Package and the Prospectus or except as would not result in a
Material Adverse Change, the Company and its subsidiaries possess such valid and
current certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct its
businesses, and the Company has not received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could result in a
Material Adverse Change.
(u) Title to Properties. The Company and its subsidiaries have good and
marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(n) above (or elsewhere in the
Disclosure Package and the Prospectus), in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value of such
property and do not materially interfere with the use made or proposed to be
made of such property by the Company and its subsidiaries. The real property,
buildings, improvements, equipment and personal property held under lease by the
Company and its subsidiaries are held under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not materially interfere
with the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company and its subsidiaries.
(v) Tax Law Compliance. The Company has filed all necessary federal, state
and foreign income and franchise tax returns and has paid all taxes required to
be paid by it and, if due and payable, any related or similar assessment, fine
or penalty levied against it. The Company has made adequate charges, accruals
and reserves in the applicable financial statements referred to in Section 1(n)
above in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company has not been
finally determined.
(w) Company Not an "Investment Company." The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Units and the application of the proceeds thereof as contemplated under
the caption "Use of Proceeds" in each of the preliminary prospectus and the
Prospectus will not be, an "investment company"
8
within the meaning of the Investment Company Act and will conduct its business
in a manner so that it will not become subject to the Investment Company Act.
(x) Insurance. The Company and its subsidiaries are insured by recognized,
financially sound and reputable institutions with policies in such amounts and
with such deductibles and covering such risks as the Company reasonably believes
are adequate and customary for its business including, but not limited to,
policies covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and earthquakes. The
Company reasonably believes that it will be able (i) to renew its existing
insurance coverage as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a Material
Adverse Change. The Company has not been denied any insurance coverage which it
has sought or for which it has applied.
(y) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of any securities of the Company to facilitate the sale or resale of the
Units or the underlying securities. The Company acknowledges that the
Underwriters may engage in passive market making transactions in the Units on
the Nasdaq Capital Market in accordance with Regulation M under the Exchange
Act.
(z) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in the preliminary prospectus or the Prospectus that have not been
described as required.
(aa) Disclosure Controls and Procedures. The Company has established and
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Exchange Act), which (i) are designed to ensure that
material information relating to the Company and its subsidiaries is made known
to the Company's principal executive officer and its principal financial officer
by others within those entities, particularly during the periods in which the
periodic reports required under the Exchange Act are being prepared, (ii) will
be evaluated for effectiveness as of the end of each fiscal quarter and fiscal
year of the Company and (iii) are effective in all material respects to perform
the functions for which they were established. The Company is not aware of (a)
any significant deficiency in the design or operation of internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weaknesses in internal controls or (b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company's internal controls.
(bb) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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(cc) No Unlawful Contributions or Other Payments. Neither the Company nor,
to the best of the Company's knowledge, any employee or agent of the Company or
any of its subsidiaries has made any contribution or other payment to any
official of, or candidate for, any federal, state or foreign office in violation
of any law or of the character required to be disclosed in the Disclosure
Package and the Prospectus.
(dd) Compliance with Environmental Laws. Except as would not, individually
or in the aggregate, result in a Material Adverse Change (i) the Company and its
subsidiaries are not in violation of any federal, state, local or foreign law or
regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, "Materials of Environmental Concern"), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or any of its subsidiaries under
applicable Environmental Laws, or noncompliance with the terms and conditions
thereof, nor has the Company or its subsidiaries received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, that alleges that the Company or any of its subsidiaries is in
violation of any Environmental Law; (ii) there is no claim, action or cause of
action filed with a court or governmental authority, no investigation with
respect to which the Company or any of its subsidiaries has received written
notice, and no written notice by any person or entity alleging potential
liability for investigatory costs, cleanup costs, governmental responses costs,
natural resources damages, property damages, personal injuries, attorneys' fees
or penalties arising out of, based on or resulting from the presence, or release
into the environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or in
the past (collectively, "Environmental Claims"), pending or, to the best of the
Company's knowledge, threatened against the Company or any person or entity
whose liability for any Environmental Claim the Company has retained or assumed
either contractually or by operation of law; and (iii) to the best of the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could result in a violation of any
Environmental Law or form the basis of a potential Environmental Claim against
the Company or against any person or entity whose liability for any
Environmental Claim the Company has retained or assumed either contractually or
by operation of law.
(ee) ERISA Compliance. The Company and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or its "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company, any member of any group of
organizations described in Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA)
10
has occurred or is reasonably expected to occur with respect to any "employee
benefit plan" established or maintained by the Company or any of its ERISA
Affiliates. No "employee benefit plan" established or maintained by the Company
or any of its ERISA Affiliates, if such "employee benefit plan" were terminated,
would have any "amount of unfunded benefit liabilities" (as defined under
ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, or any of its ERISA Affiliates that is
intended to be qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or failure to act, which would cause the
loss of such qualification.
(ff) Compliance with Xxxxxxxx-Xxxxx Act of 2002. The Company and, to the
best of its knowledge, its officers and directors are in compliance with
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the rules and
regulations promulgated in connection therewith (the "Xxxxxxxx-Xxxxx Act") that
are effective and are actively taking steps to ensure that they will be in
compliance with other applicable provisions of the Xxxxxxxx-Xxxxx Act upon the
effectiveness of such provisions, including Section 402 related to loans and
Sections 302 and 906 related to certifications.
(gg) Material Understandings, Generally. Except as fairly described in the
Prospectus and the Disclosure Package, the Company has not made a determination
to take any action and is not a party to any understanding, whether or not
legally binding, with any other person with respect to the taking of any action
that, if known to prospective purchasers of the Units, would be likely to affect
their assessment of the value or prospects of the Company or their decision to
invest in the Units.
Any certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
The Company acknowledges that the Underwriters and, for purposes of the
opinions to be delivered pursuant to Section 5 hereof, counsel to the Company
and counsel to the Underwriters, will rely upon the accuracy and truthfulness
of the foregoing representations and hereby consents to such reliance.
SECTION 2. Purchase, Sale and Delivery of the Units.
(a) The Firm Units. Upon the terms herein set forth, the Company agrees to
issue and sell the Firm Units to the several Underwriters. On the basis of the
representations, warranties and agreements herein contained, and upon the terms
but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase the Firm Units from the Company. The
purchase price per Firm Unit to be paid by the several Underwriters to the
Company shall be $____ per Unit.
(b) The First Closing Date. Delivery of the Firm Units to be purchased by
the Underwriters and payment therefor shall be made at 9:00 a.m. New York time
on
11
____________, 2006, or such other time and date as the Representative shall
designate by notice to the Company (the time and date of such closing are called
the "First Closing Date"). The Company hereby acknowledges that circumstances
under which the Representative may provide notice to postpone the First Closing
Date as originally scheduled include, but are in no way limited to, any
determination by the Company or the Representative to recirculate to the public
copies of an amended or supplemented Prospectus or Disclosure Package or a delay
as contemplated by the provisions of Section 10.
(c) The Optional Units; Each Subsequent Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the Underwriters to purchase up to an aggregate of
_____________ Optional Units from the Company at the purchase price per share to
be paid by the Underwriters for the Firm Units. The option granted hereunder may
be exercised at any time and from time to time upon notice by the Representative
to the Company, which notice may be given at any time within 45 days from the
date of this Agreement. Such notice shall set forth (i) the aggregate number of
Optional Units as to which the Underwriters are exercising the option, (ii) the
names and denominations in which the Optional Units are to be registered and
(iii) the time, date and place at which such Optional Units will be delivered
(which time and date may be simultaneous with, but not earlier than, the First
Closing Date; and in such case the term "First Closing Date" shall refer to the
time and date of delivery of the Firm Units and the Optional Units). Each time
and date of delivery, if subsequent to the First Closing Date, is called the
"Subsequent Closing Date" and shall be determined by the Representative and
shall not be earlier than three nor later than five full business days after
delivery of such notice of exercise.
(d) Public Offering of the Units. The Representative hereby advises the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Units as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representative, in its sole judgment, has determined
is advisable and practicable.
(e) Payment for the Units. Payment for the Units to be sold by the Company
shall be made at the First Closing Date (and, if applicable, at any Subsequent
Closing Date) by wire transfer of immediately available funds to the order of
the Company.
It is understood that the Representative has been authorized, for its own
account and the accounts of the several Underwriters, to accept delivery of and
receipt for, and make payment of the purchase price for, the Firm Units and any
Optional Units the Underwriters have agreed to purchase. The Representative,
individually and not as the Representative of the Underwriters, may (but shall
not be obligated to) make payment for any Units to be purchased by any
Underwriter whose funds shall not have been received by the Representative by
the First Closing Date or any Subsequent Closing Date, as the case may be, for
the account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
(f) Delivery of the Units. Delivery of the Firm Units and the Optional
Units shall be made through the facilities of The Depository Trust Company
unless the Representative shall
12
otherwise instruct. Time shall be of the essence, and delivery at the time and
place specified in this Agreement is a further condition to the obligations of
the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 10:00 p.m.
New York time on the second business day following the date the Units are first
released by the Underwriters for sale to the public, the Company shall deliver
or cause to be delivered, copies of the Prospectus in such quantities and at
such places as the Representative shall request.
(h) Representative's Warrants. In addition to the sums payable to the
Representative as provided elsewhere herein, the Representative shall be
entitled to receive at the closing occurring on the First Closing Date, for
itself alone and not as Representative of the Underwriters, as additional
compensation for its services, Representative's Warrants for the purchase of up
to ________ Units at a price of $____ per Unit, upon the terms and subject to
adjustment and conversion as described in the form of Representative's Warrants
filed as an exhibit to the Registration Statement.
SECTION 3. Covenants of the Company.
The Company covenants and agrees with each Underwriter as follows:
(a) Representative' Review of Proposed Amendments and Supplements. During
the period beginning at the Initial Sale Time and ending on the later of the
First Closing Date or such date as, in the opinion of counsel for the
Underwriters, the Prospectus is no longer required by law to be delivered in
connection with sales by an Underwriter or dealer, including under circumstances
where such requirement may be satisfied pursuant to Rule 172 under the
Securities Act (the "Prospectus Delivery Period"), prior to amending or
supplementing the Registration Statement or the Prospectus, including any
amendment or supplement through incorporation by reference of any report filed
under the Exchange Act, the Company shall furnish to the Representative for
review a copy of each such proposed amendment or supplement, and the Company
shall not file any such proposed amendment or supplement to which the
Representative shall reasonably object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representative in writing (i) when the
Registration Statement, if not effective at the Execution Time, shall have
become effective, (ii) of the receipt of any comments of, or requests for
additional or supplemental information from, the Commission, (iii) of the time
and date of any filing of any post-effective amendment to the Registration
Statement or any amendment or supplement to any preliminary prospectus or the
Prospectus, (iv) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of any order or notice
preventing or suspending the use of the Registration Statement, any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any of
such purposes. The Company shall use its best efforts to prevent the issuance of
any such stop order or prevention or suspension of such use. If the Commission
shall enter any such stop order or
13
order or notice of prevention or suspension at any time, the Company will use
its best efforts to obtain the lifting of such order at the earliest possible
moment, or will file a new registration statement and use its best efforts to
have such new registration statement declared effective as soon as practicable.
Additionally, the Company agrees that it shall comply with the provisions of
Rules 424(b) and 430A, as applicable, under the Securities Act, including with
respect to the timely filing of documents thereunder, and will use its
reasonable efforts to confirm that any filings made by the Company under such
Rule 424(b) were received in a timely manner by the Commission.
(c) Exchange Act Compliance. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
(d) Amendments and Supplements to the Registration Statement, Prospectus
and Other Securities Act Matters. If, during the Prospectus Delivery Period, any
event or development shall occur or condition exist as a result of which the
Disclosure Package or the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein in the light of the
circumstances under which they were made, as the case may be, not misleading, or
if it shall be necessary to amend or supplement the Disclosure Package or the
Prospectus, or to file under the Exchange Act any document incorporated by
reference in the Disclosure Package or the Prospectus, in order to make the
statements therein, in the light of the circumstances under which they were
made, as the case may be, not misleading, or if in the opinion of the
Representative it is otherwise necessary to amend or supplement the Registration
Statement, the Disclosure Package or the Prospectus, or to file under the
Exchange Act any document incorporated by reference in the Disclosure Package or
the Prospectus, or to file a new registration statement containing the
Prospectus, in order to comply with law, including in connection with the
delivery of the Prospectus, the Company agrees to (i) notify the Representative
of any such event or condition (unless such event or condition was previously
brought to the Company's attention by the Representative during the Prospectus
Delivery Period) and (ii) promptly prepare (subject to Section 3(a) and 3(e)
hereof), file with the Commission (and use its best efforts to have any
amendment to the Registration Statement or any new registration statement be
declared effective) and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Registration Statement, the Disclosure
Package or the Prospectus, or any new registration statement, necessary in order
to make the statements in the Disclosure Package or the Prospectus as so amended
or supplemented, in the light of the circumstances under which they were made,
as the case may be, not misleading or so that the Registration Statement, the
Disclosure Package or the Prospectus, as amended or supplemented, will comply
with law.
(e) Permitted Free Writing Prospectuses. The Company represents that it has
not made, and agrees that, unless it obtains the prior written consent of the
Representative, it will not make, any offer relating to the Units that would
constitute an Issuer Free Writing Prospectus or that would otherwise constitute
a "free writing prospectus" (as defined in Rule 405 of the Securities Act)
required to be filed by the Company with the Commission or retained by the
Company under Rule 433 of the Securities Act; provided that the prior written
consent of the Representative hereto shall be deemed to have been given in
respect of the Free Writing
14
Prospectuses included in Schedule B hereto. Any such free writing prospectus
consented to by the Representative is hereinafter referred to as a "Permitted
Free Writing Prospectus." The Company agrees that (i) it has treated and will
treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer
Free Writing Prospectus, and (ii) has complied and will comply, as the case may
be, with the requirements of Rules 164 and 433 of the Securities Act applicable
to any Permitted Free Writing Prospectus, including in respect of timely filing
with the Commission, legending and record keeping.
(f) Copies of any Amendments and Supplements to the Prospectus. The Company
agrees to furnish the Representative, without charge, during the Prospectus
Delivery Period, as many copies of each of the preliminary prospectus, the
Prospectus and the Disclosure Package and any amendments and supplements thereto
(including any documents incorporated or deemed incorporated by reference
therein) as the Representative may reasonably request.
(g) Blue Sky Compliance. The Company shall cooperate with the
Representative and counsel for the Underwriters to qualify or register the Units
for sale under (or obtain exemptions from the application of) the state
securities or blue sky laws of those jurisdictions designated by the
Representative, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required for
the distribution of the Units. The Company shall not be required to qualify as a
foreign corporation or to take any action that would subject it to general
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to taxation as a foreign corporation. The Company
will advise the Representative promptly of the suspension of the qualification
or registration of (or any such exemption relating to) the Units for offering,
sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company shall use
its best efforts to obtain the withdrawal thereof at the earliest possible
moment.
(h) Use of Proceeds. The Company shall apply the net proceeds from the sale
of the Units sold by it in the manner described under the caption "Use of
Proceeds" in the Disclosure Package and the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Common Stock.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representative an
earnings statement (which need not be audited) covering the twelve-month period
ending _________, 200_ that satisfies the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery Period,
the Company shall file, on a timely basis, with the Commission, the Nasdaq
Capital Market and the Boston Stock Exchange all reports and documents required
to be filed under the Exchange Act. Additionally, the Company shall report the
use of proceeds from the issuance of the Units as may be required under Rule 463
under the Securities Act.
15
(l) Company to Provide Interim Financial Statements. Prior to the First
Closing Date and, if applicable, each Subsequent Closing Date, the Company will
furnish the Underwriters, as soon as they have been prepared by or are available
to the Company, a copy of any unaudited interim financial statements of the
Company for any period subsequent to the period covered by the most recent
financial statements appearing in the Registration Statement and the Prospectus.
(m) Quotation. The Company will use its best efforts to include, subject to
notice of issuance, the Units on the Nasdaq Capital Market and to list the Units
on the Boston Stock Exchange.
(n) Agreement Not to Offer or Sell Additional Securities. During the period
commencing on the date hereof and ending on the 90th day following the date of
the Prospectus, the Company will not, without the prior written consent of the
Representative (which consent may be withheld at the Representative's sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell, pledge, transfer or establish an open "put equivalent position" within
the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement under
the Securities Act in respect of, any shares of Common Stock, options or
warrants to acquire shares of the Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock (other than as
contemplated by this Agreement with respect to the Units); provided, however,
that the Company may issue shares of its Common Stock or options to purchase its
Common Stock, or shares of Common Stock upon exercise of options, in each case,
pursuant to any stock option, stock bonus or other stock plan, arrangement or
contractual obligation described in the Prospectus, but only if the holders of
such shares, options, or shares issued upon exercise of such options, agree in
writing not to sell, offer, dispose of or otherwise transfer any such shares or
options during such 90-day period without the prior written consent of the
Representative (which consent may be withheld at the Representative's sole
discretion).
(o) Future Reports to the Representative. During the period of five years
hereafter the Company will furnish, if not otherwise available on XXXXX, to the
Representative at 000 XX Xxxxx Xxxxxxx, Xxxxxxxx, Xxxxxx 00000 Attention:
Syndicate Department: (i) as soon as practicable after the end of each fiscal
year, copies of the Annual Report of the Company containing the balance sheet of
the Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public or certified public accountants;
(ii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of any
report or communication of the Company mailed generally to holders of its
capital stock.
(p) Investment Limitation. The Company shall not invest, or
otherwise use the proceeds received by the Company from its sale of the Units
in such a manner as would require the Company to register as an investment
company under the Investment Company Act.
16
(q) No Manipulation of Price. The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
(r) Existing Lock-Up Agreements. Except as described in the Prospectus,
there are no existing agreements between the Company and its security holders
that prohibit the sale, transfer, assignment, pledge or hypothecation of any of
the Company's securities. The Company will direct the transfer agent to place
stop transfer restrictions upon the securities of the Company that are bound by
such "lock-up" agreements for the duration of the periods contemplated therein.
SECTION 4. Payment of Expenses.
(a) The Representative shall be entitled to reimbursement from the Company,
for itself alone and not as Representative of the Underwriters, to a
non-accountable expense allowance equal to 3% of the aggregate initial public
offering price of the Firm Units and any Option Units purchased by the
Underwriters. The Representative shall be entitled to withhold this allowance on
the Closing Date related to the purchase of the Firm Units or the Option Units,
as the case may be.
(b) In addition to the payment described in Paragraph (a) of this Section
4, the Company agrees to pay all costs, fees and expenses incurred in connection
with the performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including without limitation (i) all expenses
incident to the issuance and delivery of the Units (including all printing and
engraving costs, if any), (ii) all fees and expenses of the registrar and
transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Units to the
Underwriters, (iv) all fees and expenses of the Company's counsel, independent
public or certified public accountants and other advisors, (v) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement (including financial statements,
exhibits, schedules, consents and certificates of experts), each Issuer Free
Writing Prospectus, each preliminary prospectus and the Prospectus, and all
amendments and supplements thereto, and this Agreement, (vi) all filing fees,
attorneys' fees and expenses incurred by the Company or the Underwriters in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Units for offer and
sale under the state securities or blue sky laws, and, if requested by the
Representative, preparing and printing a "Blue Sky Survey" or memorandum, and
any supplements thereto, advising the Underwriters of such qualifications,
registrations and exemptions, (vii) the filing fees incident to the NASD's
review and approval of the Underwriters' participation in the offering and
distribution of the Units, (viii) the fees and expenses associated with
including the Units on the Nasdaq Capital Market and the Boston Stock Exchange
(ix) all other fees, costs and expenses referred to in Item 13 of Part II of the
Registration Statement, and (x) all reasonable out-of-pocket costs and expenses
of the Underwriters. Except as provided in this Section 4, Section 6, Section 8
and Section 9 hereof, the Underwriters shall pay their own expenses, including
the fees and disbursements of their counsel.
SECTION 5. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Units
as provided herein on the First
17
Closing Date and, with respect to the Optional Units, each Subsequent Closing
Date, shall be subject to (1) the accuracy of the representations and warranties
on the part of the Company set forth in Section 1 hereof as of the date hereof
and as of the First Closing Date and each Subsequent Closing Date as though then
made; (2) the timely performance by the Company of its covenants and other
obligations hereunder; and (3) each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Representative
shall have received from Xxxxxx, Xxxxxxx & Xxxxx, LLP, independent registered
public accounting firm of the Company, a letter dated the date hereof addressed
to the Underwriters, in form and substance satisfactory to the Representative,
containing statements and information of the type ordinarily included in
accountant's "comfort letters" to underwriters, delivered according to Statement
of Auditing Standards No. 72 (or any successor bulletin), with respect to the
audited and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the
Representative shall have received an additional four conformed copies of such
accountants' letter for the several Underwriters).
(b) Effectiveness of Registration Statement; Compliance with Registration
Requirements; No Stop Order. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the Optional
Units, any Subsequent Closing Date:
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities
Act) in the manner and within the time period required by Rule 424(b)
under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective
amendment shall have become effective; and
(ii) no stop order suspending the effectiveness of the Registration
Statement, or any post-effective amendment to the Registration
Statement, shall be in effect and no proceedings for such purpose
shall have been instituted or threatened by the Commission.
(c) No Material Adverse Change. For the period from and after the date of
this Agreement and prior to the First Closing Date and, with respect to the
Optional Units, each Subsequent Closing Date, in the judgment of the
Representative there shall not have occurred any Material Adverse Change.
(d) Opinion of Counsel for the Company. On each of the First Closing Date
and each Subsequent Closing Date the Representative shall have received the
opinion of Holland & Knight LLP, counsel for the Company, dated as of the First
Closing Date or the Subsequent Closing Date, as applicable, substantially in the
form attached as Exhibit A (and the Representative shall have received an
additional four conformed copies of such counsel's legal opinion for the several
Underwriters).
18
(e) Opinion of Counsel for the Underwriters. On each of the First Closing
Date and each Subsequent Closing Date the Representative shall have received the
opinion of Xxxxxx Xxxx LLP, counsel for the Underwriters, dated as of the First
Closing Date or the Subsequent Closing Date, as applicable, in a form
satisfactory to the Representative (and the Representative shall have received
an additional four conformed copies of such counsel's legal opinion for the
several Underwriters).
(f) Officers' Certificate. On each of the First Closing Date and each
Subsequent Closing Date the Representative shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer or
President of the Company and the Chief Financial Officer or Chief Accounting
Officer of the Company, dated as of such Closing Date, to the effect that the
signers of such certificate have reviewed the Registration Statement, the
Prospectus and any amendment or supplement thereto, any Issuer Free Writing
Prospectus and any amendment or supplement thereto and this Agreement, to the
effect set forth in subsection (b)(ii) of this Section 5, and further to the
effect that:
(i) for the period from and after the date of this Agreement and prior
to such Closing Date, there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company set
forth in Section 1 of this Agreement are true and correct with the
same force and effect as though expressly made on and as of such
Closing Date; and
(iii) the Company has complied with all the agreements hereunder and
satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date.
(g) Bring-down Comfort Letter. On each of the First Closing Date and each
Subsequent Closing Date, the Representative shall have received from Xxxxxx,
Xxxxxxx & Xxxxx, LLP, independent public or certified public accountants for the
Company, a letter dated such date, in form and substance satisfactory to the
Representative, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5, except
that the specified date referred to therein for the carrying out of procedures
shall be no more than three business days prior to the First Closing Date or
Subsequent Closing Date, as the case may be (and the Representative shall have
received an additional four conformed copies of such accountants' letter the
several Underwriters).
(h) Lock-Up Agreement from Certain Securityholders of the Company. On or
prior to the date hereof, the Company shall have furnished to the Representative
an agreement in the form of Exhibit B hereto from each stockholder of the
Company, and such agreement shall be in full force and effect on each of the
First Closing Date and each Subsequent Closing Date.
(i) Concurrent Bond Offering. On or before the First Closing Date, the
Representative shall have received confirmation satisfactory to it of the
receipt of proceeds by the Company from the sale of 20-year tax-exempt New
Jersey Economic Development Authority bonds in the principal amount of not less
than $16.35 million and bearing interest at a rate not greater than [8.2]%.
19
(j) Additional Documents. On or before each of the First Closing Date and
each Subsequent Closing Date, the Representative and counsel for the
Underwriters shall have received such information, documents and opinions as
they may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Units as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Representative
by notice to the Company at any time on or prior to the First Closing Date and,
with respect to the Optional Units, at any time prior to each Subsequent Closing
Date, which termination shall be without liability on the part of any party to
any other party, except that Section 4, Section 6, Section 8 and Section 9 shall
at all times be effective and shall survive such termination.
SECTION 6. Reimbursement of Underwriters' Expenses. If this Agreement is
terminated by the Representative pursuant to Section 5 or Section 11, or by the
Company pursuant to Section 7, or if the sale to the Underwriters of the Units
on the First Closing Date or Subsequent Closing Date is not consummated because
of any refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse the Representative and the other Underwriters (or such Underwriters as
have terminated this Agreement with respect to themselves), severally, upon
demand for all out-of-pocket expenses that shall have been reasonably incurred
by the Representative and the Underwriters in connection with the proposed
purchase and the offering and sale of the Units, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses, postage,
facsimile and telephone charges.
SECTION 7. Effectiveness of this Agreement. This Agreement shall become
effective upon the execution of this Agreement by the parties hereto and, except
for Sections 4, 6, 8 and 9 (for which only the execution of this Agreement shall
be required to become effective), the notification (including by way of oral
notification from the staff of the Commission) by the Commission to the Company
of the effectiveness of the Registration Statement under the Securities Act.
If executed before receipt of notification of effectiveness, this Agreement
may be terminated prior to receipt of such notification of effectiveness by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of: (a) the Company to any Underwriter,
except that (solely in the case where the Company has terminated this Agreement
pursuant to this Section 7) the Company shall be obligated to reimburse the
expenses of the Representative and the Underwriters pursuant to Sections 4 and 6
hereof and that the provisions of Section 8 and Section 9 shall survive such
termination; and (b) any Underwriter to the Company, except that the provisions
of Section 8 and Section 9 shall survive such termination.
20
SECTION 8. Indemnification.
(a) Indemnification of the Underwriters.
(1) The Company agrees to indemnify and hold harmless each Underwriter, its
officers and employees, and each person, if any, who controls any Underwriter
within the meaning of the Securities Act and the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of the Company), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A, Rule 430B and Rule 430C under the Securities
Act, or the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not misleading;
or (ii) upon any untrue statement or alleged untrue statement of a material fact
contained in any Issuer Free Writing Prospectus, any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iv) in whole
or in part upon any failure of the Company to perform its obligations hereunder
or under law; or (v) upon any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Common Stock or the offering contemplated hereby, and which is included
as part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon any matter covered by clause (i) or (ii) above,
provided that the Company shall not be liable under this clause (v) to the
extent that a court of competent jurisdiction shall have determined by a final
judgment that such loss, claim, damage, liability or action resulted directly
from any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its bad faith or willful misconduct; and to reimburse each
Underwriter and each such controlling person for any and all expenses (including
the fees and disbursements of counsel chosen by the Representative) as such
expenses are reasonably incurred by such Underwriter or such controlling person
in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, however,
that the foregoing indemnity agreement shall not apply to any loss, claim,
damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representative expressly for use in
the Registration Statement, any Issuer Free Writing Prospectus, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto). The
indemnity agreement set forth in this Section 8(a)(1) shall be in addition to
any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who
21
controls the Company within the meaning of the Securities Act or the Exchange
Act, against any loss, claim, damage, liability or expense, as incurred, to
which the Company, or any such director, officer, or controlling person may
become subject, under the Securities Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Issuer Free Writing Prospectus, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any Issuer Free
Writing Prospectus, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company by the Representative expressly for
use therein; and to reimburse the Company, or any such director, officer, or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer, or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The Company hereby acknowledges that the
only information that the Underwriters have furnished to the Company expressly
for use in the Registration Statement, any Issuer Free Writing Prospectus, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) are the statements set forth in the table in the first paragraph, in
the ____ paragraph and ___--____paragraphs (relating to stabilization
activities) and in the ______ paragraph (relating to market making) under the
caption "Underwriting" in the preliminary prospectus and the Prospectus; and the
Underwriters confirm that such statements are correct. The indemnity agreement
set forth in this Section 8(b) shall be in addition to any liabilities that each
Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing 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 for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the
22
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (the Representative in the case of
Section 8(b) and Section 9), representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
SECTION 9. Contribution. If the indemnification provided for in Section 8
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying parties on the one hand, and the
indemnified parties, on the other hand, from the offering of the Units pursuant
to this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying parties, on the one hand, and the indemnified parties,
on the other hand, in connection with the
23
statements or omissions or inaccuracies in the representations and warranties
herein which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative benefits
received by the indemnifying parties, on the one hand, and the indemnified
parties, on the other hand, in connection with the offering of the Units
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Units pursuant to
this Agreement (before deducting expenses) received by the indemnifying parties,
and the total underwriting discount received by the indemnified parties, in each
case as set forth on the front cover page of the Prospectus bear to the
aggregate initial public offering price of the Units as set forth on such cover.
The relative fault of the indemnifying parties, on the one hand, and the
indemnified parties, on the other hand, shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact or any
such inaccurate or alleged inaccurate representation or warranty relates to
information supplied by indemnifying parties, on the one hand, or the
indemnified parties, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Units underwritten by it and
distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in Schedule A. For
purposes of this Section 9, each officer and employee of an Underwriter and each
person, if any, who controls an Underwriter within the meaning of the Securities
Act and the Exchange Act shall have the same rights to contribution as such
Underwriter; and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
SECTION 10. Default of One or More of the Several Underwriters. If, on the
First Closing Date or each Subsequent Closing Date, as the case may be, any one
or more of the
24
several Underwriters shall fail or refuse to purchase Units that it or they have
agreed to purchase hereunder on such date, and the aggregate number of Units
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase does not exceed 10% of the aggregate number of the Units to be
purchased on such date, the other Underwriters shall be obligated, severally, in
the proportions that the number of Firm Units set forth opposite their
respective names on Schedule A bears to the aggregate number of Firm Units set
forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as may be specified by the Representative with the consent of
the non-defaulting Underwriters, to purchase the Units which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or each Subsequent Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to purchase
Units and the aggregate number of Units with respect to which such default
occurs exceeds 10% of the aggregate number of Units to be purchased on such
date, and arrangements satisfactory to the Representative and the Company for
the purchase of such Units are not made within 48 hours after such default, this
Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 4, Section 6, Section 8 and Section 9
shall at all times be effective and shall survive such termination. In any such
case either the Representative or the Company shall have the right to postpone
the First Closing Date or each Subsequent Closing Date, as the case may be, but
in no event for longer than seven days in order that the required changes, if
any, to the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 11. Termination of this Agreement. Prior to the First Closing Date
and, with respect to Optional Units, each Subsequent Closing Date, whether
before or after notification by the Commission to the Company of the
effectiveness of the Registration Statement under the Securities Act, this
Agreement may be terminated by the Representative by notice given to the Company
if at any time (i) trading or quotation in any of the Company's securities shall
have been suspended or limited by the Commission or by the Nasdaq Capital Market
or by the Boston Stock Exchange, or trading in securities generally on either
the Nasdaq Stock Market, the Boston Stock Exchange or the New York Stock
Exchange shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the
Commission or the NASD; (ii) a general banking moratorium shall have been
declared by any of federal, New York or Delaware authorities; (iii) there shall
have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any change in the United States or
international financial markets, or any substantial change or development
involving a prospective substantial change in United States' or international
political, financial or economic conditions that, in the judgment of the
Representative is material and adverse and makes it impracticable to market the
Units in the manner and on the terms described in the Prospectus or to enforce
contracts for the sale of securities; or (iv) in the judgment of the
Representative there shall have occurred any Material Adverse Change (regardless
of whether any loss associated with such Material Adverse Change shall have been
insured). Any termination pursuant to this Section 11 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the
25
expenses of the Representative and the Underwriters pursuant to Sections 4 and 6
hereof, (b) any Underwriter to the Company, or (c) of any party hereto to any
other party except that the provisions of Section 8 and Section 9 shall at all
times be effective and shall survive such termination.
SECTION 12. No Advisory or Fiduciary Responsibility. The Company
acknowledges and agrees that: (i) the purchase and sale of the Units pursuant to
this Agreement, including the determination of the public offering price of the
Units and any related discounts and commissions, is an arm's-length commercial
transaction between the Company, on the one hand, and the several Underwriters,
on the other hand, and the Company is capable of evaluating and understanding
and understands and accepts the terms, risks and conditions of the transactions
contemplated by this Agreement; (ii) in connection with each transaction
contemplated hereby and the process leading to such transaction each Underwriter
is and has been acting solely as a principal and is not the financial advisor,
agent or fiduciary of the Company or its affiliates, stockholders, creditors or
employees or any other party; (iii) no Underwriter has assumed or will assume an
advisory, agency or fiduciary responsibility in favor of the Company with
respect to any of the transactions contemplated hereby or the process leading
thereto (irrespective of whether such Underwriter has advised or is currently
advising the Company on other matters) and no Underwriter has any obligation to
the Company with respect to the offering contemplated hereby except the
obligations expressly set forth in this Agreement; (iv) the several Underwriters
and their respective affiliates may be engaged in a broad range of transactions
that involve interests that differ from those of the Company and that the
several Underwriters have no obligation to disclose any of such interests by
virtue of any advisory, agency or fiduciary relationship; and (v) the
Underwriters have not provided any legal, accounting, regulatory or tax advice
with respect to the offering contemplated hereby and the Company has consulted
its own legal, accounting, regulatory and tax advisors to the extent it deemed
appropriate. The Company hereby waives and releases, to the fullest extent
permitted by law, any claims that the Company may have against the several
Underwriters with respect to any breach or alleged breach of agency or fiduciary
duty.
This Agreement supersedes all prior agreements and understandings (whether
written or oral) between the Company and the several Underwriters, or any of
them, with respect to the subject matter hereof.
SECTION 13. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Units sold hereunder and any termination of this Agreement.
SECTION 14. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
26
If to the Representative:
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Facsimile: (503) ________
Attention: Syndicate Department
with a copy to:
Xxxxxx Xxxx LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
If to the Company:
Converted Organics Inc.
0X Xxxxxxxxxx Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Holland & Knight LLP
2300 US Bancorp Tower
000 XX 0xx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. xxx Xxxxxx
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
SECTION 15. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Underwriters pursuant
to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and personal representatives, and no
other person will have any right or obligation hereunder. The term "successors"
shall not include any purchaser of the Units as such from any of the
Underwriters merely by reason of such purchase.
SECTION 16. Partial Unenforceability. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
27
SECTION 17. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
SECTION 18. Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in Portland, Oregon or the courts of the State
of Oregon in each case located in Portland, Oregon (collectively, the "Specified
Courts"), and each party irrevocably submits to the exclusive jurisdiction
(except for proceedings instituted in regard to the enforcement of a judgment of
any such court (a "Related Judgment"), as to which such jurisdiction is
non-exclusive) of such courts in any such suit, action or proceeding. Service of
any process, summons, notice or document by mail to such party's address set
forth above shall be effective service of process for any suit, action or other
proceeding brought in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit, action
or other proceeding in the Specified Courts and irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such suit,
action or other proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 19. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof, including, without limitation, the indemnification
provisions of Section 8 and the contribution provisions of Section 9, and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the
risks in light of the ability of the parties to investigate the Company, its
affairs and its business in order to assure that adequate disclosure has been
made in the Registration Statement, any preliminary prospectus and the
Prospectus (and any amendments and supplements thereto), as required by the
Securities Act and the Exchange Act.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the officers or
employees of any Underwriter, any person controlling any Underwriter, the
Company, the officers or employees of the Company, or any person controlling the
Company,
28
(ii) acceptance of the Units and payment for them hereunder and (iii)
termination of this Agreement.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' officers and employees, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Units from any of the
several Underwriters merely because of such purchase.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
CONVERTED ORGANICS INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representative as of the date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
Acting as Representative of the
several Underwriters named in the
attached Schedule A.
By:
---------------------------------
[TITLE]
29
SCHEDULE A
NUMBER OF
FIRM UNITS
TO BE
UNDERWRITERS PURCHASED
------------ ----------
Xxxxxxx Investment Company, Inc. ..................................
TOTAL...........................................................
SCH. A-1
SCHEDULE B
ISSUER FREE WRITING PROSPECTUSES
SCH. B-1
SCHEDULE C
PRICING TERMS
Price per Unit to public: $_________
Underwriting discounts and commissions per share: $_________
Offering proceeds to the Company, before expenses: $_________
Closing Date: ____________, 2006
SCH. E-1
EXHIBIT A
Opinion of counsel for the Company
to be delivered pursuant to Section 5(d) of the Underwriting Agreement.
References to the Prospectus in this Exhibit A include any supplements
thereto at the First Closing Date and, if applicable, each Subsequent Closing
Date. Capitalized terms used and not defined herein shall have the meanings
ascribed to them in the Underwriting Agreement.
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Disclosure Package and the Prospectus and to enter into and perform its
obligations under the Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in New Jersey and in each other jurisdiction in
which such qualification is required, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change.
(iv) To the best of such counsel's knowledge, the Company does not own an
equity interest in any other entity, other than ____________________________.
(v) The authorized, issued and outstanding capital stock of the Company
(including the Common Stock) conforms to the descriptions thereof set forth in
the Disclosure Package and the Prospectus. All of the outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable and, to the best of such counsel's knowledge, have been issued in
compliance with the registration and qualification requirements of federal and
state securities laws. The form of certificate used to evidence the Common Stock
complies with all applicable requirements of the charter and by-laws of the
Company and the General Corporation Law of the State of Delaware. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Disclosure Package and the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(vi) No stockholder of the Company or any other person has any preemptive
right, right of first refusal or other similar right to subscribe for or
purchase securities of the Company arising (i) by operation of the charter or
by-laws of the Company or the General Corporation Law of the State of Delaware
or (ii) to the best knowledge of such counsel, otherwise.
(vii) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(viii) The Units and the Common Stock included in the Units to be purchased
by the Underwriters from the Company (including units purchasable on exercise of
the Representative's overallotment option and the Representative's Warrants)
have been duly authorized and reserved
EX.A-1
for issuance and sale pursuant to the Underwriting Agreement and, in the case of
Common Stock issuable on exercise of the Representative's Warrants, the terms
thereof and, when so issued and delivered by the Company, will be validly
issued, fully paid and nonassessable. The Class A Warrants and Class B Warrants
included in the Units to be purchased by the Underwriters from the Company have
been duly and validly authorized by all required corporate actions and will,
when issued and delivered by the Company pursuant to the Underwriting Agreement,
be validly executed and delivered by, and will be valid and binding agreements
of, the Company, enforceable in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles. The Representative's
Warrants have been duly and validly authorized by all required corporate actions
and will, when issued and delivered by the Company pursuant to the Underwriting
Agreement, be validly executed and delivered by, and will be valid and binding
agreements of, the Company, enforceable in accordance with their terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles. The Common
Stock issuable on exercise of Class A Warrants and Class B Warrants has been
duly authorized and reserved for issuance and sale pursuant to the terms of such
warrants and, when issued and delivered by the Company pursuant to such
warrants, will be validly issued, fully paid and nonassessable.
(ix) The Warrant Agreement has been duly authorized by the Company. When
duly executed, authenticated, issued and delivered as contemplated in the
Registration Statement and the Warrant Agreement, the Warrant Agreement will
constitute the legally binding agreement of the Company, enforceable against it
in accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(x) The Registration Statement and the Rule 462(b) Registration Statement,
if any, has been declared effective by the Commission under the Securities Act.
To the best knowledge of such counsel, no stop order suspending the
effectiveness of either of the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued under the Securities Act and no
proceedings for such purpose have been instituted or are pending or are
contemplated or threatened by the Commission. Any required filing of the
Disclosure Package and the Prospectus and any supplement thereto pursuant to
Rule 424(b) under the Securities Act has been made in the manner and within the
time period required by such Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b) Registration
Statement, the Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus, and each document deemed to be part of the
Disclosure Package, as of their respective effective or issue dates (other than
the financial statements and supporting schedules included therein or in
exhibits to or excluded from the Registration Statement, as to which no opinion
need be rendered) comply as to form in all material respects with the applicable
requirements of the Securities Act.
EX.A-2
(xii) The Units, the Common Stock and the Warrants have been approved for
listing on the Nasdaq Capital Market under the symbol "____" and on the Boston
Stock Exchange under the symbol "____".
(xiii) The statements (i) in each of the Disclosure Package and the
Prospectus under the captions "Related Party Transactions," "Description of
Securities" and "Shares Eligible for Future Sale," (ii) under the caption
"Indemnification of Officers and Directors" in Item 24 of the Registration
Statement, and (iii) under the caption "Recent Sales of Unregistered Securities
in Item 26 of the Registration Statement, insofar as such statements constitute
matters of law, legal conclusions or summaries of legal matters or documents or
the Company's charter or by-law provisions, have been reviewed by such counsel
and fairly present and summarize, in all material respects, the matters referred
to therein.
(xiv) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement or the Disclosure
Package, other than those disclosed therein.
(xv) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto; and the descriptions thereof
and references thereto are correct in all material respects.
(xvi) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance of the
Underwriting Agreement and consummation of the transactions contemplated thereby
and by the Prospectus, except as required under the Securities Act, the
applicable laws of any foreign jurisdiction, applicable state securities or blue
sky laws and from the NASD.
(xvii) The execution and delivery of the Underwriting Agreement by the
Company and the performance by the Company of its obligations thereunder (other
than performance by the Company of its obligations under the indemnification
section of the Underwriting Agreement, as to which no opinion need be rendered)
(i) have been duly authorized by all necessary corporate action on the part of
the Company; (ii) will not result in any violation of the provisions of the
charter or by-laws of the Company; (iii) will not (A) constitute a breach of, or
Default under any Existing Instrument, or (B) result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, in the case of each of clauses (A) and (B), any Existing
Instrument filed as an exhibit to the Registration Statement or, to the best
knowledge of such counsel, any other material Existing Instrument; or (iv) to
the best knowledge of such counsel, will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company.
(xviii) The Company is not, and after receipt of payment for the Units and
the application of the proceeds thereof as contemplated under the caption "Use
of Proceeds" in the Prospectus and in the Disclosure Package will not be, an
"investment company" within the meaning of Investment Company Act.
EX.A-3
(xix) To the best knowledge of such counsel, there are no persons with
registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by the Underwriting Agreement, except for such rights as have been
duly waived.
(xx) To the best knowledge of such counsel, the Company is not in violation
of its charter or by-laws or any law, administrative regulation or
administrative or court decree applicable to the Company or is in Default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material Existing Instrument, except in each such case for such
violations or Defaults as would not, individually or in the aggregate, result in
a Material Adverse Change.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified registered public
accountants for the Company and with representatives of the Underwriters at
which the contents of the Registration Statement and the Prospectus, and any
supplements or amendments thereto, and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, including the documents incorporated
by reference therein (other than as specified above), and any supplements or
amendments thereto, on the basis of the foregoing, nothing has come to their
attention which has caused them to believe that (i) either the Registration
Statement or any amendments thereto, at the time the Registration Statement or
such amendments 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 not misleading; (ii) the Prospectus, as
of its date or at the First Closing Date or each Subsequent Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
the items specified in Schedule I, consisting of those included in the
Disclosure Package, contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements therein, in
the light of circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief as to the financial
statements or schedules or other financial data derived therefrom, included or
incorporated by reference in the Registration Statement or the Prospectus or any
amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, or the federal law of the United
States, to the extent they deem proper and specified in such opinion, upon the
opinion (which shall be dated the First Closing Date or each Subsequent Closing
Date, as the case may be, shall be satisfactory in form and substance to the
Underwriters, shall expressly state that the Underwriters may rely on such
opinion as if it were addressed to them and shall be furnished to the
Representative) of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters; provided,
however, that such counsel shall further state that they believe that they and
the Underwriters are justified in relying upon such opinion of other counsel,
and (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and public officials.
EX.A-4
EXHIBIT B
FORM OF LOCK-UP AGREEMENT
EX.B-1
