Exhibit 1.1
EAGLE SUPPLY GROUP, INC.
2,000,000 SHARES OF COMMON STOCK AND
2,500,000 COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
Boca Raton, Florida
, 1998
Xxxxxx Xxxxx Securities, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Gentlemen:
Eagle Supply Group, Inc. (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell to Xxxxxx Xxxxx Securities, Inc. (the "Underwriter")
for sale in a proposed public offering pursuant to the terms of this
Underwriting Agreement (the "Agreement"), on a "firm commitment" basis,
2,000,000 shares of Common Stock (the "Shares") at $5.00 per Share and 2,500,000
Redeemable Common Stock Purchase Warrants (the "Warrants") at $.125 per Warrant.
The Shares and the Warrants are collectively referred to as the "Securities".
Each Warrant is exercisable to purchase one (1) share of Common Stock (the
"Common Stock") at $5.00 per share at any time during the period between the
Effective Date and five (5) years from the Effective Date. The date upon which
the Securities and Exchange Commission ("Commission") shall declare the
Registration Statement of the Company effective shall be the "Effective Date".
The Warrants are subject to redemption under certain circumstances. In addition,
the Company proposes to grant to the Underwriter the option referred to in
Section 2(b) to purchase all or any part of an aggregate of 300,000 additional
Shares and/or 375,000 additional Warrants (the "Option Securities").
The Underwriter has advised the Company that the Underwriter desires to
purchase the Securities, and that the Underwriter is authorized to execute this
Agreement. The Company confirms the agreements made by it with respect to the
purchase of the Securities by the Underwriter, as follows:
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1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with the Underwriter
as of the Effective Date (as defined above), the Closing Date (as hereinafter
defined) and the Option Closing Date (as hereinafter defined) that:
(a) A registration statement (File No. 333-09951) on Form S-1 relating
to the public offering of the Securities, including a preliminary form of the
prospectus, copies of which have heretofore been delivered to the Underwriter,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Commission thereunder, and has been filed
with the Commission under the Act. The Company has prepared in the same manner
and proposes to file, prior to the Effective Date of such registration
statement, an additional amendment or amendments to such registration statement,
including a final form of Prospectus, copies of which shall be delivered to the
Underwriter. "Preliminary Prospectus" shall mean each prospectus filed pursuant
to the Rules and Regulations under the Act prior to the Effective Date. The
registration statement (including all financial schedules and exhibits) as
amended at the time it becomes effective and the final prospectus included
therein are respectively referred to as the "Registration Statement" and the
"Prospectus", except that (i) if the prospectus first filed by the Company
pursuant to Rule 424(b) of the Rules and Regulations shall differ from said
prospectus as then amended, the term "Prospectus" shall mean the prospectus
first filed pursuant to Rule 424(b), and (ii) if such registration statement or
prospectus is amended or such prospectus is supplemented, after the effective
date of such registration statement and prior to the Option Closing Date (as
hereinafter defined), the terms "Registration Statement" and "Prospectus" shall
include such registration statement and prospectus as so amended, and the term
"Prospectus" shall include the prospectus as so supplemented, or both, as the
case may be.
(b) At the Effective Date and at all times subsequent thereto up to the
Option Closing Date, if any, and during such longer period as the Prospectus may
be required to be delivered in connection with salesDealers: (i) the
Registration Statement and Prospectus will in all respects conform to the
requirements of the Act and the Rules and Regulations; and (ii) neither the
Registration Statement nor the Prospectus will include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make statements therein, in light of the circumstances under
which they are made, not misleading; provided, however, that the Company makes
no representations, warranties or agreement as to information contained in or
omitted from the Registration Statement or Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by the Underwriter
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specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus with respect to stabilization, under the
heading "Underwriting" and regarding the identity of counsel to the Underwriter
under the heading "Legal Matters" constitute the only information furnished in
writing by the Underwriter for inclusion in the Prospectus.
(c) Each of the Company and each subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions in which the nature of its business
or the character or location of its properties requires such qualification,
except where failure to so qualify will not materially affect the Company's
business, properties or financial condition.
(d) The authorized, issued and outstanding securities of the Company as
of the date of the Prospectus is as set forth in the Prospectus under
"Capitalization"; all of the issued and outstanding securities of the Company
have been, or wil duly authorized, validly issued and fully paid and
non-assessable; the issuances and sales of all such securities complied in all
material respect with, or were exempt from, applicable Federal and state
securities laws; the holders thereof have no rights of rescission against the
Company with respect thereto, and are not subject to personal liability by
reason of being such holders; none of such securities were issued in violation
of the preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company; except as set forth in the
Prospectus, no options, warrants or other rights to purchase, agreements or
other obligations to issue, or agreements or other rights to convert any
obligation into, any securities of the Company have been granted or entered into
by the Company; and all of the securities of the Company, issued and to be
issued as set forth in the Registration Statement, conform to all statements
relating thereto contained in the Registration Statement and Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and paid
for pursuant to this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights of any security holder of
the Company. Neither the filing of the Registration Statement nor the offering
or sale of the Securities as contemplated in this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any securities of the Company, except as described in the
Registration Statement.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been
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duly authorized, validly issued and delivered and will constitute valid and
legally binding obligations of the Company entitling the holders to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form filed
as an exhibit to the Registration Statement. The shares of Common Stock issuable
upon exercise of the Warrants have been reserved for issuance and when issued in
accordance with the terms of the Warrants and Warrant Agreement will be duly and
validly authorized, validly issued, fully paid and non-assessable, free of
pre-emptive rights, and no personal liability will attach to the ownership
thereof. The Warrant exercise period and the Warrant exercise price may not be
changed or revised by the Company without the prior written consent of the
Underwriter. The Warrant Agreement has been duly authorized and, when executed
and delivered pursuant to this Agreement, will have been duly executed and
delivered and will constitute the valid and legally binding obligation of the
Company enforceable in accordance with its terms.
The Common Stock Underwriter Warrants, the Warrant Underwriter
Warrants, the Underlying Warrants, the shares of Common Stock issuable upon
exercise of the Common Stock Underwriter Warrants, and the shares of Common
Stock issuable upon exercise of the Underlying Warrants (all as defined in the
Underwriter's Warrant Agreement described in Section 11 herein), have been duly
authorized and, when issued, delivered and paid for, will be validly issued,
fully paid, non-assessable, free of pre-emptive rights and no personal liability
will attach to the ownership thereof, and will constitute valid and legally
binding obligations of the Company enforceable in accordance with their terms
and entitled to the benefits provided by the Underwriter's Warrant Agreement.
(f) This Agreement, the Warrant Agreement, the Financial Advisory
Agreement, the Merger and Acquisition Agreement (the "M/A Agreement") and the
Underwriter's Warrant Agreement have been duly and validly authorized, executed
and delivered by the Company, and assuming due execution of this Agreement by
the other party hereto, constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally. The Company has full power and lawful
authority to authorize, issue and sell the Securities to be sold by it hereunder
on the terms and conditions set forth herein, and no consent, approval,
authorization or other order of any governmental authority is required in
connection with such authorization, execution and delivery or with the
authorization, issue and sale of the Securities or the securities to be issued
pursuant to the Underwriter's Warrant Agreement, except such as may be required
under the Act or state securities laws, or as otherwise have been obtained.
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(g) Except as described in the Prospectus, neither the Company nor any
subsidiary is in material violation, breach of or default under, and
consummation of the transactions herein contemplated and the fulfillment of the
terms of this Agreement will not conflict with, or result in a breach of, or
constitute a material default under, or result in the creation or imposition of
any material lien, charge or encumbrance upon any property or assets of the
Company or any subsidiary or any of the terms or provisions of any material
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any subsidiary is a party or by which the
Company or any subsidiary may be bound or to which any of the property or assets
of the Company or any subsidiary is subject, nor will such action result in any
material violation of the provisions of the Articles of Incorporation or By-Laws
of the Company or any subsidiary, as amended, or any statute or any order, rule
or regulation applicable to the Company or subsidiary of any court or of any
regulatory authority or other governmental body having jurisdiction over the
Company or each subsidiary.
(h) Subject to the qualifications stated in the Prospectus, the Company
and each subsidiary have good and marketable title to all properties and assets
described in the Prospectus as owned by each of them, free and clear of all
liens, charges, encumbrances or restrictions, except such as are not material to
its business, financial condition or results of operation; all of the material
leases and subleases under which the Company or each subsidiary is the lessor or
sublessor of properties or assets or under which the Company or each subsidiary
holds properties or assets as lessee or sublessee as described in the Prospectus
are in full force and effect, and, except as described in the Prospectus,
neither the Company nor each subsidiary is in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone adverse to rights of the
Company or any subsidiary as lessor, sublessor, lessee, or sublessee under any
of the leases or subleases mentioned above, or affecting or questioning the
right of the Company or any subsidiary to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company and each subsidiary
owns or leases all such properties described in the Prospectus as are necessary
to its operations as now conducted and, except as otherwise stated in the
Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) Deloitte & Touche LLP, who has given its report on certain
financial statements filed and to be filed with the Commission as part of the
Registration Statement, and which are includpany, independent public accountants
as required by the Act and the Rules and Regulations.
(j) The financial statements and schedules, together with
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related notes, set forth in the Prospectus and the Registration Statement
present fairly the financial condition, results of operations and cash flows of
the Company on the basis stated in the Registration Statement, at the respective
dates and for the respective periods to which they apply. Said financial
statements and related notes and schedules have been prepared in accordance with
generally accepted accounting principles applied on a basis which is consistent
during the periods involved. The Company's internal accounting controls and
procedures are sufficient to cause the Company and each subsidiary to prepare
financial statements which comply in all material respects with generally
accepted accounting principles applied on a basis which is consistent during the
periods involved. During the preceding five (5) year period, nothing has been
brought to the attention of the Company's management that would result in any
material reportable condition relating to the Company's internal accounting
procedures, weaknesses or controls.
(k) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus and to and including the
Option Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) neither the Company nor any subsidiary has
incurred and will not have incurred any material liabilities or obligations,
direct or contingent, and has not entered into and will not have entered into
any material transactions other than in the ordinary course of business and/or
as contemplated in the Registration Statement and the Prospectus; (ii) neither
the Company nor any subsidiary has and will not have paid or declared any
dividends or have made any other distribution on its capital stock; (iii) there
has not been any change ng-term debt by, the Company or any subsidiary; (iv)
neither the Company nor any subsidiary has issued any options, warrants or other
rights to purchase the capital stock of the Company or any subsidiary; and (v)
there has not been and will not have been any material adverse change in the
business, financial condition or results of operations of the Company or any
subsidiary, or in the book value of the assets of the Company or any subsidiary,
arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending or, to
the knowledge of the Company or any subsidiary, threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary, or any of the officers or directors of the Company or any
subsidiary, or any material action, suit, proceeding, inquiry, arbitration, or
investigation, which might result in any material adverse change in the
condition (financial or other), business prospects, net worth, or properties of
the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the Company and each
subsidiary has filed all necessary federal, state
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and foreign income and franchise tax returns and has paid all taxes shown as due
thereon; and there is no tax deficiency which has been or to the knowledge of
the Company might be asserted against the Company or any subsidiary that has not
been provided for in the financial statements.
(n) Except as set forth in the Prospectus, each of the Company and each
subsidiary has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all material
respects in compliance therewith and owns or possesses adequate right to use all
material patents, patent applications, trademarks, service marks, trade-names,
trademark registrations, service xxxx registrations, copyrights, and licenses
necessary for the conduct of such business and has not received any notice of
conflict with the asserted rights of others in respect thereof. To the best of
the Company's knowledge, none of the activities or business of the Company or
any subsidiary are in violation of, or cause the Company or any subsidiary to
violate, any law, rule, regulation or order of the United States, any state,
county or locality, or of any agency or body of the United States or of any
state, county or locality, the violation of which would have a material adverse
impact upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company and any
subsidiary.
(o) Neither the Company nor any subsidiary has, directly or indirectly,
at any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution, in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public of quasi-public duties, other than
payments or contributions required or allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other taxes
(including franchise, capital stock or other tax, other than income taxes,
imposed by any jurisdiction) if any, which are required to be paid in connection
with the sale and transfer of the Securities to the Underwriter hereunder will
have been fully paid or provided for by the Company, and all laws imposing such
taxes will have been fully complied with.
(q) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been so
described and/or filed.
(r) Except as described in the Registration Statement and Prospectus,
no holders of Common Stock or of any other securities of the Company have the
right to include such Common Stock or other securities in the Registration
Statement and Prospectus.
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(s) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, neither the Company nor any subsidiary has any
material contingent liabilities.
(t) The Company has no subsidiary corporations except as disclosed in
the Registration Statement and Prospectus, nor has it any equity interest in any
partnership, joint venture, association or other entity except as disclosed in
the Registration Statement or Prospectus. Except as described in the
Registration Statement and Prospectus, the Company owns all of the outstanding
securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or suspending the
use of any Preliminary Prospectus with respect to the offer and sale of the
Securities and each Preliminary Prospectus, as of its date, has conformed fully
in all material respects with the requirements of the Act and the Rules and
Regulations and did not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein not
misleading.
(v) Neither the Company, nor, to the Company's knowledge, any of its
officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(w) Item 15 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three year
period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions which
were exempt from the registration provisions of the Act and not in violation of
Section 5 thereof.
(x) Other than as set forth in the Prospectus, the Company has not
entered into any agreement pursua as a finder in connection with the proposed
offering, and the Company agrees to indemnify and hold harmless the Underwriter
against any losses, claims, damages or liabilities, which shall include, but not
be limited to, all costs to defend against any such claim, so long as such claim
arises out of agreements made or allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or five percent (5%) or greater stockholder of the Company or
any subsidiary has any direct or indirect affiliation or association with any
member of the National Association of Securities Dealers, Inc. ("NASD"), except
as disclosed to the Underwriter in writing, and no beneficial owner of the
Company's unregistered securities has any direct or indirect
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affiliation or association with any NASD member except as disclosed to the
Underwriter in writing. The Company will advise the Underwriter and the NASD if
any five percent (5%) or greater shareholder of the Company or any subsidiary is
or becomes an affiliate or associated person of an NASD member participating in
the distribution.
(z) The Company and each subsidiary is in compliance in all material
respects with all federal, state and local laws and regulations respecting the
employment of its employees and employment practices, terms and conditions of
employment and wages and hours relating thereto. There are no pending
investigations involving the Company or any subsidiary by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state or local laws and regulations. There is no unfair labor practice
charge or complaint against the Company or any subsidiary pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or to the knowledge of the Company, threatened
against or involving the Company or any subsidiary or any predecessor entity. No
question concerning f the Company or any subsidiary and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
or any subsidiary. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any
subsidiary, if any.
(aa) Except as disclosed in the Prospectus, neither the Company nor any
subsidiary maintains, sponsors nor contributes to, nor is it required to
contribute to, any program or arrangement that is an "employee pension benefit
plan", an "employee welfare benefit plan", or a "multi-employer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). Except as disclosed in the Prospectus, neither the Company nor any
subsidiary maintained or contributed to a defined benefit plan, as defined in
Section 3(35) of ERISA.
(ab) Based upon written representations received from the officers and
directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors of the
Company or any subsidiary have been:
(1) The subject of a petition under the federal bankruptcy
laws or any state insolvency law filed by or against them, or by a
receiver, fiscal agent or similar officer appointed by a court for
their business or property, or any partnership in which any of
them was a general partner at or within two years before the time
of such filing, or any corporation or business association of
which any of them was an executive officer at or
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within two years before the time of such filing;
(2) Convicted in a criminal proceeding or a named subject of
a pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining any
of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator,
floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee
of any investment company, bank, savings and loan association
or insurance company, or engaging in or continuing any
conduct or practice in connection with any such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in
connection with any violation of federal or state securities
law or federal commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or
state authority barring, suspending or otherwise limiting for more
than sixty (60) days their right to engage in any activity
described in paragraph (3)(i) above, or be associated with persons
engaged in any such activity;
(5) Found by any court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the judgment in
such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such
civil action or finding by the
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Commodity Futures Trading Commission has not been subsequently
reversed, suspended or vacated.
(ac) Based upon written representations received from the officers and
directors of the Company, each of the officers and directors of the Company has
reviewed the sections in the Prospectus relating to their biographical data and
equity ownership position in the Company, and all information contained therein
is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement and based
upon the representations, warranties and agreements herein contained, the
Company hereby agrees to issue and sell to the Underwriter an aggregate of
2,000,000 Shares at $4.50 per Share and 2,500,000 Warrants at $.1125 per
Warrant, (the public offering price less ten percent (10%)) at the place and
time hereinafter specified. The price at which the Underwriter shall sell the
Securities to the public shall be $5.00 per Share and $.125 per Warrant.
Delivery of the Securities against payment therefor shall take place at
the offices of Xxxxxx Xxxxx Securities, Inc., 0000 Xxxx Xxxxxx Xxxx, Xxxx Xxxxx,
Xxxxxxx 00000 (or at such other place as may be designated by the Underwriter)
at 10:00 a.m., Eastern Time, on such date after the Registration Statement has
become effective as the Underwriter shall designate, but not later than ten (10)
business days (holidays excepted) following the first date that any of the
Securities are released to the Underwriter, such time and date of payment and
delivery for the Securities being herein called the "Closing Date".
(b) In addition, subject to the terms and conditions of this
Agreement, and based upon the representations, warrantie purchase all or any
part of an aggregate of an additional 300,000 Shares and 375,000 Warrants at the
same price per Share and Warrant as the Underwriter shall pay for the Securities
being sold pursuant to the provisions of subsection (a) of this Section 2 (such
additional Securities being referred to herein as the "Option Securities"). This
option may be exercised within forty-five (45) days after the Effective Date of
the Registration Statement upon notice by the Underwriter to the Company
advising as to the amount of Option Securities as to which the option is being
exercised, the names and denominations in which the certificates for such Option
Securities are to be registered and the time and date when such certificates are
to be delivered. Such time and date shall be determined by the Underwriter but
shall not be later than ten (10) full business days after the exercise of said
option, nor in any event prior to the Closing Date, and such time and date is
referred to herein as the "Option Closing Date". Delivery of the Option
Securities against payment therefor shall
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take place at the offices of the Underwriter. The Option granted hereunder may
be exercised only to cover overallotments in the sale by the Underwriter of the
Securities referred to in subsection (a) above. In the event the Company
declares or pays a dividend or distribution on its Common Stock, whether in the
form of cash, shares of Common Stock or any other consideration, prior to the
Option Closing Date, such dividend or distribution shall also be paid on the
Option Closing Date.
(c) The Company will make the certificates for the Securities to be
sold hereunder available to the Underwriter for inspection at least two (2) full
business days prior to the Closing Date at the offices of the Underwriter, and
such certificates shall be registered in such names and denominations as the
Underwriter may request. 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 Company to each Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered by the Company to the
Underwriter for the account of the Underwriter against payment of the purchase
prices by the Underwriter by certified or bank cashier's checks in New York
Clearing House funds payable to the order of the Company or by wire transfer in
New York Clearing House funds to the account of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Securities pursuant
to the provisions of subsection (b) above, payment for such Securities shall be
made payable in New York Clearing House funds at the offices of the Underwriter,
or by wire transfer, at the time and date of delivery of such Securities as
required by the provisions of subsection (b) above, against receipt of the
certificates for such Securities by the Underwriter for the account of the
Underwriter registered in such names and in such denominations as the
Underwriter may request.
It is understood that the Underwriter proposes to offer the Securities
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement is declared
effective by the Commission.
3. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise the Underwriter and
will not at any time, whether before or after the Effective Date, file any
amendment to the Registration Statement or supplement to the Prospectus of which
the Underwriter shall not previously been advised and furnished with a copy or
to which the Underwriter or the Underwriter's counsel shall have objected in
writing, acting reasonably, or which is not in compliance with the
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Act and the Rules and Regulations. At any time prior to the later of (i) the
completion by the Underwriter of the distribution of the Securities as
contemplated hereby; or (ii) 25 days after the date on which the Registration
Statement shall have become or been declared effective, the Company will prepare
and file with the Commission, promptly upon the Underwriter'srospectus which may
be necessary or advisable in connection with the distribution of the Securities
and as mutually agreed by the Company and the Underwriter.
After the Effective Date and as soon as the Company is advised thereof,
the Company will advise the Underwriter, and confirm the advice in writing, of
the receipt of any comments of the Commission, of the effectiveness of any
post-effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made by
the Commission for amendment of the Registration Statement or for supplementing
of the Prospectus or for additional information with respect thereto, of the
issuance by the Commission or any state or regulatory body of any stop order or
other order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order, and, if
issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to the Underwriter copies of
each Preliminary Prospectus and Definitive Prospectus, and the Company has
consented and hereby consents to the use of such copies for the purposes
permitted by the Act. The Company authorizes the Underwriter and Selected
Dealers to use the Prospectus in connection with the sale of the Securities for
such period as in the opinion of counsel to the Underwriter the use thereof is
required to comply with the applicable provisions of the Act and the Rules and
Regulations. In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in connection with sales by
the Underwriter or Selected Dealers, of any event of which the Company has
knowledge and which materially affects the Company or the securities of the
Company, or which in the opinion of counsel for the Company or counsel for the
Underwriter, should be set forth in an amendment to the Registration Statement
or a supplement to the Prospectus, in order to make the statements therein not
then misleading, in light of the circumstances existing at the time the
Prospectus is required to be delivered curities, or in case it shall be
necessary to amend or supplement the Prospectus to comply with law or with the
Act and the Rules and Regulations, the Company will notify the Underwriter
promptly and forthwith prepare and furnish to the Underwriter copies of such
amended Prospectus or of such supplement to be attached to the Prospectus, in
such
13
quantities as the Underwriter may reasonably request, in order that the
Prospectus, as so amended or supplemented, will not contain any untrue statement
of a material fact or omit to state any material facts necessary in order to
make the statements in the Prospectus, in the light of the circumstances under
which they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriter.
The Company will comply with the Act, the Rules and Regulations
thereunder, the Securities Exchange Act of 1934 (the "1934 Act"), and the rules
and regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will act in good faith and use its best efforts and
cooperate with the Underwriter and the Underwriter's counsel to qualify to
register the Securities for sale under the securities or "blue sky" laws of
such jurisdictions as the Underwriter may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent to service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Securities. The Company
will, from time to time, prepare and file such statements and reports as are
or may be required to continue such qualification in effect for so long a
period as the Underwriter may reasonably request.
(c) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not
limited to, all such expenses itemized in Section 8(a) and 8(c) hereof, and
either (i) the out-of-pocket expenses of the Underwriter, not to exceed the
$50,000 previously paid if the Underwriter elects to terminate the offering
for any reason; or (ii) the out-of-pocket expenses of the Underwriter if the
Company elects to terminate the offering for any reason. For the purposes of
this sub-section, the Underwriter shall be deemed to have assumed such
expenses when they are billed or incurred, regardless of whether such
expenses have been paid. The Underwriter shall not be responsible for any
expenses of the Company or others, or for any charges or claims relative to
the proposed public offering if it is not consummated.
(d) The Company will deliver to the Underwriter at or before the
Closing Date two signed copies of the Registration Statement, including all
financial statements and exhibits filed therewith, and of each amendment or
supplement thereto. The Company will deliver to or upon the order of the
Underwriter, from time to time until the Effective Date of the Registration
Statement, as many copies of any Preliminary Prospectus filed with the
Commission
14
prior to the Effective Date of the Registration Statement as the Underwriter may
reasonably request. The Company will deliver to the Underwriter on the Effective
Date of the Registration Statement and thereafter for so long as a Prospectus is
required to be delivered under the Act, from time to time, as many copies of the
Definitive Prospectus, or as thereafter amended or supplemented, as the
Underwriter may from time to time reasonably request.
(e) For so long as the Company is a reporting company under either
Section 12 or 15 of the 1934 Act, the Company, at its expense, will furnish to
the Underwriter during the period ending five (5) years from the Effective Date,
(i) as soon as practicable after the end of each fiscal year, a balance sheet of
the Company and any of its subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and cash flow of the Company and any
subsidiaries for such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent accountants; (ii) as
soon as they are available, a copy of all reports (financial or other) mailed to
security holders; (iii) as soon as they are available,-confidential documents,
including annual reports, periodic reports and financial statements, furnished
to or filed with the Commission under the Act and the 1934 Act; (iv) copies of
each press release, news item and article with respect to the Company's affairs
released by the Company; and (v) such other information as the Underwriter may
from time to time reasonably request.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will make generally available to its stockholders and
to the registered holders of its Warrants and deliver to the Underwriter as soon
as it is practicable, but in no event later than the first day of the sixteenth
full calendar month following the Effective Date, an earnings statement (which
need not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the necessary
action to become a reporting company under Section 12 of the 1934 Act, and the
Company will make all filings required to and will have obtained approval for
the listing of the Shares and Warrants on The Nasdaq Small Cap Market System,
and will use its best efforts to maintain such listing for at least seven (7)
years from the date of this Agreement.
(i) For a period of seven (7) years following the Effective Date, the
Company will hold an annual meeting of stockholders for the election of
Directors within 180 days after the end of each of
15
the Company's fiscal years and, within nine (9) months after the end of each of
the Company's fiscal years will provide the Company's stothe fiscal year just
completed prior thereto. Such financial statements shall be those required by
Rule 14a-3 under the 1934 Act and shall be included in an annual report pursuant
to the requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption "Use
of Proceeds" in the Prospectus, and will file such reports with the Commission
with respect to the sale of the Securities and the application of the proceeds
therefrom as may be required by Sections 12, 13 and/or 15 of the 1934 Act and
pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon the Underwriter's request, prepare
and file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action, which
in the reasonable opinion of counsel to the Underwriter and the Company may be
reasonably necessary or advisable in connection with the distribution of the
Securities and will use its best efforts to cause the same to become effective
as promptly as possible.
(l) On the Closing Date, the Company shall execute and deliver to the
Underwriter the Underwriter's Warrant Agreement. The Underwriter's Warrant
Agreement and Warrant Certificates will be substantially in the form of the
Underwriter's Warrant Agreement filed as an exhibit to the Registration
Statement.
(m) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable upon
exercise of the Underwriter's Warrants outstanding from time to time.
(n) All existing beneficial owners of the Company's securities
(including warrants, options and common stock of the Company), as of the
Effective Date, shall agree in writing, in a form satisfactory to the
Underwriter, not to sell, transfer or otherwise dispose of any of such
securities or underlying securities for a period of twenty-four (24) months from
the Effective Date, or any longer period required by the NASD, Nasdaq, or any
State. For a period of two (2) years following the Effective Date, all sales of
the Company's securities by officers and/or directors of the Company shall be
effected through the Underwriter.
(o) The Company will obtain, on or before the Closing Date, key person
life insurance on each of the lives of Xxxxxxx X. Xxxxxx and Xxxxxxxxx X.
Xxxxxxxx in an amount of not less than $1,000,000 each, and will use its best
efforts to maintain such insurance for
16
a period of at least five (5) years from the Effective Date.
(p) Prior to the Closing Date, the Company shall, at its own expense,
undertake to list the Company's securities in the appropriate recognized
securities manual or manuals published by Standard & Poor's Corporation and such
other manuals as the Underwriter may designate, such listings to contain the
information required by such manuals and the Uniform Securities Act. The Company
hereby agrees to use its best efforts to maintain such listing for a period of
not less than five (5) years. The Company shall take such action as may be
reasonably requested by the Underwriter to obtain a secondary market trading
exemption in such states as may be reasonably requested by the Underwriter.
(q) During the one hundred eighty (180) day period commencing on the
Closing Date, the Company will not, without the prior written consent of the
Underwriter, grant options or warrants to purchase the Company's Common Stock at
a price less than the initial per share public offering price.
(r) Prior to the Closing Date, neither the Company nor any
subsidiary will issue, directly or indirectly, without the Underwriter's
prior consent, any press release or other communication or hold any press
conference with respect to the Company or its activities or the offering of
the Securities other than routine customary advertising of the Company's pf
any relevant regulatory authority in any relevant jurisdiction.
(s) At the Closing Date, the Company will engage the Underwriter as a
non-exclusive financial advisor to the Company for a period of twelve (12)
months commencing on the first day of the month following the Company's receipt
of the proceeds of this offering, at an aggregate fee of $108,000, all of which
shall be payable to the Underwriter on the Closing Date. The financial advisory
agreement will provide that the Underwriter shall, at the Company's request,
provide advice and consulting services to the Company concerning potential
merger and acquisition proposals and the obtaining of short or long-term
financing for the Company, whether by public financing or otherwise.
(t) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the financial
statements to be included in any registration statement or similar disclosure
document to be filed by the Company hereunder, or any amendment or supplement
thereto. For a period of five (5) years from the Effective Date, the Company, at
its expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) the Company's financial statements for
each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial
17
information, the filing of the Company's quarterly report and the mailing of
quarterly financial information to stockholders.
(u) The Company shall retain Continental Stock Transfer & Trust Company
as the transfer agent for the securities of the Company, or such other transfer
agent as the Underwriter may agree to in writing. In addition, the Company shall
direct such transfer agent to furnish the Underwriter with daily transfer sheets
as to each of the Company's securities as prepared by the Company's transfer
agent and copies of lists of stockholders and warrantholders as reasonably
requested by the Underwriter, for a five (5) year period commencing from the
Closing Date.
(v) The Company shall cause the Depository Trust Company, or such other
depository of the Company's securities, to furnish special security position
reports ("DTC Tracking Reports") to the Underwriter on a daily and weekly basis
at the expense of the Company, for a five (5) year period from the Effective
Date. It is anticipated that the DTC Tracking Reports may cost up to $10,000 for
the initial two (2) month period from the Effective Date, after which time the
Company's obligation to furnish such tracking reports will be reviewed by the
Company and the Underwriter.
(w) Following the Effective Date, the Company shall, at its sole
cost and expense, prepare and file such Blue Sky applications with such
jurisdictions as the Underwriter shall designate and the Company may
reasonably agree.
(x) On the Effective Date and for a period of three (3) years
thereafter, the Company's Board of Directors shall consist of a minimum of five
(5) persons, two (2) of whom shall be independent and not otherwise affiliated
with the Company or associated with any of the Company's affiliates. The
Underwriter shall have the opportunity to invite an observer to attend Board of
Directors meetings of the Company at the expense of the Company.
(y) On the Closing Date, the Company shall execute and deliver to the
Underwriter a non-exclusive M/A Agreement with the Underwriter in a form
satisfactory to the Underwriter, providing:
(1) that the Underwriter will be paid a finder's fee, of from five
percent (5%) of the first $1,000,000 ranging in $1,000,000 increments
down to one percent (1%) of the excess, if any, over $4,000,000 of the
consideration involved in any transaction introduced by the Underwriter
(including mergers, acquisitions, joint ventures, and any other
business for the Company introduced by the Underwriter) consummated by
the Company, as an "Introduced, Consummated Transaction", by which the
Underwriter introduced the other party to the Company during a period
ending five (5) years from the date of the M/A Agreement; and
(2) that any such finder's fee due to the Underwriter
18
will be paid in cash or stock as mutually agreed at the closing of
the particular Introduced, Consummated Transaction for which the
finder's fee is due.
(z) After the Closing Date, the Company shall prepare and publish
"tombstone" advertisements of at least 5 x 5 inches in publications to be
designated by the Underwriter at a total cost not to exceed $15,000.
(aa) For such period as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement or a new Registration Statement to become effective in compliance with
the Act and without any lapse of time between the effectiveness of any such
post-effective amendments and cause a copy of each Prospectus, as then amended,
to be delivered to each holder of record of a Warrant and to furnish the
Underwriter and each dealer as many copies of each such Prospectus as the
Underwriter or such dealer may reasonably request. Such post-effective
amendments or new Registration Statement shall also include the Underwriter's
Warrants and all the securities underlying the Underwriter's Warrants. The
Company shall not call for redemption any of the Warrants unless a Registration
Statement covering the securities underlying the Warrants has been declared
effective by the Commission and remains current at least until the date fixed
for redemption. In addition, the Warrants shall not be redeemable during the
first year after the Effective Date without the written consent of the
Underwriter.
(ab) Until such time as the securities of the Company are listed or
quoted on either the New York Stock Exchange or the American Stock Exchange, the
Company shall engage the Company's legal counsel to deliver to the Underwriter a
written opinion detailing those states in which the Shares and Warrants of the
Company may be traded in non-issuer transactions under the Blue Sky laws of the
fifty states ("Secondary Market Trading Opinion"). The initial Secondary Market
Trading Opinion shall be delivered to the Underwriter on the Effective Date, and
the Company shall continue to update such opinion and deliver same to the
Underwriter on a timely basis, but in any event at the beginning of each fiscal
quarter, for a five (5) year period, if required.
(ac) As promptly as practicable after the Closing Date, the Company
will prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute such volumes to the individuals designated by the
Underwriter or counsel to the Underwriter.
4. Conditions of Underwriter's Obligations. The obligation of the
Underwriter to purchase and pay for the Securities which the Underwriter has
agreed to purchase hereunder from the Company is subject, as of the date hereof
and as of the Closing Date and the Option Closing Date, to the execution of this
Agreement by the
19
Underwriter, to the continuing accuracy of, and compliance with, the
representations and warranties of the Company herein, to the accuracy of
statements of officers of the Company made pursuant to the provisions hereof, to
the performance by the Company of its obligations hereunder, and to the
following additional conditions:
(a) (i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or at such
later time or on such later date as the Underwriter may agree to in writing;
(ii) at or prior to the Closing Date, no stop order suspending the effectiveness
of the Registration Statement shall have been issued by the Commission and no
proceeding for that purpose shall have been initiated or pending, or shall be
threatened, or to the knowledge of the Company, contemplated by the Commission;
(iii) no stop order suspending the effectiveness of the qualification or
registration of the Securiti(whether or not a jurisdiction which the Underwriter
shall have specified) shall be threatened or to the knowledge of the Company
contemplated by the authorities of any such jurisdiction or shall have been
issued and in effect; (iv) any request for additional information on the part of
the Commission or any such authorities shall have been complied with to the
satisfaction of the Commission and any such authorities, and to the satisfaction
of counsel to the Underwriter; and (v) after the date hereof no amendment or
supplement to the Registration Statement or the Prospectus shall have been filed
unless a copy thereof was first submitted to the Underwriter and the Underwriter
did not object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any subsidiary or any material adverse change in
the long-term debt of the Company or any material subsidiary except as set forth
in or contemplated by the Registration Statement, (ii) there shall not have been
any material adverse change in the general affairs, business, properties,
condition (financial or otherwise), management, or results of operations of the
Company or any subsidiary, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement or Prospectus; (iii) neither the
Company nor any subsidiary shall have sustained any material interference with
its business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is not set
forth in the Registration Statement and Prospectus; and (iv) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the
20
requirements thereof, and neither the Registration Statement nor the Prospectus
nor any amendment or supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstance under
which they are made, not misleading.
(c) Except as set forth in the Prospectus, there is not pending or, to
the knowledge of the Company or any subsidiary, threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary, or any of the officers or directors of the Company or any
subsidiary, or any material action, suit, proceeding, inquiry, arbitration, or
investigation, which might result in any material adverse change in the
condition (financial or other), busineerties of the Company or any subsidiary.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct as of this date and at the Closing Date as if
made at the Closing Date, and all covenants and agreements herein contained to
be performed on the part of the Company and all conditions herein contained to
be fulfilled or complied with by the Company at or prior to the Closing Date
shall have been duly performed, fulfilled or complied with.
(e) At the Closing Date, the Underwriter shall have received the
opinion, dated as of the Closing Date, from Gusrae, Xxxxxx & Xxxxx, counsel for
the Company, in form and substance satisfactory to counsel for the Underwriter,
which in the aggregate shall state:
(i) the Company and each subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, with full corporate power and
authority to own its properties and conduct its business as described
in the Registration Statement and Prospectus and is duly qualified or
licensed to do business as a foreign corporation and is in good
standing in each other jurisdiction in which the ownership or leasing
of its properties or conduct of its business requires such
qualification except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company and
each subsidiary as a whole;
(ii) the authorized capitalization of the Company is as set forth
under "Capitalization" in the Prospectus; all shares of the Company's
outstanding stock and other securities requiring authorization for
issuance by the Company's Board of Directors have been duly authorized,
validly issued, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; the outstanding shares
of Common Stock of the Company and other securities have not been
issued
21
in violation of the preemptive rights of any stockholder and the
stockholders of the Company do not have any preemptive rights or, to
such counsel's knowledge, other rights to subscribe for or to purchase
securities of the Company, nor, to such counsel's knowledge, are there
any restrictions upon the voting or transfer of any of the securities
of the Company, except as disclosed in the Prospectus; the Common
Stock, the Shares, the Warrants, and the securities contained in the
Underwriter's Warrant Agreement conform to the respective descriptions
thereof contained in the Prospectus; the Common Stock, the Shares, the
Warrants, the shares of Common Stock to be issued upon exercise of the
Warrants and the securities contained in the Underwriter's Warrant
Agreement, have been duly authorized and, when issued, delivered and
paid for, will be duly authorized, validly issued, fully paid,
non-assessable, free of pre-emptive rights and no personal liability
will attach to the ownership thereof; no stockholders of the Company
have any rescission rights against the Company with respect to the
Company's securities; a sufficient number of shares of Common Stock has
been reserved for issuance upon exercise of the Warrants and the
Underwriter Warrants, and to the best of such counsel's knowledge,
neither the filing of the Registration Statement nor the offering or
sale of the Securities as contemplated by this Agreement gives rise to
any registration rights or other rights, other than those which have
been waived or satisfied or described in the Registration Statement;
(iii) this Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement, and the M/A
Agreement have been duly and validly authorized, executed and delivered
by the Company and, assuming the due authorization, execution and
delivery of this Agreement by the Underwriter, are the valid and
legally binding obligations of the Company, enforceable in accordance
with their terms, except (a) as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect which effect creditors' rights
generally; and (b) no opinion is expressed as to the enforceability of
the indemnity provisions or the contribution provisions contained in
this Agreement;
(iv) the certificates evidencing the outstanding securities of the
Company, the Shares, the Common Stock and the Warrants are in valid and
proper legal form;
(v) to the best of such counsel's knowledge, except as set forth
in the Prospectus, there is not pending, threatened, any material
action, suit, proceeding, inquiry, arbitration or investigation against
the Company or any subsidiary or any of the officers of directors of
the Company or any subsidiary, nor any material action, suit,
proceeding,
22
inquiry, arbitration, or investigation, which might materially and
adversely affect the condition (financial or otherwise), business
prospects, net worth, or properties of the Company or any subsidiary;
(vi) the execution and delivery of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement, the Financial
Advisory Agreement, and the M/A Agreement, and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, will not result in a
violation of, or constitute a default under (a) the Articles of
Incorporation or By-Laws of the Company and each subsidiary; (b) to the
best of such counsel's knowledge, any material obligations, agreement,
covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to
which the Company or any subsidiary is a party or by which it or any of
its material properties is bound; or (c) to the best of such counsel's
knowledge, any material order, rule, regulation, writ, injunction, or
decree of any government, governmental instrumentality or court,
domestic or foreign;
(vii) the Registration Statement has become effective under the
Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or are
pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements,
other financial data, other financial information and arithmetic
calculations contained therein, or omitted therefrom, as to which such
counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the Rules and
Regulations; and
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or delivery
of the Securities by the Company in connection with the execution,
delivery and performance of this Agreement by the Company or in
connection with the taking of any action contemplated herein, or the
issuance of the Underwriter's Warrants or the Securities underlying the
Underwriter's Warrants, other than registrations or qualifications of
the Securities under applicable state or foreign securities or Blue Sky
laws and registration under the Act.
Such opinion shall also cover such matters incident to the transactions
contemplated hereby as the Underwriter or counsel for the Underwriter shall
reasonably request. In rendering such
23
opinion, such counsel may rely upon certificates of any officer of the Company
or public officials as to matters of fact; and may rely as to all matters of
law, upon opinions of counsel satisfactory to the Underwriter and counsel to the
Underwriter. The opinion of such counsel to the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and
that the Underwriter and they are justified in relying thereon.
Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment
thereto at the time it became effective contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or that the
Prospectus or any supplement thereto contains any untrue statement of a
material fact or omits to state a material fact requird to be stated therein
or necessary to make statements therein, in light of the circumstances under
which they are made, not misleading (except, in the case of both the
Registration Statement and any amendment thereto and the Prospectus and any
supplement thereto, for the financial statements, notes thereto and other
financial information, arithmetic calculations, and statistical data
contained therein, as to which such counsel need express no opinion).
(f) The Underwriter shall have received on the Closing Date a
certificate dated as of the Closing Date, signed by the Chief Executive Officer
and the Chief Financial Officer of the Company and such other officers of the
Company as the Underwriter may request, certifying that:
(i) No Order suspending the effectiveness of the Registration
Statement or stop order regarding the sale of the Securities is in
effect and no proceedings for such purpose are pending or are, to their
knowledge, threatened by the Commission;
(ii) They do not know of any litigation instituted or, to their
knowledge, threatened against the Company or any subsidiary or any
officer or director of the Company or any subsidiary of a character
required to be disclosed in the Registration Statement which is not
disclosed therein; they do not know of any contracts which are required
to be summarized in the Prospectus which are not so summarized; and
they do not know of any material contracts required to be filed as
exhibits to the Registration Statement which are not so filed;
(iii) They have each carefully examined the Registration Statement
and the Prospectus and, to the best of their
24
knowledge, neither the Registration Statement nor the Prospectus nor
any amendment or supplement to either of the foregoing contains an
untrue statement of any material fact or omits to state any material
fact required to be stated therein or necessary to make the statement
therein, in light of the circumstances under which they are made, not
misleading; and since the Effective Date, to the best of their
knowledge, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
(iv) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been
any material adverse change in the condition of the Company or any
subsidiary, financial or otherwise, or in the results of its
operations, except as reflected in or contemplated by the Registration
Statement and the Prospectus, and except as so reflected or
contemplated since such date, there has not been any material
transaction entered into by the Company or any subsidiary;
(v) The representations and warranties set forth in this Agreement
are true and correct in all material respects and the Company has
complied with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is delinquent in the
filing of any federal, state and other tax return or the payment of any
federal, state or other taxes; they know of no proposed redetermination
or re-assessment of taxes, adverse to the Company or any subsidiary,
and the Company and each subsidiary has paid or provided by adequate
reserves for all known tax liabilities;
(vii) They know of no material obligation or liability of the
Company, contingent or otherwise, not disclosed in the Registration
Statement and Prospectus;
(viii) This Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement, and the M/A
Agreement, the consummation of the transactions therein contemplated,
and the fulfillment of the terms thereof, will not result in a breach
by the Company of any terms of, or constitute a default under, the
Company's Articles of Incorporation or By-Laws, any indenture,
mortgage, lease, deed of trust, bank loan or credit agreement or any
other material agreement or undertaking of the Company or any
subsidiary including, by way of specification but not by way of
limitation, any agreement or instrument to which the Company or any
subsidiary is now a party or pursuant to which the Company or any
subsidiary has acquired any material right and/or obligations by
succession or otherwise;
25
(ix) The financial statements and schedules filed with and as part
of the Registration Statement present fairly the financial position of
the Company as of the dates thereof all in conformity with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved. Since the respective dates of such financial
statements, there have been no material adverse change in the condition
or general affairs of the Company, financial or otherwise, other than
as referred to in the Prospectus;
(x) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as may
otherwise be indicated therein or contemplated thereby, neither the
Company nor any subsidiary has, prior to the Closing Date, either (i)
issued any securities or incurred any material liability or obligation,
direct or contingent, for borrowed money, or (ii) entered into any
material transaction other than in the ordinary course of business. The
Company has not declared, paid or made any dividend or distribution of
any kind on its capital stock;
(xi) They have reviewed the sections in the Prospectus relating to
their biographical data and equity ownership position in the Company,
and all information contained therein is true and accurate; and
(xii) Except as disclosed in the Prospectus, during the past five
years, they have not been:
(1) The subject of a petition under the federal bankruptcy
laws or any state insolvency law filed by or against them, or by a
receiver, fiscal agent or similar officer appointed by a court for
their business or property, or any partnership in which either of
them was a general partner at or within two years before the time
of such filing, or any corporation or business association of
which either of them was an executive officer at or within two
years before the time of such filing;
(2) Convicted in a criminal proceeding or a named subject of
a pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining any
of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator,
floor broker, leverage
26
transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person
of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice
in connection with any such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in
connection with any violation of federal or state securities
law or federal commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or
state authority barring, suspending or otherwise limiting for more
than sixty (60) days their right to engage in any activity
described in paragraph (3)(i) above, or be associated with persons
engaged in any such activity;
(5) Found by any court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the judgment in
such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(g) The Underwriter shall have received from Deloitte & Touche LLP,
independent auditors to the Company, certificates or letters, one dated and
delivered on the Effective Date and one dated and delivered on the Closing Date,
in form and substance satisfactory to the Underwriter, stating that:
(i) they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable Rules
and Regulations;
(ii) the financial statements and the schedules included in the
Registration Statement and the Prospectus were examined
27
by them and, in their opinion, comply as to form in all material
respects with the applicable accounting requirements of the Act, the
Rules and Regulations and instructions of the Commission with respect
to Registration Statements on Form S-1;
(iii) on the basis of inquiries and procedures conducted by them
(not constituting an examination in accordance with generally accepted
auditing standards), including a reading of the latest available
unaudited interim financial statements or other financial information
of the Company (with an indication of the date of the latest available
unaudited interim financial statements), inquiries of officers of the
Company who have responsibility for financial and accounting matters,
review of minutes of all meetings of the stockholders and the Board of
Directors of the Company and other specified inquiries and procedures,
nothing has come to their attention as a result of the foregoing
inquiries and procedures that causes them to believe that:
(a) during the period from (and including) the date of the
financial statements in the Registration Statement and the
Prospectus to a specified date not more than five days prior to
the date of such letters, there has been any change in the Common
Stock, long-term debt or other securities of the Company (except
as specifically contemplated in the Registration Statement and
Prospectus) or any material decreases in net current assets, net
assets, stockholder's equity, working capital or in any other item
appearing in the Company's financial statements as to which the
Underwriter may request advice, in each case as compared with
amounts shown in the balance sheet as of the date of the most
recent financial statements in the Prospectus, except in each case
for changes, increases or decreases which the Prospectus discloses
have occurred or will occur;
(b) during the period from (and including) the date of the
financial statements in the Registration Statement and the
Prospectus to such specified date there was any material decrease
in revenues or in the total or per share amounts of income or loss
before extraordinary items or net income or loss, or any other
material change in such other items appearing in the Company's
financial statements as to which the Underwriter may request
advice, in each case as compared with the fiscal period ended as
of the date of the most recent financial statements in the
Prospectus, except in each case for increases, changes or
decreases which the Prospectus discloses have occurred or will
occur;
(c) the unaudited interim financial statements of the Company
appearing in the Registration Statement and
28
the Prospectus (if any) do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting
principles and practices on a basis substantially consistent with
the audited financial statements included in the Registration
Statements or the Prospectus.
(iv) they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excluding
any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards)
set forth in the letters and found them to be in agreement; and
(v) they have not during the immediately preceding five (5) year
period brought to the attention of the Company's management any
reportable condition related to the Company's internal accounting
procedures, weaknesses and/or controls.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriter. Any changes, increases or decreases in
the items set forth in such letters which, in the judgment of the Underwriter,
are materially adverse with respect to the financial position or results of
operations of the Company shall be deemed to constitute a failure of the Company
to comply with the conditions of the obligations to the Underwriter hereunder.
(h) Upon exercise of the option provided for in Section 2(b) hereof,
the obligation of the Underwriter to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to the
Underwriter's knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable request on the part
of the Commission for additional information shall have been complied
with to the satisfaction of counsel to the Underwriter.
29
(ii) At the Option Closing Date, there shall have been delivered
to the Underwriter the signed opinions from Gusrae, Xxxxxx & Xxxxx,
counsel for the Company, dated as of the Option Closing Date, in form
and substance satisfactory to counsel to the Underwriter, which
opinions shall be substantially the same in scope and substance as the
opinions furnished to the Underwriter at the Closing Date pursuant to
Section 4(e) hereof, except that such opinions, where appropriate,
shall cover the Option Securities.
(iii) At the Option Closing Date, there shall have been delivered
to the Underwriter a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company, dated the Option Closing Date,
in form and substance satisfactory to counsel to the Underwriter,
substantially the same in scope and substance as the certificate
furnished to the Underwriter at the Closing Date pursuant to Section
4(f) hereof.
(iv) At the Option Closing Date, there shall have been delivered
to the Underwriter a letter in form and substance satisfactory to the
Underwriter from Deloitte & Touche LLP, independent auditors to the
Company, dated the Option Closing Date and addressed to the Underwriter
confirming the information in their letter referred to in Section 4(g)
hereof and stating that nothing has come to their attention during the
period from the ending date of their review referred to in said letter
to a date not more than five business days prior to the Option Closing
Date, which would require any change in said letter if it were required
to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date
in connection with the sale and issuance of the Option Securities shall
be satisfactory in form and substance to the Underwriter, and the
Underwriter and counsel to the Underwriter shall have been furnished
with all such documents, certificates, and opinions as the Underwriter
may request in connection with this transaction in order to evidence
the accuracy and completeness of any of the representations, warranties
or statements of the Company or its compliance with any of the
covenants or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD, the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Common Stock and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the Underwriter or the
Company, shall be contemplated by the Commission or the NASD. The Company
represents that at the date hereof it has no knowledge that any such action is
in fact contemplated by the Commission or the NASD. The Company shall advise the
Underwriter
30
of any NASD affiliations of any of its officers, directors, or stockholders or
their affiliates in accordance with Section 1(y) of this Agreement.
(j) At the Effective Date, the Underwriter shall have received from
counsel to the Company, dated as of the Effective Date, in form and substance
satisfactory to counsel for the Underwriter, a written Secondary Market Trading
Opinion detailing those states in which the Shares and Warrants may be traded in
non- issuer transactions under the Blue Sky laws of the fifty (50) states after
the Effective Date, in accordance with Section 3(ab) of this Agreement.
(k) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the Underwriter, and such counsel shall be furnished with such documents,
certificates and opinions as they may reasonably request to enable them to pass
upon the matters referred to in this sub-section.
(l) Prior to the Effective Date, the Underwriter shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(m) If any of the conditions provided for in this Section shall not
have been fulfilled as of the date indicated, this Agreement and all obligations
of the Underwriter under this Agreement may be canceled at, or at any time prior
to, the Closing Date and/or the Option Closing Date by the Underwriter notifying
the Company of such cancellation in writing or by facsimile at or prior to the
applicable Closing Date or Option Closing Date. Any such cancellation shall be
without liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company. The obligation of the
Company to sell and deliver the Securities is subject to the execution of this
Agreement by the Company, and to the following conditions:
(i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or
on such later time or date as the Company and the Underwriter may agree
in writing; and
(ii) At the Closing Date and the Option Closing Date, no stop
orders suspending the effectiveness of the Registration Statement shall
have been issued under the Act or any proceedings therefore initiated
or threatened by the Commission.
If the conditions to the obligations of the Company provided
31
for in this Section have been fulfilled on the Closing Date but are not
fulfilled after the Closing Date and prior to the Option Closing Date, then only
the obligation of the Company to sell and deliver the Securities on exercise of
the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include but not be
limited to, all reasonable costs of defense and investigation and all attorneys'
fees), to which the Underwriter or such controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
(i) the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement thereto, (ii) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such cases to the extent, but only to the
extent, that any such losses, claim, damages or liability arises out of or is
baged untrue statement or omission or alleged omission made in reliance upon and
in conformity with written information furnished to the Company by the
Underwriter specifically for use in the Registration Statement or any amendment
or supplement thereof or any Blue Sky Application or any Preliminary Prospectus
or the Prospectus or any such amendment or supplement thereto. Notwithstanding
the foregoing, the Company shall have no liability under this Section if such
untrue statement or omission made in a Preliminary Prospectus is cured in the
Prospectus and the Prospectus is not delivered to the person or persons alleging
the liability upon which indemnification is being sought. This indemnity will be
in addition to any liability which the Company may otherwise have.
(b) The Underwriter indemnifies and holds harmless the Company, each of
its directors, each nominee (if any) for director named in the Prospectus, each
of the persons who have signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of the Act, against any losses,
claims, damages or liabilities (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and
32
investigation and all attorneys' fees) to which the Company or any such
director, signer of the Registration Statement, officer or controlling person
may become subject under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged 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
statements or allegeission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use in such
Registration Statement or Prospectus. Notwithstanding the foregoing, the
Underwriter shall have no liability under this section if such untrue statement
or omission made in a Preliminary Prospectus is cured in the Prospectus and the
Prospectus is not delivered to the person or persons alleging the liability upon
which indemnification is being sought through no fault of the Underwriter. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof nvestigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees
33
and expenses of such counsel shall be at the expense of the indemnifying party
if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the reasonable judgment of
the Underwriter, it is advisable for the Underwriter or such Underwriter or
controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Underwriter or such controlling person). No settlement of any
action against an indemnified party shall be made without the consent of the
indemnifying party, which shall not be unreasonably withheld in light of all
factors of importance to such indemnifying and indemnified parties.
7. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) the Underwriter makes claim
for indemnification pursuant to Section 6 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 6 provide for indemnification in
such case, or (ii) contribution xxxx Underwriter, then the Company and each
person who controls the Company, in the aggregate, and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees) in either such case (after contribution from others)
in such proportions that the Underwriter is responsible in the aggregate for
that portion of such losses, claims, damages or liabilities represented by the
percentage that the underwriting discount per Share appearing on the cover page
of the Prospectus bears to the public offering price appearing thereon, and the
Company shall be responsible for the remaining portion, provided, however, that
if such allocation is not permitted by applicable law then the relative fault of
the Company and the Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company, or the Underwriter and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriter agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriter to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the
34
Underwriter and its controlling persons in the aggregate were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations he first sentence of this Section. No
person ultimately determined to be guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not ultimately determined to be guilty of
such fraudulent misrepresentation. As used in this Section, the term
"Underwriter" includes any officer, director, or other person who controls the
Underwriter within the meaning of Section 15 of the Act, and the word "Company"
includes any officer, director, or person who controls the Company within the
meaning of Section 15 of the Act. If the full amount of the contribution
specified in this paragraph is not permitted by law, then the Underwriter and
each person who controls the Underwriter shall be entitled to contribution from
the Company, its officers, directors and controlling persons to the full extent
permitted by law. This foregoing agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of the
Act other than the Company and the Underwriter. No contribution shall be
requested with regard to the settlement of any matter from any party which did
not consent to the settlement; provided, however, that such consent shall not be
unreasonably withheld in light of all factors of importance to such party.
8. Costs and Expenses. (a) Whether or not this Agreement becomes
effective or the sale of the Securities to the Underwriter is consummated, the
Company will pay all costs and expenses incident to the performance of this
Agreement by the Company including but not limited to the fees and expenses of
counsel to the Company and of the Company's accountants; the costs and expenses
incident to the preparation, printing, filing and distribution under the Act of
the Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), Preliminary Prospectus and the Prospectus, as
amended or supplemented; the fee of rs, Inc. ("NASD") in connection with the
filing required by the NASD relating to the offering of the Securities
contemplated hereby; all state filing fees, expenses and disbursements and legal
fees of counsel to the Underwriter who shall serve as Blue Sky counsel to the
Company in connection with the filing of applications to register the Securities
under the state securities or blue sky laws (which legal fees shall be payable
by the Company in the sum of $27,500, of which $15,000 has been paid); the cost
of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selected Dealers Agreement, and the Blue Sky Memorandum; the cost of printing
the certificates evidencing the securities comprising the Securities; the cost
of preparing and delivering to the Underwriter and its counsel bound volumes
containing copies of all documents and appropriate correspondence filed with or
received from the Commission and the NASD and all closing documents; and the
fees and disbursements of
35
the transfer agent for the Company's securities. The Company shall pay any and
all taxes (including any original issue, transfer, franchise, capital stock or
other tax imposed by any jurisdiction) on sales to the Underwriter hereunder.
The Company will also pay all costs and expenses incident to the furnishing of
any amended Prospectus or of any supplement to be attached to the Prospectus.
The Company shall also engage the Company's counsel to provide the Underwriter
with a written Secondary Market Trading Opinion in accordance with paragraphs
3(ab) and 4(j) of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Underwriter a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds received from the sale of the
Securities, of which an advance of $50,000 has been paid to date. In the event
the overallotment option is exercised, the Company shall pay to the Underwriter
at the Option Closing Date an additional amount equal to three percent (3%) of
the gross proceeds received upon exercise of the overallotment option.
(c) Other than as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter against any losses, claims, damages or liabilities,
which shall, for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all attorneys' fees, to which the
Underwriter may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
claim of any person (other than an employee of the party claiming indemnity) or
entity that he or it is entitled to a finder's fee in connection with the
proposed offering by reason of such person's or entity's influence or prior
contact with the indemnifying party.
9. Effective Date. The Agreement shall become effective upon its
execution except that the Underwriter may, at the Underwriter's option, delay
its effectiveness until 11:00 a.m., Eastern time, on the first full business day
following the execution of this Agreement; or at such earlier time after the
Effective Date of the Registration Statement as the Underwriter in the
Underwriter's discretion shall first commence the public offering of any of the
Securities. The time of the public offering shall mean the time after the
effectiveness of the Registration Statement when the Securities are first
generally o. This Agreement may be terminated by the Underwriter at any time
before it becomes effective as provided above, except that Sections 3(c), 6, 7,
8, 12, 13, 14, 15, 16 and 17 shall remain in effect notwithstanding such
termination.
10. Termination. (a) This Agreement, except for Sections 3(c),
6, 7, 8, 12, 13, 14, 15, 16, and 17 hereof, may be terminated
36
at any time prior to the Closing Date, and the option referred to in Section
2(b) hereof, if exercised, may be cancelled at any time prior to the Option
Closing Date, by the Underwriter if in the Underwriter's judgment it is
impracticable to offer for sale or to enforce contracts made by the
Underwriter for the resale of the Securities agreed to be purchased hereunder
by reason of: (i) the Company having sustained a material adverse loss,
whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action,
order or decree; (ii) trading in securities on the New York Stock Exchange or
the American Stock Exchange having been suspended or limited; (iii) material
governmental restrictions having been imposed on trading in securities
generally (not in force and effect on the date hereof); (iv) a banking
moratorium having been declared by Federal or New York or Florida state
authorities; (v) an outbreak of major international hostilities or other
national or international calamity having occurred; (vi) the passage by the
Congress of the United States or by any state legislative body of similar
impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is reasonably
believed likely by the Underwriter to have a material adverse impact on the
business, financial condition or financial statements of the Company or the
market for the Securities offered hereby; (vii) any material adverse change
in the financial or securities markets beyond normal market fluctuations
having occurred since the date of this Agreement; (viii) any material adverse
change having occurred, since the respective dates as of which information is
given in the Registration Statement and Prospectus, in the earnings, business
prospects or general condition of the Company, financial or otherwise,
whether or not arising in the business; (ix) a pending or threatened legal or
governmental proceeding or action relating generally to the Company's
business, or a notification having been received by the Company of the threat
of any such proceeding or action, which could, in the reasonable judgment of
the Underwriter, materially adversely affect the Company; (x) except as
contemplated by the Prospectus, the Company is merged or consolidated into or
acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs; or (xi) the Company shall not have complied in all material
respects with any term, condition or provisions on its part to be performed,
complied with or fulfilled (including but not limited to those set forth in
this Agreement) within the respective times therein provided.
(b) If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section, the
Company shall be promptly notified by the Underwriter, by telephone, telegram or
facsimile, confirmed by letter.
11. Underwriter's Warrant Agreement. At the Closing Date,
the Company will issue to the Underwriter and/or persons related to
37
the Underwriter, for an aggregate purchase price of $10, and upon the terms and
conditions set forth in the form of Underwriter's Warrant Agreement annexed as
an exhibit to the Registration Statement, Underwriter Warrants to purchase up to
an aggregate of 200,000 Shares and 250,000 Warrants, in such denominations as
the Underwriter shall designate. In the event of conflict in the terms of this
Agreement and the Underwriter's Warrant Agreement, the language of the form of
Underwriter's Warrant Agreement shall control.
12. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its principal officers, where a this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of the Underwriter, the Company or any of its officers or directors or
any controlling person and will survive delivery of and payment for the
Securities and the termination of this Agreement.
13. Notice. All communications hereunder will be in writing
and, except as otherwise expressly provided herein, will be mailed,
delivered or telefaxed, and confirmed:
If to the Underwriter: Xxxxxx X. Xxxx, President
Xxxxxx Xxxxx Securities, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Copy to: Xxxxx X. Xxxxxx, P.A.
0000 Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
If to the Company: Xxxxxxx X. Xxxxxx, Chief Executive Officer
Eagle Supply Group, Inc.
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Copy to: Xxxxxx Xxxxx, Esq.
Gusrae, Xxxxxx & Bruno
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
14. Parties in Interest. This Agreement herein set forth is made
solely for the benefit of the Underwriter, the Company and, to the extent
expressed, any person controlling the Company or the Underwriter, and
directors of the Company, nominees for director (if any) named in the
Prospectus, each person who has signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The
term "sucessors and assigns" shall not include any purchaser of the
Securities, as such purchaser, from the Underwriter.
38
15. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida applicable to contracts made
and to be performed entirely within the State of Florida. The parties agree that
any action brought by any party against another party in connection with any
rights or obligations arising out of this Agreement shall be instituted properly
in a federal or state court of competent jurisdiction with venue only in the
Fifteenth Judicial Circuit Court in and for Palm Beach County, Florida or the
United States District Court for the Southern District of Florida, West Palm
Beach Division. A party to this Agreement named as a Defendant in any action
brought in connection with this Agreement in any court outside of the above
named designated county or district shall have the right to have the venue of
said action changed to the above designated county or district or, if necessary,
have the case dismissed, requiring the other party to refile such action in an
appropriate court in the above designated county or federal district.
16. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
17. Entire Agreement. This Agreement and the agreements referred to
within this Agreement constitute the entire agreement of the parties and
supersedes all prior agreements, understandings, negotiations and discussions,
whether written or oral, of the parties hereto.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
EAGLE SUPPLY GROUP, INC.
BY:
-------------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
XXXXXX XXXXX SECURITIES, INC.
BY:
-------------------------------------
Xxxxxx X. Xxxx, President
39
EAGLE SUPPLY GROUP, INC.
2,000,000 Shares of Common Stock and
2,500,000 Common Stock Purchase Warrants
SELECTED DEALER AGREEMENT
Boca Raton, Florida
_____________, 1998
Gentlemen:
1. Xxxxxx Xxxxx Securities, Inc. (the "Underwriter") is offering for
sale an aggregate of 2,000,000 Shares of Common Stock (the "Shares") and
2,500,000 Warrants (the "Warrants") (collectively the "Firm Securities") of
Eagle Supply Group, Inc. (the "Company"), which the Underwriter has agreed to
purchase from the Company, and which are more particularly described in the
Registration Statement, Underwriting Agreement and Prospectus. In addition, the
Underwriter has been granted an option to purchase from the Company up to an
additional 300,000 Shares and an additional 375,000 Warrants (the "Option
Securities") to cover overallotments in connection with the sale of the Firm
Securities. The Firm Securities and any Option Securities purchased are herein
called the "Securities". The Securities and the terms under which they are to be
offered for sale by the Underwriter is more particularly described in the
Prospectus.
2. The Securities are to be offered to the public by the Underwriter at
the price per Share and price per Warrant set forth on the cover page of the
Prospectus (the "Public Offering Price"), in accordance with the terms of
offering set forth in the Prospectus.
3. The Underwriter, subject to the terms and conditions hereof, is
offering a portion of the Securities for sale to certain dealers who are
actually engaged in the investment banking or securities business and who are
either (a) members in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"), or (b) dealers with their principal places of
business located outside the United States, its territories and its
possessions and not registered as brokers or dealers under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), who have agreed not to
make any sales within the United States, its territories or its possessions
or to persons who are nationals thereof or residents therein (such dealers
who shall agree to sell Securities herering price, less a selling concession
(which may be changed) of not in excess of $ per Share and/or $ per
Warrant payable as hereinafter provided, out of which concession an amount
not exceeding $ per Share and/or $ per
1
Warrant may be reallowed by Selected Dealers to members of the NASD or foreign
dealers qualified as aforesaid. The Selected Dealers who are members of the NASD
agree to comply with all of the provisions of the NASD Conduct Rules. Foreign
Selected Dealers agree to comply with the provisions of Rule 2740 of the NASD
Conduct Rules, and, if any such dealer is a foreign dealer and not a member of
the NASD, such Selected Dealer also agrees to comply with the NASD's
Interpretation with Respect to Free-Riding and Withholding, and to comply, as
though it were a member of the NASD, with the provisions of Rules 2730 and 2750
of the NASD Conduct Rules, and to comply with Rule 2420 thereof as that Rule
applies to non-member foreign dealers. The Underwriter has agreed that, during
the term of this Agreement, it will be governed by the terms and conditions
hereof.
4. The Underwriter shall act as Underwriter and shall have full
authority to take such action as it may deem advisable in respect to all matters
pertaining to the public offering of the Securities.
5. If you desire to act as a Selected Dealer and purchase any of the
Securities, your application should reach us promptly by facsimile, letter or
telegraph at the offices of Xxxxxx Xxxxx Securities, Inc., 0000 Xxxx Xxxxxx
Xxxx, Xxxx Xxxxx, Xxxxxxx 00000, Attention: Xxxxxx X. Xxxx. We reserve the right
to reject subscriptions in whole or in part, to make allotments, and to close
the subscription books at any time without notice. The Securities allotted to
you will be confirmed, subject to the terms and conditions of this Selected
Dealers Agreement (the "Agreement").
6. The privilege of subscribing for the Securities is extended to you
only on the condition that the Underwriter may lawfully sell the Securities to
Selected Dealers in your state or other applicable jurisdiction.
7. Any Securities to be purchased by you under the terms of this
Agreement may be immediately reoffered to the public in accordance with the
terms of offering as set forth herein and in the Prospectus, subject to the
securities or Blue Sky laws of the various states or other jurisdictions.
You agree to pay us on demand for the account of the Underwriter an
amount equal to the Selected Dealer concession as to any Securities purchased by
you hereunder which, prior to the completion of the public offering as defined
in paragraph 8 below, we may purchase or contract to purchase for our account
and, in addition, we may charge you with any broker's commission and transfer
tax paid in connection with such purchase or contract to purchase. Certificates
for Securities delivered on such repurchases need not be the identical
certificates originally purchased.
2
You agree to advise us from time to time, upon request, of the number
of Securities purchased by you hereunder and remaining unsold at the time of
such request, and, if in our opinion any such Securities shall be needed to make
delivery of the Securities sold or overallotted for the account of the
Underwriter, you will, forthwith upon our request, grant to us for the account
of the Underwriter the right, exercisable promptly after receipt of notice from
you that such right has been granted, to purchase, at the Public Offering Price
less the selling concession or such part thereof as we shall determine, such
number of Securities owned by you as shall have been specified in our request.
No expenses shall be charged to Selected Dealers. A single transfer
tax, if payable, upon the sale of the Securities by the Underwriter to you will
be paid when such Securities are delivered to you. However, you shall pay any
transfer tax on sales of Securities by you and you shall pay your proportionate
share of any transfer tax (other than the single transfer tax described above)
in the event that any such tax shall from time to time be assessed against you
and other Selected Dealers as a group or otherwise.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the sale of the
Securities other than as contained in the Prospectus.
8. The first three paragraphs of Section 7 hereof will terminate when
we shall have determined that the public offering of the Securities has been
completed and upon telefax notice to you of such termination, but, if not
theretofore terminated, they will terminate at the close of business on the 30th
full business day after the date hereof; provided, however, that we shall have
the right to extend such provisions for a further period or periods, not
exceeding an additional 30 days in the aggregate upon telefax notice to you.
9. For the purpose of stabilizing the market in the Securities, we
have been authorized to make purchases and sales of the Securities of the
Company, in the open market or otherwise, for long or short account, and, in
arranging for sales, to overallot.
10. On becoming a Selected Dealer, and in offering and selling the
Securities, you agree to comply with all the applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the 1934 Act. You
confirm that you are familiar with Rule 15c2-8 under the 1934 Act relating to
the distribution of preliminary and final prospectuses for securities of an
issuer (whether or not the issuer is subject to the reporting requirements of
Section 13 or 15(d) of the 0000 Xxx) and confirm that you have complied and will
comply therewith.
3
We hereby confirm that we will make available to you such number of
copies of the Prospectus (as amended or supplemented) as you may reasonably
request for the purposes contemplated by the 1933 Act or the 1934 Act, or the
rules and regulations thereunder.
11. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Securities are qualified
for sale under the respective securities or Blue Sky laws of such states and
other jurisdictions, but we shall not assume any obligation or responsibility as
to the right of any Selected Dealer to sell the Securities in any state or other
jurisdiction or as to the eligibility of the Securities for sale therein. We
will, if requested, file a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York.
12. No Selected Dealer is authorized to act as agent for the
Underwriter, or otherwise to act on our behalf, in offering or selling the
Securities to the public or otherwise or to furnish any information or make any
representation except as contained in the Prospectus.
13. Nothing will constitute the Selected Dealers an association or
other separate entity or partners with the Underwriter, or with each other, but
you will be responsible for your share of any liability or expense based on any
claim to the contrary. We shall not be under any liability for or in respect of
value, validity or form of the Securities, or the delivery of the certificates
for the Securities, or the performance by anyone of any agreement on its part,
or the qualification of the Securities for sale under the laws of any
jurisdiction, or for or in respect of any other matter relating to this
Agreement, except for lack of good faith and for obligations expressly assumed
by us or by the Underwriter in this Agreement and no obligation on our part
shall be implied herefrom. The foregoing provisions shall not be deemed a waiver
of any liability imposed under the 1933 Act.
14. Payment for the Securities sold to you hereunder is to be made at
the Public Offering Price less the above-mentioned selling concession on such
time and date as we may advise, at the office of Xxxxxx Xxxxx Securities, Inc.,
0000 Xxxx Xxxxxx Xxxx, Xxxx Xxxxx, Xxxxxxx 00000, Attention: Xxxxxx X. Xxxx, by
wire transfer to the account of the Underwriter or by a certified or official
bank check in current New York Clearing House funds, payable to the order of
Xxxxxx Xxxxx Securities, Inc., as Underwriter, against delivery of certificates
for the Securities so purchased. If such payment is not made at such time, you
agree to pay us interest on such funds at the prevailing broker's loan rate.
15. Notices to us should be addressed to us at the offices of Xxxxxx
Xxxxx Securities, Inc., 0000 Xxxx Xxxxxx Xxxx, Xxxx Xxxxx, Xxxxxxx 00000,
Attention: Xxxxxx X. Xxxx. Notices to you shall be
4
deemed to have been duly given if telephoned, telefaxed, telegraphed or mailed
to you at the address to which this Agreement or accompanying Selected Dealer
Letter is addressed.
16. This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida without giving effect to the choice of law
or conflicts of law principles thereof.
17. If you desire to purchase any Securities and act as a Selected
Dealer, please confirm your application by signing and returning to us your
confirmation on the duplicate copy of the Selected Dealer Letter enclosed
herewith, even though you may have previously advised us thereof by telephone,
letter or telegraph.
Our signature hereon may be by facsimile.
Very truly yours,
XXXXXX XXXXX SECURITIES, INC.
BY: _____________________________
Authorized Officer
5
SELECTED DEALER LETTER
Xxxxxx X. Xxxx, President
Xxxxxx Xxxxx Securities, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
We hereby subscribe for ___________ Shares and/or __________________
Warrants of Eagle Supply Group, Inc. in accordance with the terms and
conditions stated in the foregoing Selected Dealers Agreement and this
Selected Dealer letter. We hereby acknowledge receipt of the Prospectus
referred to in the Selected Dealers Agreement and Selected Dealer letter. We
further state that in purchasing said Shares and/or Warrants we have relied
upon said Prospectus and upon no other statement whatsoever, whether written
or oral. We confirm that we are a dealer actually engaged in the investment
banking or securities business and that we are either (i) a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD"); or
(ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered as a broker or
dealer under the Securities Exchange Act of 1934, as amended, who hereby
agrees not to make any sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents therein. As
a member of the NASD, we hereby agree to comply with all of the provisions of
NASD Conduct Rules. If we are a foreign Selected Dealer, we agree to comply
with the provisions of Rule 2740 of the NASD Conduct Rules, and if we are a
foreign dealer and not a member of the NASD, we agree to comply with the
NASD's interpretation with respect to free-riding and withholding, and agree
to comply, as though we were a member of the NASD, with provisions of Rules
2730 and 2750 of the NASD Conduct Rules, and to comply with Rule 2420 of the
NASD Conduct Rules as that Rule applies to non-member foreign dealers.
Firm: _________________________________
By: _________________________________
(Name and Position)
Address: _________________________________
_________________________________
Telephone No.: _________________________________
Dated: ______________, 1998
6
