UNDERWRITING AGREEMENT
BETWEEN
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
AND
X.X. XXXXXXXX & CO., INC.
DATED: _________ __, 1997
TABLE OF CONTENTS
PAGE
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1. PURCHASE AND SALE OF SECURITIES.. . . . . . . . . . . . . . . . . . . . . 1
1.1 FIRM SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1.1 PURCHASE OF FIRM SECURITIES. . . . . . . . . . . . . . . . . 1
1.1.2 PAYMENT AND DELIVERY . . . . . . . . . . . . . . . . . . . . 1
1.2 OVER-ALLOTMENT OPTION . . . . . . . . . . . . . . . . . . . . . . . 2
1.2.1 OPTION SECURITIES. . . . . . . . . . . . . . . . . . . . . . 2
1.2.2 EXERCISE OF OPTION . . . . . . . . . . . . . . . . . . . . . 2
1.2.3 PAYMENT AND DELIVERY . . . . . . . . . . . . . . . . . . . . 2
1.3 UNDERWRITER'S PURCHASE OPTION . . . . . . . . . . . . . . . . . . . 3
1.3.1 PURCHASE OPTION. . . . . . . . . . . . . . . . . . . . . . . 3
1.3.2 PAYMENT AND DELIVERY . . . . . . . . . . . . . . . . . . . . 3
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . 3
2.1 FILING OF REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . 3
2.1.1 PURSUANT TO THE ACT. . . . . . . . . . . . . . . . . . . . . 3
2.1.2 PURSUANT TO THE EXCHANGE ACT . . . . . . . . . . . . . . . . 3
2.2 NO STOP ORDERS, ETC.. . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 DISCLOSURES IN REGISTRATION STATEMENT . . . . . . . . . . . . . . . 4
2.3.1 SECURITIES ACT AND EXCHANGE ACT REPRESENTATION . . . . . . . 4
2.3.2 DISCLOSURE OF CONTRACTS. . . . . . . . . . . . . . . . . . . 4
2.3.3 PRIOR SECURITIES TRANSACTIONS. . . . . . . . . . . . . . . . 4
2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT . . . . . . . . . . . 5
2.4.1 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . 5
2.4.2 RECENT SECURITIES TRANSACTIONS, ETC. . . . . . . . . . . . . 5
2.5 INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . 5
2.6 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. . . . . . . . . . . . . . . . . . 5
2.8 VALID ISSUANCE OF SECURITIES; ETC . . . . . . . . . . . . . . . . . 5
2.8.1 OUTSTANDING SECURITIES . . . . . . . . . . . . . . . . . . . 5
2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT . . . . . . . . . 6
2.9 REGISTRATION RIGHTS OF THIRD PARTIES. . . . . . . . . . . . . . . . 6
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS . . . . . . . . . . . . . 6
2.11 NO CONFLICTS, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 NO DEFAULTS; VIOLATIONS . . . . . . . . . . . . . . . . . . . . . . 7
2.13 CORPORATE POWER; LICENSES; CONSENTS . . . . . . . . . . . . . . . . 7
2.13.1 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . 7
2.13.2 TRANSACTIONS CONTEMPLATED HEREIN . . . . . . . . . . . . . . 7
2.14 TITLE TO PROPERTY; INSURANCE. . . . . . . . . . . . . . . . . . . . 7
2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. . . . . . . . . . . . . . . . 8
2.16 GOOD STANDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.18 EMPLOYEES' OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 8
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2.19 TRANSACTIONS AFFECTING DISCLOSURE TO NASD . . . . . . . . . . . . . 8
2.19.1 FINDER'S FEES. . . . . . . . . . . . . . . . . . . . . . . . 8
2.19.2 PAYMENTS WITHIN TWELVE MONTHS. . . . . . . . . . . . . . . . 9
2.19.3 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . 9
2.19.4 INSIDERS' NASD AFFILIATION . . . . . . . . . . . . . . . . . 9
2.20 FOREIGN CORRUPT PRACTICES ACT . . . . . . . . . . . . . . . . . . . 9
2.21 NASDAQ AND BSE ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . 9
2.22 INTANGIBLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.23 RELATIONS WITH EMPLOYEES. . . . . . . . . . . . . . . . . . . . . .10
2.23.1 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . .10
2.23.2 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . .10
2.24 OFFICERS' CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . .10
2.25 WARRANT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . .11
2.26 AGREEMENTS WITH INSIDERS. . . . . . . . . . . . . . . . . . . . . .11
2.27 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.28 UNAUDITED FINANCIALS. . . . . . . . . . . . . . . . . . . . . . . .11
2.29 PRODUCT LIABILITY INSURANCE . . . . . . . . . . . . . . . . . . . .11
3. COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . .11
3.1 AMENDMENTS TO REGISTRATION STATEMENT. . . . . . . . . . . . . . . .11
3.2 FEDERAL SECURITIES LAWS . . . . . . . . . . . . . . . . . . . . . .11
3.2.1 COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . .11
3.2.2 FILING OF FINAL PROSPECTUS . . . . . . . . . . . . . . . . .12
3.2.3 EXCHANGE ACT REGISTRATION. . . . . . . . . . . . . . . . . .12
3.3 BLUE SKY FILING . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.4 DELIVERY TO THE UNDERWRITER OF PROSPECTUSES . . . . . . . . . . . .12
3.5 EVENTS REQUIRING NOTICE TO THE UNDERWRITER. . . . . . . . . . . . .12
3.6 REVIEW OF FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . .13
3.7 RESERVED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.8 SECONDARY MARKET TRADING AND STANDARD & POOR'S. . . . . . . . . . .13
3.9 NASDAQ MAINTENANCE. . . . . . . . . . . . . . . . . . . . . . . .13
3.10 WARRANT SOLICITATION AND REGISTRATION OF COMMON STOCK UNDERLYING THE
WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.10.1 WARRANT SOLICITATION FEES. . . . . . . . . . . . . . . . . .13
3.10.2 REGISTRATION OF COMMON STOCK . . . . . . . . . . . . . . . .14
3.11 REPORTS TO THE UNDERWRITER AND OTHERS . . . . . . . . . . . . . . .14
3.11.1 PERIODIC REPORTS, ETC. . . . . . . . . . . . . . . . . . . .14
3.11.2 TRANSFER SHEETS AND WEEKLY POSITION LISTINGS . . . . . . . .14
3.11.3 SECONDARY MARKET TRADING MEMORANDUM. . . . . . . . . . . . .14
3.12 AGREEMENTS BETWEEN THE UNDERWRITER AND THE COMPANY. . . . . . . . .14
3.12.1 Underwriter's Purchase Option. . . . . . . . . . . . . . . .14
3.13 DISQUALIFICATION OF FORM SB-2 . . . . . . . . . . . . . . . . . . .14
3.14 PAYMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . . .15
3.14.1 GENERAL EXPENSES . . . . . . . . . . . . . . . . . . . . . .15
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3.14.2 NON-ACCOUNTABLE EXPENSES . . . . . . . . . . . . . . . . . .15
3.15 APPLICATION OF NET PROCEEDS . . . . . . . . . . . . . . . . . . . .16
3.16 DELIVERY OF EARNINGS STATEMENTS TO SECURITY HOLDERS . . . . . . . .16
3.17 KEY PERSON LIFE INSURANCE . . . . . . . . . . . . . . . . . . . . .16
3.18 STABILIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.19 INTERNAL CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . .16
3.20 ACCOUNTANTS AND LAWYERS . . . . . . . . . . . . . . . . . . . . . .16
3.21 TRANSFER AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.22 SALE OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . .17
4. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS . . . . . . . . . . . . . . .17
4.1 REGULATORY MATTERS. . . . . . . . . . . . . . . . . . . . . . . . .17
4.1.1 EFFECTIVENESS OF REGISTRATION STATEMENT. . . . . . . . . . .17
4.1.2 NASD CLEARANCE . . . . . . . . . . . . . . . . . . . . . . .17
4.1.3 NO BLUE SKY STOP ORDERS. . . . . . . . . . . . . . . . . . .17
4.2 COMPANY COUNSEL MATTERS . . . . . . . . . . . . . . . . . . . . . .17
4.2.1 EFFECTIVE DATE OPINION OF COUNSEL. . . . . . . . . . . . . .17
4.2.2 EFFECTIVE DATE OPINION OF REGULATORY COUNSEL . . . . . . . .21
4.2.3 CLOSING DATE AND OPTION CLOSING DATE OPINION OF COUNSEL. . .22
4.2.4 RELIANCE . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.2.5 SECONDARY MARKET TRADING MEMORANDUM. . . . . . . . . . . . .22
4.3 COLD COMFORT LETTER. . . . . . . . . . . . . . . . . . . . . . . . .22
4.4 OFFICERS' CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . .24
4.4.1 OFFICERS' CERTIFICATE. . . . . . . . . . . . . . . . . . . .24
4.4.2 SECRETARY'S CERTIFICATE. . . . . . . . . . . . . . . . . . .24
4.5 NO MATERIAL CHANGES. . . . . . . . . . . . . . . . . . . . . . . . .24
4.6 DELIVERY OF AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . .25
4.7 OPINION OF COUNSEL FOR THE UNDERWRITER . . . . . . . . . . . . . . .25
4.8 OPINION OF SPECIAL REGULATORY CONSULTANT . . . . . . . . . . . . . .25
5. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
5.1 INDEMNIFICATION OF THE UNDERWRITER . . . . . . . . . . . . . . . . .25
5.1.1 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . .25
5.1.2 PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . . .26
5.2 INDEMNIFICATION OF THE COMPANY . . . . . . . . . . . . . . . . . . .26
5.3 CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
5.3.1 CONTRIBUTION RIGHTS. . . . . . . . . . . . . . . . . . . . .26
5.3.2 CONTRIBUTION PROCEDURE . . . . . . . . . . . . . . . . . . .27
6. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . .27
7. ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .27
7.1 BOARD DESIGNEE. . . . . . . . . . . . . . . . . . . . . . . . . . .27
7.2 PRESS RELEASES. . . . . . . . . . . . . . . . . . . . . . . . . . .28
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7.3 FORM S-8 OR ANY SIMILAR FORM. . . . . . . . . . . . . . . . . . . .28
7.4 COMPENSATION AND OTHER ARRANGEMENTS . . . . . . . . . . . . . . . .28
7.5 REGULATION S. . . . . . . . . . . . . . . . . . . . . . . . . . . .28
7.6 PUBLIC RELATIONS FIRM . . . . . . . . . . . . . . . . . . . . . . .28
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. . . . . . . . . . . .28
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF. . . . . . . . .28
9.1 EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . . . .28
9.2 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
9.3 NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
9.4 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
9.5 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . .29
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
10.1 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
10.2 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
10.3 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
10.4 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .30
BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . . . . . . .30
10.6 GOVERNING LAW; JURISDICTION . . . . . . . . . . . . . . . . . . . .30
10.7 EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . . . .31
10.8 WAIVER, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
iv
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
1,500,000 Shares of Common Stock
and
1,500,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
New York, New York
______ ___, 1997
X.X. Xxxxxxxx & Co., Inc.
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
The undersigned, Dental/Medical Diagnostic Systems, Inc., a Delaware
corporation (the "Company"), hereby confirms its agreement with X.X. Xxxxxxxx &
Co., Inc. ("MHM" being referred to herein variously as the "Underwriter" or
"you") as follows:
1. PURCHASE AND SALE OF SECURITIES.
1.1 FIRM SECURITIES.
1.1.1 PURCHASE OF FIRM SECURITIES. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter and the Underwriter agrees to purchase from the Company 1,500,000
shares of the Company's Common Stock ("Common Stock") at a purchase price (net
of discounts commissions) of $____ per share ("Common Stock") and 1,500,000 of
Redeemable Common Stock Purchase Warrants ("Warrant(s)") at a purchase price of
$___ per Warrant, each Warrant entitling the holder thereof to purchase one
share of Common Stock at an initial purchase price of $5.00 per share commencing
one year after the Effective Date and expiring at the close of business on the
last day of the five-year period following the Effective Date (these shares of
Common Stock and Warrants being referred to herein as "Firm Securities").
1.1.2 PAYMENT AND DELIVERY. Delivery and payment for the Firm
Securities shall be made at 10:00 A.M., New York time, on or before the third
business day following the date that the Firm Securities commence trading or at
such earlier time as the Underwriter shall determine, or at such other time as
shall be agreed upon by the Underwriter and the Company at the offices of MHM or
at such other place as shall be agreed upon by the Underwriter and the Company.
The hour and date of delivery and payment for the Firm Securities are called the
"Closing Date." Payment for the Firm Securities shall be made on the Closing
Date at the Underwriter's election by wire transfer or by certified or bank
cashier's check(s) in New York Clearing House funds, payable to the order of the
Company upon delivery to you of certificates (in form and substance satisfactory
to the Underwriter) representing the Firm Securities for the account of the
Underwriter. The Firm Securities shall be registered in such name or names and
in such authorized denominations as the Underwriter may request in writing at
least two full business days prior to the Closing Date. The Company will permit
the Underwriter to examine and package the Firm Securities for delivery, at
least one full business day prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Securities except upon tender of payment
by the Underwriter for all the Firm Securities.
1.2 OVER-ALLOTMENT OPTION.
1.2.1 OPTION SECURITIES. For the purposes of covering any over-
allotments in connection with the distribution and sale of the Firm Securities,
the Underwriter is hereby granted an option to purchase up to an additional
225,000 shares of Common Stock and/or 225,000 Warrants from the Company ("Over-
allotment Option"). Such additional 225,000 shares of Common Stock and 225,000
Warrants are hereinafter referred to as the "Option Securities." The Firm
Securities and the Option Securities are, together with the shares of Common
Stock issuable upon exercise of the Warrants, hereinafter referred to
collectively as the "Public Securities." The purchase price to be paid for the
Option Securities will be the same price per Option Security as the price per
Firm Security set forth in Section 1.1.1 hereof.
1.2.2 EXERCISE OF OPTION. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Underwriter as to all
or any part of the Option Securities at any time, from time to time, within
forty-five days after the effective date ("Effective Date") of the Registration
Statement (as hereinafter defined). The Underwriter will not be under any
obligation to purchase any Option Securities prior to the exercise of the Over-
allotment Option. The Over-allotment Option granted hereby may be exercised by
the giving of oral notice to the Company from MHM, which must be confirmed
within 24 hours thereof by a letter or telecopy setting forth the number of
Option Securities to be purchased, the date and time for delivery of and payment
for the Option Securities and stating that the Option Securities referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution and sale of the Firm Securities. If such notice is given
at least two full business days prior to the Closing Date, the date set forth
therein for such delivery and payment will be the Closing Date. If such notice
is given thereafter, the date set forth therein for such delivery and payment
will not be earlier than five full business days after the date of the notice,
unless we mutually agree to an earlier date. If such delivery and payment for
the Option Securities does not occur on the Closing Date, the date and time of
the closing for such Option Securities will be as set forth in the notice
(hereinafter the "Option Closing Date"). Upon exercise of the Over-allotment
Option, the Company will become obligated to convey to the Underwriter, and,
subject to the terms and conditions set forth herein, the Underwriter will
become obligated to purchase, the number of Option Securities specified in such
notice.
1.2.3 PAYMENT AND DELIVERY. Payment for the Option Securities
will be at the Underwriter's election by wire transfer or by certified or bank
cashier's check(s) in New York Clearing House funds, payable to the order of the
Company at the offices of MHM or at such other place as shall be agreed upon by
the Underwriter and the Company upon delivery to you of certificates
representing such securities for the account of the Underwriter. The
certificates representing the Option Securities to be delivered will be in such
denominations and registered in such names as the request not less than two full
business days prior to the Closing Date or the Option Closing Date, as the case
may be, and will be made available to the Underwriter for inspection, checking
and packaging at the aforesaid office of the Company's transfer agent or
correspondent not less than one full business day prior to such Closing Date.
2
1.3 UNDERWRITER'S PURCHASE OPTION.
1.3.1 PURCHASE OPTION. The Company hereby agrees to issue and
sell to the Underwriter (and/or its respective designees) on the Closing Date
for an aggregate purchase price of $100, an option ("Underwriter's Purchase
Option"), exercisable at any time, in whole or in part, between the first and
fifth anniversary dates of the Effective Date, for the purchase of an aggregate
of 150,000 shares of Common Stock ("Underwriter's Shares") at an initial
exercise price of 110% of the initial offering price of a share of common stock
(i.e., $____ per share of Common Stock) and/or 150,000 Warrants ("Underwriter's
Warrants") at an initial exercise price 110% of the initial offering price of a
Warrant (i.e. $____ per Warrant). Each of the Underwriter's Shares and the
Underwriter's Warrants is identical to the Firm Securities. The Underwriter's
Purchase Option, the Underwriter's Shares, the Underwriter's Warrants and the
shares of Common Stock issuable upon exercise of the Underwriter's Warrants are
hereinafter referred to collectively as the "Underwriter's Securities." The
Public Securities and the Underwriter's Securities are hereinafter referred to
collectively as the "Securities."
1.3.2 PAYMENT AND DELIVERY. Delivery and payment for the Purchase
Option shall be made on the Closing Date. The Company shall deliver to the
Underwriter, upon payment therefor, certificates for the Purchase Option in the
name or names and in such authorized denominations as the Underwriter may
request.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Underwriter as follows:
2.1 FILING OF REGISTRATION STATEMENT.
2.1.1 PURSUANT TO THE ACT. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form SB-2 (No. _____________) including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Public Securities under the Securities Act of 1933, as
amended ("Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations ("Regulations") of the Commission under the Act.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated therein
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Regulations), is hereinafter called the
"Registration Statement," and the form of the final prospectus dated the
Effective Date (or, if applicable, the form of final prospectus filed with the
Commission pursuant to Rule 424 of the Regulations), is hereinafter called the
"Prospectus." The Registration Statement has been declared effective by the
Commission on the date hereof.
2.1.2 PURSUANT TO THE EXCHANGE ACT. The Company has filed with
the commission a registration statement on Form 8-A providing for the
registration under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), of the Public Securities. Such registration of the Public Securities has
been declared effective by the Commission on the date hereof.
2.2 NO STOP ORDERS, ETC. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use
3
of any Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
2.3 DISCLOSURES IN REGISTRATION STATEMENT.
2.3.1 SECURITIES ACT AND EXCHANGE ACT REPRESENTATION. At the time
the Registration Statement became effective and at all times subsequent thereto
up to and including the Closing Date and the Option Closing Date, if any, the
Registration Statement and the Prospectus and any amendment or supplement
thereto contained and will contain all material statements which are required to
be stated therein in accordance with the Act and the Regulations, and conformed
and will conform in all material respects to the requirements of the Act and the
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, during such time period and on such dates,
contained or will contain any untrue statement of a material fact or omitted or
will omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, nor did they or will they contain
any untrue statement of a material fact or did they or will they omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto at the time such filing was made
complied in all material respects with the applicable provisions of the Act and
the Regulations. The representation and warranty made in this Section 2.3.1
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriter by the Underwriter expressly for use in the Registration Statement
or Prospectus or any amendment thereof or supplement thereto.
2.3.2 DISCLOSURE OF CONTRACTS. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate and presents fairly the information required to be disclosed and there
are no contracts or other documents required to be described in the Registration
Statement or the Prospectus or to be filed with the Commission as exhibits to
the Registration Statement, which have not been so described or filed. Each
contract or other instrument (however characterized or described) to which the
Company is a party or by which its property or business is or may be bound or
affected and (i) which is referred to in the Prospectus, or (ii) is material to
the Company's business, has been duly and validly executed, is in full force and
effect in all material respects and is enforceable against the parties thereto
in accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and neither the Company nor, to the best of the
Company's knowledge, any other party is in default thereunder and, to the best
of the Company's knowledge, no event has occurred which, with the lapse of time
or the giving of notice, or both, would constitute a default thereunder. None
of the material provisions of such contracts or instruments violates or will
result in a violation of any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court having
jurisdiction over the Company or any of its respective assets or businesses,
including, without limitation, those relating to environmental laws and
regulations.
2.3.3 PRIOR SECURITIES TRANSACTIONS. No securities of the Company
have been sold by the Company within the three years prior to the date hereof,
except as disclosed in the Registration Statement.
4
2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT.
2.4.1 NO MATERIAL ADVERSE CHANGE. Since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or in the results of
operations, business or business prospects of the Company, including, but not
limited to, a material loss or interference with its business from fire, storm,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, whether or
not arising in the ordinary course of business, and (ii) there have been no
transactions entered into by the Company, other than those in the ordinary
course of business, which are material with respect to the condition, financial
or otherwise, or to the results of operations, business or business prospects of
the Company.
2.4.2 RECENT SECURITIES TRANSACTIONS, ETC. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or
(ii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock.
2.5 INDEPENDENT ACCOUNTANTS. Coopers & Xxxxxxx, L.L.P., whose report is
filed with the Commission as part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.
2.6 FINANCIAL STATEMENTS. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company at the dates and for the periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved; and
the supporting schedules included in the Registration Statement present fairly
the information required to be stated therein.
2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date
there will be no options, warrants, or other rights to purchase or otherwise
acquire any authorized but unissued shares of Common Stock of the Company,
including any issuances pursuant to anti-dilution provisions, or any security
convertible into shares of Common Stock of the Company, or any contracts or
commitments to issue or sell shares of Common Stock or any such options,
warrants, rights or convertible securities.
2.8 VALID ISSUANCE OF SECURITIES; ETC.
2.8.1 OUTSTANDING SECURITIES. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and 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
5
Company. The outstanding options and warrants to purchase shares of Common
Stock constitute the valid and binding obligations of the Company, enforceable
in accordance with their terms. The authorized Common Stock and outstanding
options and warrants to purchase shares of Common Stock conform in all material
respects to all statements relating thereto contained in the Registration
Statement and the Prospectus. The offers and sales of the outstanding Common
Stock, options and warrants to purchase shares of Common Stock were at all
relevant times either registered or qualified under the Act and the applicable
state securities or Blue Sky Laws or exempt from such registration requirements.
2.8.2 SECURITIES SOLD PURSUANT TO THIS AGREEMENT. The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. When issued, the
Purchase Option and the Warrants will constitute valid and binding obligations
of the Company to issue and sell, upon exercise thereof and payment therefor,
the number and type of securities of the Company called for thereby and the
Underwriter's Purchase Option and the Warrants will be enforceable against the
Company in accordance with their respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
2.9 REGISTRATION RIGHTS OF THIRD PARTIES. Except as set forth in the
Prospectus, no holders of any securities of the Company or of any options or
warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities
in a registration statement to be filed by the Company.
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This Agreement has been
duly and validly authorized by the Company, and this Agreement, the
Underwriter's Purchase Option and the Warrant Agreement (as hereinafter defined)
have been duly and validly authorized by the Company and constitute, or when
executed and delivered, will constitute, the valid and binding agreements of the
Company, enforceable against the Company in accordance with their respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
2.11 NO CONFLICTS, ETC. The execution, delivery, and performance by the
Company of this Agreement, the Underwriter's Purchase Option and the Warrant
Agreement, and the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof and
thereof have been duly authorized by all necessary corporate action and do not
and will not, with or without the giving of notice or the lapse of time or both,
(i) result in a breach of, or conflict with any of the terms and provisions of,
or constitute a default under,
6
or result in the creation, modification, termination or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any indenture, mortgage, deed of trust, note, loan or credit agreement
or any other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets of
the Company is subject; (ii) result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business; or (iv) have a material adverse
effect on any permit, license, certificate, registration, approval, consent,
license or franchise concerning the Company.
2.12 NO DEFAULTS; VIOLATIONS. Except as described in the Prospectus, no
default exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or instrument evidencing
an obligation for borrowed money, or any other material agreement or instrument
to which the Company is a party or by which the Company may be bound or to which
any of the properties or assets of the Company is subject, the result of which
would have, singly or in the aggregate, a material adverse effect on the
Company, its assets or its operations. The Company is not in violation of any
term or provision of its Certificate of Incorporation or By-Laws or in violation
of any franchise, license, permit, applicable law, rule, regulation, judgment or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business, except as
described in the Prospectus.
2.13 CORPORATE POWER; LICENSES; CONSENTS.
2.13.1 CONDUCT OF BUSINESS. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies to own or lease its properties and conduct its
business as described in the Prospectus, and the Company is and has been doing
business in compliance with all such material authorizations, approvals, orders,
licenses, certificates and permits and all federal, state and local laws, rules
and regulations. The disclosures in the Registration Statement concerning the
effects of federal, state and local regulation on the Company's business as
currently contemplated are correct in all material respects and do not omit to
state a material fact.
2.13.2 TRANSACTIONS CONTEMPLATED HEREIN. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities pursuant to this Agreement, the Underwriter's Purchase Option and the
Warrant Agreement, and as contemplated by the Prospectus, except with respect to
applicable federal and state securities laws.
2.14 TITLE TO PROPERTY; INSURANCE. The Company has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable. The Company has
adequately insured its properties
7
against loss or damage by fire or other casualty and maintains, in adequate
amounts, such other insurance as is usually maintained by companies engaged in
the same or similar business.
2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or threatened
against, or involving the properties or business of, the Company which might
materially and adversely affect the financial position, prospects, value or the
operation or the properties or the business of the Company, or which question
the validity of the capital stock of the Company or this Agreement or of any
action taken or to be taken by the Company pursuant to, or in connection with,
this Agreement. There are no outstanding orders, judgments or decrees of any
court, governmental agency or other tribunal naming the Company and enjoining
the Company from taking, or requiring the Company to take, any action, or to
which the Company, its properties or business is bound or subject.
2.16 GOOD STANDING. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the state of
its incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on the Company.
2.17 TAXES. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof. The Company has paid
all taxes (as hereinafter defined) shown as due on such returns that were filed
and has paid all taxes imposed on or assessed against the Company. The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements. Except as disclosed in writing
to the Underwriter, (i) no issues have been raised (and are currently pending)
by any taxing authority in connection with any of the returns or taxes asserted
as due from the Company, and (ii) no waivers of statutes of limitation with
respect to the returns or collection of taxes have been given by or requested
from the Company. The term "taxes" mean all federal, state, local, foreign, and
other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees, assessments, or charges
of any kind whatever, together with any interest and any penalties, additions to
tax, or additional amounts with respect thereto. The term "returns" means all
returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.
2.18 EMPLOYEES' OPTIONS. No shares of Common Stock are eligible for sale
pursuant to Rule 701 promulgated under the Act.
2.19 TRANSACTIONS AFFECTING DISCLOSURE TO NASD.
2.19.1 FINDER'S FEES. There are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee to which any of the Company or any of its officers, directors or
their respective affiliates is a party, with respect to the sale of the
Securities hereunder or any other arrangements, agreements, understandings,
payments or
8
issuance with respect to the Company that may affect the compensation, as
determined by the National Association of Securities Dealers, Inc. ("NASD").
2.19.2 PAYMENTS WITHIN TWELVE MONTHS. Except for the issuance of
options to purchase _____ shares of Common Stock to R. Xxxxx Xxxxxxx on
________, 1996 for services rendered solely in connection with the acquisition
described in Note 3 to the financial statements included in the Prospectus, the
Company has not made any direct or indirect payments (in cash, securities or
otherwise) to (i) any person, as a finder's fee, investing fee or otherwise, in
consideration of such person raising capital for the Company or introducing to
the Company persons who provided capital to the Company, (ii) to any NASD
member, or (iii) to any person or entity that has any direct or indirect
affiliation or association with any NASD member within the twelve month period
prior to the date on which the Registration Statement was filed with the
Commission ("Filing Date") or thereafter, other than payments to the
Underwriter.
2.19.3 USE OF PROCEEDS. None of the net proceeds of the offering
will be paid by the Company to any participating NASD member or any affiliate or
associate of any NASD member, except as specifically authorized herein.
2.19.4 INSIDERS' NASD AFFILIATION. No officer or director of the
Company or beneficial owner of 5% or more of the Company's outstanding Common
Stock has any direct or indirect affiliation or association with any NASD
member. The Company will advise the Underwriter and the NASD if any stockholder
beneficially owning 5% or more of the outstanding Common Stock of the Company is
or becomes an affiliate or associated person of an NASD member participating in
the offering.
2.20 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of its
officers, directors, employees, agents or any other person acting on behalf of
the Company has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) which (i) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
as reflected in any of the financial statements contained in the Prospectus or
(iii) if continued in the future, might adversely affect the assets, business,
operations or prospects of the Company. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
2.21 NASDAQ AND BSE ELIGIBILITY. As of the Effective Date, the Public
Securities have been approved for quotation on the Nasdaq SmallCap Market
("Nasdaq") and approved for listing, upon notification of issuance, on the
Boston Stock Exchange ("BSE").
2.22 INTANGIBLES. The Company owns or possesses the requisite licenses or
rights to use all trademarks, service marks, service names, trade names, patents
and patent applications, copyrights and other rights (collectively,
"Intangibles") described as being licensed to or owned by it in the Registration
Statement. The Company's Intangibles which have been registered in the
9
United States Patent and Trademark Office have been fully maintained and are in
full force and effect. There is no claim or action by any person pertaining to,
or proceeding pending or threatened and the Company has not received any notice
of conflict with the asserted rights of others which challenges the exclusive
right of the Company with respect to any Intangibles used in the conduct of the
Company's business except as described in the Prospectus. The Intangibles and
the Company's current products, services and processes do not infringe on any
intangibles held by any third party. To the best of the Company's knowledge, no
others have infringed upon the Intangibles of the Company.
2.23 RELATIONS WITH EMPLOYEES.
2.23.1 EMPLOYEE MATTERS. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all federal, state 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 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 pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or threatened against or involving the Company or any predecessor
entity, and none has ever occurred. No question concerning representation
exists respecting the employees of the Company and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company, if any. The Company has
obtained Key person life insurance in an amount not less than $2,000,000 on the
life of Xxxxxx X. Gureuitch naming the Company as the sole beneficiary.
2.23.2 EMPLOYEE BENEFIT PLANS. Other than as set forth in the
Registration Statement, the Company neither 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"). The Company does not, and has at no time,
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA. If the Company does maintain or contribute to a defined benefit plan,
any termination of the plan on the date hereof would not give rise to liability
under Title IV of ERISA. No ERISA Plan (or any trust created thereunder) has
engaged in a "prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended ("Code"), which
could subject the Company to any tax penalty for prohibited transactions and
which has not adequately been corrected. Each ERISA Plan is in compliance with
all material reporting, disclosure and other requirements of the Code and ERISA
as they relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multi-employer plan".
2.24 OFFICERS' CERTIFICATE. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to your counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
10
2.25 WARRANT AGREEMENT. The Company has entered into a warrant agreement
with respect to the Warrants and the Warrants substantially in the form filed as
an exhibit to the Registration Statement ("Warrant Agreement") with American
Stock Transfer & Trust Company, in form and substance satisfactory to the
Underwriter, providing for among other things, (i) no redemption of the Warrants
without the consent of MHM and (ii) for the payment of a warrant solicitation
fee as contemplated by Section 3.10 hereof.
2.26 AGREEMENTS WITH INSIDERS. The Company has caused to be duly executed
a legally binding and enforceable agreements pursuant to which the officers,
directors and stockholders of the Company identified on Schedule 2.26
(collectively, the "Insiders") agree (a) not to sell any shares of Common Stock
owned by them (either pursuant to Rule 144 of the Regulations or otherwise) for
varying periods of time following the Effective Date except with the prior
consent of MHM, and (b) as set forth on Schedule 2.26 agree to sell to MHM or
permit MHM to sell for their account any shares of Common Stock they desire to
sell in the open market for a period of 5 years following the Effective Date.
2.27 SUBSIDIARIES. The representations and warranties made by the Company
in this Agreement shall, in the event that the Company has one or more
subsidiaries (a "subsidiary(ies)") also apply and be true with respect to each
subsidiary, individually and taken as a whole with the Company and all other
subsidiaries, as if each representation and warranty contained herein made
specific reference to the subsidiary each time the term "Company" was used.
2.28 UNAUDITED FINANCIALS. The Company has furnished to the Underwriter as
early as practicable prior to the date hereof a copy of the latest available
unaudited interim financial statements ("Unaudited Financials") of the Company
(which in no event shall be as of a date more than thirty days prior to the
Effective Date) which have been read by the Company's independent accountants,
as stated in their letter to be furnished pursuant to Section 4.3 hereof.
2.29 PRODUCT LIABILITY INSURANCE. The Company maintains product liability
insurance of the type and in the amounts typically maintained by participants in
the dental equipment industry.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows:
3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will deliver to the
Underwriter, prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective Date and not
file any such amendment or supplement to which the Underwriter shall reasonably
object.
3.2 FEDERAL SECURITIES LAWS.
3.2.1 COMPLIANCE. During the time when a Prospectus is required
to be delivered under the Act the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriter, the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein
11
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to amend
the Prospectus to comply with the Act, the Company will notify the Underwriter
promptly and prepare and file with the Commission, subject to Section 3.1
hereof, an appropriate amendment or supplement in accordance with Section 10 of
the Act.
3.2.2 FILING OF FINAL PROSPECTUS. The Company will file the
Prospectus (in form and substance satisfactory to the Underwriter) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 EXCHANGE ACT REGISTRATION. For a period of five years from
the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock and Warrants under the provisions of Section 12
of the Exchange Act.
3.3 BLUE SKY FILING. The Company will endeavor in good faith, in
cooperation with the Underwriter, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Underwriter agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
3.4 DELIVERY TO THE UNDERWRITER OF PROSPECTUSES. The Company will deliver
to the Underwriter, without charge, from time to time during the period when the
Prospectus is required to be delivered under the Act or the Exchange Act such
number of copies of each Preliminary Prospectus and the Prospectus as the
Underwriter may reasonably request and, as soon as the Registration Statement or
any amendment or supplement thereto becomes effective, deliver to you two
original executed Registration Statements, including exhibits, and all post-
effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and all original executed consents of
certified experts.
3.5 EVENTS REQUIRING NOTICE TO THE UNDERWRITER. The Company will notify
the Underwriter immediately upon its becoming aware, and confirm the notice in
writing, (i) of the effectiveness of the Registration Statement and any
amendment thereto, (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceeding for that purpose, (iii)
of the issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Public Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the mailing and delivery to the Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus, (v) of
the receipt of any comments or request for any additional information from the
Commission, and (vi) of the happening of any event during the period described
in Section 3.4 hereof which, in the judgment of the Company, makes any statement
of a material fact made in the Registration Statement or the Prospectus untrue
or which requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.
12
3.6 REVIEW OF FINANCIAL STATEMENTS. For a period of five 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 fiscal quarters prior to the
announcement of quarterly financial information and the filing of the Company's
Form 10-Q quarterly report.
3.7 RESERVED.
3.8 SECONDARY MARKET TRADING AND STANDARD & POOR'S. If the Company is not
already published in Standard and Poor's Corporation Records Corporate
Descriptions, the Company will take all necessary and appropriate actions to
achieve accelerated publication in Standard and Poor's Corporation Records
Corporate Descriptions (within 30 days after the Effective Date) and to maintain
such publication with updated quarterly information for a period of five years
from the Effective Date, including the payment of any necessary fees and
expenses. 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 requested by the Underwriter, including the payment of any necessary fees
and expenses and the filing of a Form (e.g. 25101(b)) for secondary market
trading of the Securities in the State of California on the Effective Date or as
soon thereafter as is practicable.
3.9 NASDAQ MAINTENANCE. For a period of five years from the date hereof,
the Company will use its best efforts to maintain the quotation by Nasdaq and
listing on the BSE of the Common Stock, and, if outstanding, the Warrants and,
if the Company satisfies the inclusion standards of the Nasdaq National Market,
to apply for and maintain quotations by the Nasdaq National Market of such
securities during such period. If the Common Stock and, if outstanding, the
Warrants become quoted on the National Market, the Company may delist the Common
Stock and Warrants from the BSE.
3.10 WARRANT SOLICITATION AND REGISTRATION OF COMMON STOCK UNDERLYING THE
WARRANTS.
3.10.1 WARRANT SOLICITATION FEES. The Company hereby engages the
Underwriter, on a non-exclusive basis, as its agent for the solicitation of the
exercise of the Warrants. The Company, at its cost, will (i) assist the
Underwriter with respect to such solicitation, if requested by the Underwriter
and will (ii) provide the Underwriter, and direct the Company's transfer and
warrant agent to provide to the Underwriter, lists of the record and, to the
extent known, beneficial owners of the Company's Warrants. During the period
commencing one year after the Effective Date, the Company will pay to the
Underwriter a commission of four percent of the Warrant exercise price for each
Warrant exercised, payable on the date of such exercise, on the terms provided
for in the Warrant Agreement, if allowed under the rules and regulations of the
NASD and only if the Underwriter has provided bona fide services to the Company
in connection with the exercise of Warrants. In addition to soliciting either
orally or in writing, the exercise of Warrants, such services may also include
disseminating information, either orally or in writing to Warrant holders about
the Company or the market for the Company's securities, and the assisting in the
processing of the exercise of Warrants. The Underwriter may engage sub-agents
in its solicitation efforts. The Company will disclose the arrangement to pay
such solicitation fees to the Underwriter in any prospectus used by the Company
in connection with the registration of the shares of Common Stock underlying the
Warrants.
13
3.10.2 REGISTRATION OF COMMON STOCK. The Company agrees that prior
to the date that the Warrants become exercisable it shall file with the
Commission a post-effective amendment to the Registration Statement, if
possible, or a new registration statement, under the Act, and it shall take such
action as is necessary to qualify for sale, in those states in which the
Warrants were initially offered by the Company, the Common Stock issuable upon
exercise of the Warrants. In either case, the Company shall cause the same to
become effective prior to the date that the Warrants become exercisable and
shall maintain the effectiveness of such registration statement and keep current
a prospectus thereunder and maintain such qualification until the expiration of
the Warrants and the Underwriter's Warrants in accordance with the provisions of
this Agreement.
3.11 REPORTS TO THE UNDERWRITER AND OTHERS.
3.11.1 PERIODIC REPORTS, ETC. For a period of five years from the
Effective Date, the Company will promptly furnish to the Underwriter copies of
such financial statements and other periodic and special reports as the Company
from time to time files with any governmental authority or furnishes generally
to holders of any class of its securities, and promptly furnish to the
Underwriter (i) a copy of each periodic report the Company shall be required to
file with the Commission, (ii) a copy of every press release and every news item
and article with respect to the Company or its affairs which was released by the
Company, (iii) a copy of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4
received or prepared by the Company, and (iv) such additional documents and
information with respect to the Company and the affairs of any future
subsidiaries of the Company as the Underwriter may from time to time reasonably
request. In addition, until April 30, 1998, the Company will furnish to the
Underwriter its monthly consolidated profit and loss statements no later than
the 21st day of the following month.
3.11.2 TRANSFER SHEETS AND WEEKLY POSITION LISTINGS. For a period
of five years from the Closing Date, the Company will furnish to the Underwriter
at the Company's sole expense such transfer sheets and position listings of the
Company's securities as the Underwriter may reasonably request, including the
daily, weekly and monthly consolidated transfer sheets of the transfer agent of
the Company and the weekly position listings of the Depository Trust Company.
3.11.3 SECONDARY MARKET TRADING MEMORANDUM. Until such time as the
Public Securities are listed or quoted, as the case may be, on one of the
following: the New York Stock Exchange, the American Stock Exchange or Nasdaq
National Market, the Company shall cause the legal counsel to deliver to the
Underwriter on the Effective Date a written opinion detailing those states in
which Public Securities may be traded in non-issuer transactions under the Blue
Sky laws of the fifty states ("Secondary Market Trading Memorandum") and to
update such memorandum as reasonably requested by the Underwriter. The Company
shall pay to the Underwriter's legal counsel a one-time fee of $5,000 for such
services at the Closing.
3.12 AGREEMENTS BETWEEN THE UNDERWRITER AND THE COMPANY.
3.12.1 Underwriter's Purchase Option. On the Closing Date, the
Company will execute and deliver the Underwriter's Purchase Option to the
Underwriter substantially in the form filed as an exhibit to the Registration
Statement.
3.13 DISQUALIFICATION OF FORM SB-2. For a period equal to five years from
the date hereof, the Company will not take any action or actions which may
prevent or disqualify the Company's use
14
of Form SB-2 (or other appropriate form) for the registration of the Warrants
and the Underwriter's Purchase Option and the securities issuable upon exercise
of those securities under the Act.
3.14 PAYMENT OF EXPENSES.
3.14.1 GENERAL EXPENSES. The Company hereby agrees to pay on each
of the Closing Date and the Option Closing Date, if any, to the extent not paid
at Closing Date, all expenses incident to the performance of the obligations of
the Company under this Agreement, including but not limited to (i) the
preparation, printing, filing, delivery and mailing (including the payment of
postage with respect to such mailing) of the Registration Statement, the
Prospectus and the Preliminary Prospectuses and the printing and mailing of this
Agreement and related documents, including the cost of all copies thereof and
any amendments thereof or supplements thereto supplied to the Underwriter in
quantities as may be required by the Underwriter, (ii) the printing, engraving,
issuance and delivery of the shares of Common Stock, the Warrants and the
Underwriter's Purchase Option, including any transfer or other taxes payable
thereon, (iii) the qualification of the Public Securities under state or foreign
securities or Blue Sky laws, including the filing fees under such Blue Sky laws,
the costs of printing and mailing the "Preliminary Blue Sky Memorandum," and all
amendments and supplements thereto, fees, up to an aggregate of $35,000, and
disbursements of the Underwriter's counsel, and fees and disbursements of local
counsel, if any, retained for such purpose, and a one-time fee of $5,000 payable
to the Underwriter's counsel for the preparation of the Secondary Market Trading
Memorandum, (iv) filing fees, costs and expenses (including fees not to exceed
$5,000 and disbursements for the Underwriter's counsel) incurred in registering
the offering with the NASD, (v) costs of placing "tombstone" advertisements in
THE WALL STREET JOURNAL, THE NEW YORK TIMES and a third publication to be
selected by the Underwriter, (vi) fees and disbursements of the transfer and
warrant agent, (vii) the Company's expenses associated with "due diligence"
meetings arranged by the Underwriter, (viii) the preparation, binding and
delivery of transaction "bibles," in number, form and style reasonably
satisfactory to the Underwriter and transaction lucite cubes or similar
commemorative items in a style and quantity as reasonably requested by the
Underwriter, (ix) any listing of the Public Securities on Nasdaq SmallCap, and
any securities exchange or any listing in Standard & Poor's, (x) fees and
disbursements of any counsel engaged to review the Company's intellectual
property rights, and (xi) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 3.14.1. Since an important part of the public
offering process is for the Company to appropriately and accurately describe
both the background of the principals of the Company and the Company's
competitive position in its industry, the Company has engaged and has paid for
an investigative search firm of the Underwriter's choice to conduct an
investigation of principals of the Company mutually selected by the Underwriter
and the Company. The Underwriter may deduct from the net proceeds of the
offering payable to the Company on the Closing Date, or the Option Closing Date,
if any, the expenses set forth herein to be paid by the Company to the
Underwriter and/or to third parties.
3.14.2 NON-ACCOUNTABLE EXPENSES. The Company further agrees that,
in addition to the expenses payable pursuant to Section 3.15.1, it will pay to
the Underwriter a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Public
Securities, of which $50,000 has been paid to date, and the Company will pay the
balance on the Closing Date and any additional monies owed attributable to the
Option Securities or otherwise on the Option Closing Date by certified or bank
cashier's check or, at the election of the Underwriter, by deduction from the
proceeds of the offering contemplated herein. If the offering contemplated by
this Agreement is not consummated for any reason whatsoever then
15
the following provisions shall apply: The Company's liability for payment to the
Underwriter of the non-accountable expense allowance shall be equal to the sum
of the Underwriter's actual out-of-pocket expenses (including, but not limited
to, counsel fees, "road-show" and due diligence expenses). The Underwriter
shall retain such part of the non-accountable expense allowance previously paid
as shall equal such actual out-of-pocket expenses. If the amount previously
paid is insufficient to cover such actual out-of-pocket expenses, the Company
shall remain liable for and promptly pay any other actual out-of-pocket
expenses. If the amount previously paid exceeds the amount of actual out-of-
pocket expenses, the Underwriter shall promptly remit to the Company any such
excess.
3.15 APPLICATION OF NET PROCEEDS. The Company will apply the net proceeds
from the offering received by it in a manner consistent with the application
described under the caption "USE OF PROCEEDS" in the Prospectus. The Company
hereby agrees that, other than described under "USE OF PROCEEDS" in the
Prospectus, the Company will not apply any net proceeds from the offering to pay
(i) any debt for borrowed funds, other than periodic payments, in the ordinary
course, under bank or other institutional credit lines, or (ii) any debt or
obligation owed to any Insider, or by any family member or affiliate of any of
the foregoing persons.
3.16 DELIVERY OF EARNINGS STATEMENTS TO SECURITY HOLDERS. The Company will
make generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth full calendar month following the
Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.17 KEY PERSON LIFE INSURANCE. The Company will maintain key person life
insurance in an amount no less than $2,000,000 each on the life of Xxxxxx X.
Xxxxxxxxx and pay the annual premiums therefor naming the Company as the sole
beneficiary thereof for at least three years following the Effective Date.
3.18 STABILIZATION. Neither the Company, nor, to its knowledge, any of its
employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.
3.19 INTERNAL CONTROLS. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.20 ACCOUNTANTS AND LAWYERS. For a period of five years from the
Effective Date, the Company shall retain independent public accountants and
securities lawyers reasonably acceptable to the Underwriter. Accountants
Coopers & Xxxxxxx, L.L.P. and lawyers Troop Xxxxxxxxx Xxxxxxx & Xxxxxx, L.L.P.
are acceptable to the Company.
16
3.21 TRANSFER AGENT. For a period of five years from the Effective Date,
the Company Underwriter shall retain a transfer agent for the Common Stock and
Warrants acceptable to the Underwriter. American Stock Transfer & Trust Company
("Transfer Agent") is acceptable to the Underwriter.
3.22 SALE OF SECURITIES. The Company agrees not to permit or cause a
private or public sale or private or public offering of any of its securities
(in any manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for the periods following the Effective Date set
forth on Schedule 2.26 without obtaining the prior written approval of MHM.
4. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Securities, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
4.1 REGULATORY MATTERS.
4.1.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement has been declared effective on the date of this Agreement and, at each
of the Closing Date and the Option Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for the purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Xxxxxxxx Mollen & Xxxxxx, counsel to the Underwriter.
4.1.2 NASD CLEARANCE. By 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.
4.1.3 NO BLUE SKY STOP ORDERS. No order suspending the sale of
the Securities in any jurisdiction designated by you pursuant to Section 3.3
hereof shall have been issued on either on the Closing Date or the Option
Closing Date, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
4.2 COMPANY COUNSEL MATTERS.
4.2.1 EFFECTIVE DATE OPINION OF COUNSEL. On the Effective Date,
the Underwriter shall have received the favorable opinion of Troop Xxxxxxxxx
Xxxxxxx & Xxxxxx, L.L.P., counsel to the Company, dated the Effective Date,
addressed to the Underwriter and in form and substance satisfactory to Xxxxxxxx
Mollen & Xxxxxx, counsel to the Underwriter, to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which it owns or leases any
real property or to the best of our knowledge the character of its operations as
described in the Prospectus requires such qualification or licensing, except
where the failure would have a material adverse effect on the business of the
Company.
17
(ii) The Company has all requisite corporate power and
authority, and has all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental or regulatory officials
and bodies to own or lease its properties and conduct its business as described
in the Prospectus, except where failure to have same would not have, either
singly or in the aggregate, a material adverse effect on the Company or its
operations. The Company has all corporate power and authority to enter into
this Agreement, the Warrant Agreement and the Underwriter's Purchase Option and
to carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required by it in connection therewith have
been obtained. No consents, approvals, authorizations or orders of, and no
filing with any court or governmental agency or body (other than such as may be
required under the Act and applicable Blue Sky laws), is required by it for the
valid authorization, issuance, sale and delivery of the Securities, and the
consummation of the transactions and agreements contemplated by this Agreement,
the Warrant Agreement and the Purchase Option or if so required, all such
authorizations, approvals, consents, orders, registrations, licenses and permits
have been duly obtained by it and are in full force and effect and have been
disclosed to the Underwriter.
(iii) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto, and are
not subject to personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company or, to the best of such counsel's knowledge after
due inquiry, similar contractual rights granted by the Company. The outstanding
options and warrants issued by the Company to purchase shares of Common Stock
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The offers and sales of the
outstanding Common Stock and options and warrants to purchase shares of Common
Stock were at all relevant times either registered under the Act or exempt from
such registration requirements. The authorized capital stock of the Company is
as set forth under the caption "Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized and, when issued
and paid for, will be validly issued, fully paid and non-assessable; the holders
thereof are not and will not be subject to personal liability by reason of being
such holders. The Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or, to the best of such
counsel's knowledge, similar contractual rights granted by the Company. All
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken. When issued, the
Underwriter's Purchase Option, the Underwriter's Warrants and the Warrants will
constitute valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of securities of the
Company called for thereby and such Underwriter's Warrants, the Underwriter's
Purchase Option, and the Warrants, when issued, in each case, will be
enforceable against the Company in accordance with their respective terms,
except (a) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (b) as
enforceability of any indemnification provision may be limited under the federal
and state securities laws, and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
18
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The certificates representing the
Securities are in due and proper form.
(v) To the best of such counsel's knowledge, except as set
forth in the Prospectus, no holders of any securities of the Company or of any
options, warrants or securities of the Company exercisable for or convertible or
exchangeable into securities of the Company and issued by the Company have the
right to require the Company to register any such securities of the Company
under the Act or to include any such securities in a registration statement to
be filed by the Company under the Act.
(vi) To the best of such counsel's knowledge, the shares of
Common Stock and the Warrants are eligible for quotation on Nasdaq and have been
approved for listing, upon notification for issuance, on the BSE.
(vii) This Agreement, the Purchase Option and the Warrant
Agreement have each been duly and validly authorized by the Company and, when
executed and delivered by the Company, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provisions may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(viii) The execution, delivery and performance by the Company of
this Agreement, the Underwriter's Purchase Option and the Warrant Agreement, the
issuance and sale of the Securities, the consummation of the transactions
contemplated hereby and thereby and the compliance by the Company with the terms
and provisions hereof and thereof, do not and will not, with or without the
giving of notice or the lapse of time, or both, (a) conflict with, or result in
a breach of, any of the terms or provisions of, or constitute a default under,
or result in the creation or modification of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company pursuant to
the terms of, any material mortgage, deed of trust, note, indenture, loan,
contract, commitment or other material agreement or instrument, to which the
Company is a party or by which the Company or any of its properties or assets
may be bound and of which such counsel has knowledge, (b) result in any
violation of the provisions of the Certificate of Incorporation or the By-Laws
of the Company, (c) violate any statute or any judgment, order or decree, rule
or regulation applicable to the Company of any court, domestic or foreign, or of
any federal, state or other regulatory authority or other governmental body
having jurisdiction over the Company, its properties or assets and of which such
counsel has knowledge, or (d) have a material effect on any permit,
certification, registration, approval, consent, license or franchise of the
Company that is known to such counsel.
(ix) The Registration Statement, each Preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements thereto
(other than the financial statements included therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations. The Securities and all other
securities issued or issuable by the Company and described in the Registration
Statement and the Prospectus conform in all respects to the description thereof
contained in the Registration Statement and the Prospectus. The statements in
the Prospectus under "Business," "Management," "Certain
19
Transactions," "Risk Factors," Principal Stockholders," "Description of
Securities" and "Shares Eligible for Future Sale," have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions are correct in all
material respects. No statute or regulation or legal or governmental proceeding
required to be described in the Prospectus is not described as required, nor are
any contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement and known to counsel not so described or filed as
required.
(x) Counsel has participated in conferences with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company and Underwriter, at which the contents of the
Registration Statement, the Prospectus and related matters were discussed and
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus (except as otherwise set forth in this
opinion), no facts have come to the attention of such counsel which lead them to
believe that either the Registration Statement or the Prospectus nor any
amendment or supplement thereto, as of the date of such opinion, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
(xi) The Registration Statement is effective under the Act,
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or threatened under the Act
or applicable state securities laws.
(xii) To the best of such counsel's knowledge, no default exists
in the due performance and observance of any term, covenant or condition of any
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the properties or
assets of the Company is subject, except where such defaults, either singly or
in the aggregate, would not have a material adverse effect on the Company or its
operations. The Company is not in violation of any term or provision of its
Certificate of Incorporation or By-Laws. The Company is not in violation of any
franchise, license, permit, applicable law, rule, regulation, judgment or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or business, except where such
violations, either singly or in the aggregate, would not have a material adverse
effect on the Company or its operations.
(xiii) To the best of such counsel's knowledge after due inquiry,
the Company owns or possesses, free and clear of all liens or encumbrances and
rights thereto or therein by third parties, other than as described in the
Prospectus, the requisite licenses or other rights to use all Intangibles and
other rights necessary to conduct its business (including, without limitation,
any such licenses or rights described in the Prospectus as being licensed to,
owned or possessed by the Company), and there is no claim or action by any
person pertaining to, or proceeding, pending or, to the best of such counsel's
knowledge after due inquiry, threatened, which challenges the exclusive rights
of the Company with respect to any Intangibles used in the conduct of its
business
20
(including without limitation any such licenses or rights described in the
Prospectus as being owned or possessed by the Company); to the best of such
counsel's knowledge after due inquiry, the Company's current products, services
and processes do not infringe on any Intangibles held by third parties except as
discussed in the Prospectus.
(xiv) To the best of such counsel's knowledge, except as
described in the Prospectus, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity.
(xv) To the best of such counsel's knowledge, except as set
forth in the Prospectus, there is no action, suit or proceeding before or by any
court of governmental agency or body, domestic or foreign, now pending, or
threatened against the Company, which might result in any material and adverse
change in the condition (financial or otherwise), business or prospects of the
Company, or might materially and adversely affect the properties or assets
thereof.
(xvi) To the best of such counsel's knowledge, except as
described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings with the Company for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or financial consulting arrangements or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriter's
compensation, as determined by the NASD.
Unless the context clearly indicates otherwise, the term "Company" as
used in this Section 4.2.1 shall include each subsidiary of the Company. The
opinion of counsel for the Company and any opinion relied upon by such counsel
for the Company shall include a statement to the effect that it may be relied
upon by counsel for the Underwriter in its opinion delivered to the Underwriter.
4.2.2 EFFECTIVE DATE OPINION OF REGULATORY COUNSEL. On the
Effective Date, the Underwriter shall have received the favorable opinion of
Xxxxx, Xxxxxx & XxXxxxxx, special regulatory counsel to the Company, dated the
Effective Date, addressed to the Underwriter and in form and substance
satisfactory to Xxxxxxxx Mollen & Xxxxxx, counsel to the Underwriter, to the
effect that:
(i) The Company's intraoral dental camera is a Class I medical
device, exempt from premarket notification with the U.S. Food and Drug
Administration ("FDA").
(ii) If the Company is in compliance with the Federal Food,
Drug and Cosmetic Act ("FDC Act"), the FDA's regulations and similar regulations
of the State of California, it would be in substantial compliance with similar
regulations of the other states of the United States.
(iii) The statements in the Registration Statement and
Prospectus under "Risk Factors -- Extensive Government Regulation" and "Business
-- Government Regulation" have been reviewed by such counsel, and insofar as
they refer to statements of law, description of statutes, licenses, rules or
regulations or legal conclusions are correct in all material respects. No
statute or regulation or legal or government proceeding required to be described
in the Prospectus is not described as required.
21
(iv) Counsel has participated in conferences with officers and
other representatives of the Company and representatives of the Underwriter, at
which the contents of the sections of the Registration Statement and the
Prospectus described in (iii) above were discussed and although such counsel is
not passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in those sections of the
Registration Statement and Prospectus (except as otherwise set forth in this
opinion), no facts have come to the attention of such counsel which lead them to
believe that such sections of the Registration Statement or the Prospectus nor
any amendment or supplement thereto, as of the date of such opinion, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.2.3 CLOSING DATE AND OPTION CLOSING DATE OPINION OF COUNSEL. On
each of the Closing Date and the Option Closing Date, if any, the Underwriter
shall have received the favorable opinion of Troop Xxxxxxxxx Xxxxxxx & Xxxxxx,
L.L.P., counsel to the Company, and Xxxxx, Xxxxxx & XxXxxxxx, special regulatory
counsel to the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriter and in form and substance
satisfactory to Xxxxxxxx Mollen & Xxxxxx, counsel to the Underwriter, confirming
as of the Closing Date and, if applicable, the Option Closing Date, certain of
the statements made by such counsel in their opinions delivered on the Effective
Date.
4.2.4 RELIANCE. In rendering such opinions, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
counsel) of other counsel reasonably acceptable to counsel, familiar with the
applicable laws, and (ii) as to matters of fact, to the extent they deem proper,
on certificates or other written statements of officers of departments of
various jurisdiction having custody of documents respecting the corporate
existence or good standing of the Company, provided that copies of any such
statements or certificates shall be delivered to counsel if requested. The
opinion of counsels for the Company shall include a statement to the effect that
it may be relied upon by counsel for the Underwriter in its opinion delivered to
the underwriter.
4.2.5 SECONDARY MARKET TRADING MEMORANDUM. On the Effective Date
the Underwriter shall have received the written Secondary Market Trading
Memorandum.
4.3 COLD COMFORT LETTER. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the underwriter and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Xxxxxxxx
Xxxxxx & Xxxxxx, counsel for the underwriter, from Coopers & Xxxxxxx, L.L.P.,
dated, respectively, as of the date of this Agreement and as of the Closing Date
and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with respect to
the Company within the meaning of the Act and the applicable Regulations;
(ii) Stating that in their opinion the financial statements of the
Company included in the Registration Statement and Prospectus comply as to form
in all material respects with the applicable accounting requirements of the Act
and the published Regulations thereunder;
22
(iii) Stating that, based on the performance of procedures specified
by the American Institute of Certified Public Accountants for a review of the
latest available unaudited interim financial statements of the Company (as
described in SAS No. 71 Interim Financial Information), with an indication of
the date of the latest available unaudited interim financial statements, a
reading of the latest available minutes of the stockholders and board of
directors and the various committees of the board of directors, consultations
with officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (a) the unaudited
financial statements of the Company included in the Registration Statement do
not comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or any material modification should
be made to the unaudited interim financial statements included in the
Registration Statement for them to be in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included in the Registration
Statement, (b) at a date not later than five days prior to the Effective Date,
Closing Date or Option Closing Date, as the case may be, there was any change in
the capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity of the Company as compared with amounts shown in the
December 31, 1996 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if there
was any decrease, setting forth the amount of such decrease, and (c) during the
period from January 1, 1997 to a specified date not later than five days prior
to the Effective Date, Closing Date or Option Closing Date, as the case may be,
there was any decrease in revenues, net earnings or net earnings per share of
Common Stock, in each case as compared with the corresponding period in the
preceding year and as compared with the corresponding period in the preceding
quarter, other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) Setting forth, at a date not later than five days prior to the
Effective Date, the amount of liabilities of the Company (including a break-down
of commercial papers and notes payable to banks);
(v) Stating that 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, and work sheets,
of the Company with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately preceding
five year period brought to the attention of the Company's management any
reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 -- "Communication of
Internal Control Structure Related Matters Noted in an Audit," in the Company's
internal controls; and
(vii) Statements as to such other matters incident to the transaction
contemplated hereby as you may reasonably request.
23
4.4 OFFICERS' CERTIFICATES.
4.4.1 OFFICERS' CERTIFICATE. At each of the Closing Date and the
Option Closing Date, if any, the underwriter shall have received a certificate
of the Company signed by the Chief Executive Officer and the Chief Financial
Officer of the Company, dated the Closing Date or the Option Closing Date, as
the case may be, respectively, to the effect that the Company has performed all
covenants and complied with all conditions required by this Agreement to be
performed or complied with by the Company prior to and as of the Closing Date,
or the Option Closing Date, as the case may be, and that the conditions set
forth in Section 4.5 hereof have been satisfied as of such date and that, as of
Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct. In addition, the underwriter will have received such other
and further certificates of officers of the Company as the underwriter may
reasonably request.
4.4.2 SECRETARY'S CERTIFICATE. At each of the Closing Date and
the Option Closing Date, if any, the underwriter shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified, (iii)
all correspondence between the Company or its counsel and the Commission, (iv)
all correspondence between the Company or its counsel and the NASD concerning
inclusion on Nasdaq, (v) all correspondence between the Company or its counsel
and the BSE concerning listing on the BSE, and (vi) as to the incumbency of the
officers of the Company. The documents referred to in such certificate shall be
attached to such certificate.
4.5 NO MATERIAL CHANGES. Prior to and on each of the Closing Date and the
Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material change in the condition
or prospects or the business activities, financial or otherwise, of the Company
from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and Prospectus which is materially adverse
to the Company, taken as a whole, (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness
which default would have a material adverse effect on the Company, (iv) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus, (v)
no action suit or proceeding, at law or in equity, shall have been pending or
threatened against the Company or affecting any of its property or business
before or by any court or federal or state commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus, (vi) no stop order shall have been issued under the
Act and no proceedings therefor shall have been initiated or threatened by the
Commission, and (vii) the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all material statements which are
required to be stated therein in accordance with the Act and the Regulations and
conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or
24
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 DELIVERY OF AGREEMENTS. The Company has delivered to the underwriter
an executed copy of the underwriter's Purchase Option.
4.7 OPINION OF COUNSEL FOR THE UNDERWRITER. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Xxxxxxxx Xxxxxx & Xxxxxx, counsel to the underwriter, and you shall have
received from such counsel a favorable opinion, dated the Closing Date and the
Option Closing Date, if any, with respect to such of these proceedings as you
may reasonably require. On or prior to the Effective Date, the Closing Date and
the Option Closing Date, as the case may be, counsel for the underwriter shall
have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 4.7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
4.8 OPINION OF SPECIAL REGULATORY CONSULTANT. On the Effective Date, the
Underwriter shall have received the favorable opinion of Holland & Associates,
special regulatory consultant to the Company, to the same effect as its opinion
to the Company dated January 22, 1997, except that it shall be based upon its
review of the Company's affairs as of a date not more than five days prior to
the Effective Date, and such opinion shall be redelivered on the Closing Date
and the Option Closing Date, as the case may be.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION OF THE UNDERWRITER
5.1.1 GENERAL. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter, its respective
directors, officers, agents and employees and each person, if any, who controls
the Underwriter ("controlling person") within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all
legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, whether arising out
of any action between the Underwriter and the Company or between the Underwriter
and any third-party or otherwise) to which they or any of them may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
(i) the Registration Statement or the Prospectus (as from time to time each may
be amended and supplemented); (ii) in any post-effective amendment or amendments
or any new registration statement and prospectus in which is included securities
of the Company issued or issuable upon exercise of the Underwriter's Purchase
Option; or (iii) any application or other document or written communication (in
this Section 5 collectively called "application") executed by the Company or
based upon written information furnished by the Company in any jurisdiction in
order to qualify the Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, Nasdaq or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances
25
under which they were made, not misleading, unless such statement or omission
was made in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to the Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be. The Company agrees promptly to notify the
Underwriter of the commencement of any litigation or proceedings against the
Company or any of its officers, directors or controlling persons in connection
with the issue and sale of the Securities or in connection with the Registration
Statement or Prospectus.
5.1.2 PROCEDURE. If any action is brought against the Underwriter
or controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, such Underwriter shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the approval of such Underwriter) and payment of actual expenses.
Such Underwriter or controlling person shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such Underwriter or such controlling person unless (i) the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action, or (ii) the Company shall not
have employed counsel to have charge of the defense of such action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to the Company (in which case the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys selected by the Underwriter and/or controlling
person shall be borne by the Company. Notwithstanding anything to the contrary
contained herein, if an Underwriter or controlling person shall assume the
defense of such action as provided above, the Company shall have the right to
approve the terms of any settlement of such action which approval shall not be
unreasonably withheld.
5.2 INDEMNIFICATION OF THE COMPANY. The Underwriter agrees to indemnify
and hold harmless the Company against any and all loss, liability, claim, damage
and expense described in the foregoing indemnity from the Company to the
Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriter in connection with this offering made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any application in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against the Underwriter, the Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the Underwriter by the
provisions of Section 5.1.2.
5.3 CONTRIBUTION.
5.3.1 CONTRIBUTION RIGHTS. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5
26
makes claim for indemnification pursuant hereto 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 this Section 5 provides for indemnification in such case, or (ii)
contribution under the Act, the Exchange Act or otherwise may be required on the
part of any such person in circumstances for which indemnification is provided
under this Section 5, then, and in each such case, the Company and the
Underwriter shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and the Underwriter, as incurred, in such proportions
that the Underwriter is responsible for that portion represented by the
percentage that the underwriting discount appearing on the cover page of the
Prospectus bears to the initial offering price appearing thereon and the Company
is responsible for the balance; provided, that, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 5.3, the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Public Securities underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such Underwriter has otherwise been required to pay in
respect of such losses, liabilities, claims, damages and expenses. For purposes
of this Section, each director, officer and employee of the Underwriter, and
each person, if any, who controls the Underwriter within the meaning of Section
15 of the Act shall have the same rights to contribution as such Underwriter.
5.3.2 CONTRIBUTION PROCEDURE. Within fifteen days after receipt
by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any settlement of any claim, action or
proceeding which was effected by such party without the written consent of such
contributing party. The contribution provisions contained in this Section are
intended to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available.
6. INTENTIONALLY OMITTED.
7. ADDITIONAL COVENANTS.
7.1 BOARD DESIGNEE. For a period of five years from the Effective Date,
the Company will recommend and use its best efforts to elect a designee of MHM
as a member of the Board of Directors of the Company. Such designee shall
receive no more or less compensation than is paid to other non-management
directors of the Company. If MHM does not exercise its option to designate a
member of the Company's Board of Directors, MHM shall nevertheless have the
right to send a representative (who need not be the same individual from meeting
to meeting) to observe each meeting of the Board of Directors. Such person,
whether a member of the Board or a
27
representative, shall be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings, including, but not limited to, food,
lodging and transportation. The Company agrees to give MHM written notice of
each such meeting and to provide MHM with an agenda and minutes of the meeting
no later than it gives such notice and provides such items to the other
directors.
7.2 PRESS RELEASES. The Company will not issue a press release or engage
in any other publicity until 25 days after the Effective Date without the prior
written consent.
7.3 FORM S-8 OR ANY SIMILAR FORM. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period of
one year from the Effective Date without MHM's written consent.
7.4 COMPENSATION AND OTHER ARRANGEMENTS. The Company hereby agrees that
for a period of three years from the Effective Date, all compensation and other
arrangements between the Company and its officers, directors and affiliates
shall be approved by the Compensation Committee of the Company's Board of
Directors, a majority of the members of which shall have no affiliation or other
relationship with the Company other than as directors.
7.5 REGULATION S. The Company shall not sell any of its securities
pursuant to Regulation S promulgated under the Act for a period of 18 months
from the Effective Date without MHM's written consent.
7.6 PUBLIC RELATIONS FIRM. For a period of three years from the Effective
Date, the Company shall retain a public relations firm reasonably acceptable to
MHM.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Dates and such representations, warranties and agreements of the
Underwriter and Company, including the indemnity agreements contained in Section
5 hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the Underwriter until the earlier of
the expiration of any applicable statute of limitations and the seventh
anniversary of the later of the Closing Date or the Option Closing Date, if any,
at which time the representations, warranties and agreements shall terminate and
be of no further force and effect.
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
9.1 EFFECTIVE DATE. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective.
9.2 TERMINATION. You shall have the right to terminate this Agreement at
any time prior to any Closing Date, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, The Boston Stock Exchange or in the over-the-counter market shall have
been
28
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities shall have been required on the over-the-
counter market by the NASD or by order of the Commission or any other government
authority having jurisdiction, or (iii) if the United States shall have become
involved in a war or major hostilities, or (iv) if a banking moratorium has been
declared by a New York State or federal authority, or (v) if a moratorium on
foreign exchange trading has been declared which materially adversely impacts
the United States securities market, or (vi) if the Company shall have sustained
a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not such loss shall have
been insured, will, in your opinion, make it inadvisable to proceed with the
delivery of the Securities, or (vii) if Xxxxxx X. Xxxxxxxxx shall no longer
serve the Company in his present capacity, or (viii) if the Company has breached
any of its representations, warranties or obligations hereunder, or (ix) if the
Underwriter shall have become aware after the date hereof of such a material
adverse change in the condition (financial or otherwise), business, or prospects
of the Company, or such adverse material change in general market conditions as
in the Underwriter's judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Securities or to enforce contracts made by
the Underwriter for the sale of the Securities.
9.3 NOTICE. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, the
Company shall be notified on the same day as such election is made by you by
telephone or telecopy, confirmed by letter.
9.4 EXPENSES. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.14 hereof.
9.5 INDEMNIFICATION. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
10. MISCELLANEOUS.
10.1 NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed
If to the Underwriter:
X.X. Xxxxxxxx & Co., Inc.
000 Xxxxxxxxxx Xxxxxxxxx
00xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxx
29
Copy to:
Xxxxxxxx Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
If to the Company:
Dental/Medical Diagnostic Systems, Inc.
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Copy to:
Troop Xxxxxxxxx Xxxxxxx & Xxxxxx, L.L.P.
00000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx Xxxxxxx III, Esq.
10.2 HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
10.3 AMENDMENT. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
10.4 ENTIRE AGREEMENT. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
10.5 BINDING EFFECT. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 5 hereof, and their
respective successors, legal representative and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
10.6 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed and enforced in accordance with the law of the State of New York,
without giving effect to conflicts of law. The Company hereby agrees that any
action, proceeding or claim against it arising out of, relating in any way to
this Agreement shall be brought and enforced in the courts of the State of New
York or the United States District Court for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any such
process or summons to be served upon the Company may be served by transmitting a
copy
30
thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 10.1 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
10.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
10.8 WAIVER, ETC. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
31
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
By:
-------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman and Chief Executive Officer
Accepted as of the date first
above written.
New York, New York
X.X. XXXXXXXX & CO., INC.
By:
--------------------------
Name:
Title:
------------------
32
