1,000,000 Units
(Each Unit consisting of one share of Common Stock, par value $.01 per
share, and one Class E Redeemable Common Stock Purchase Warrant, each
exercisable to purchase one share of Common Stock)
TRANS GLOBAL SERVICES, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1997
Xxxxxxxxx Xxxxxx, Inc.
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Trans Global Services, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Underwriter") an aggregate of 1,000,000
Units (each Unit consisting of one share of Common Stock, par value $.01 per
share ("Common Stock"), and one Class E Redeemable Common Stock Purchase Warrant
("Warrants") to purchase one share of Common Stock at $6.00 per share for a
period of two (2) years commencing _________, 1998, subject to redemption in
certain instances. In addition, the Company proposes to grant to the Underwriter
the option referred to in Section 2(b) to purchase all or any part of an
aggregate of 150,000 additional Units.
Unless the context otherwise requires, the aggregate of 1,000,000 shares of
Common Stock and Warrants to be sold by the Company, together with all or any
part of the 150,000 Units which the Underwriter has the option to purchase, and
the shares of Common Stock and the Warrants comprising such Units, are herein
called the "Units." The Common Stock to be outstanding after giving effect to
the sale of the Units are herein called the "Shares." The Shares and Warrants
included in the Units (including the Units which the Underwriter has the option
to purchase pursuant to paragraph 2(b), are herein collectively called the
"Securities."
1
You have advised the Company that you desire to purchase the Units. The
Company confirms the agreements made by it with respect to the purchase of the
Units by the Underwriter as follows:
1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with you that:
(a) A registration statement (File No. 333-14289) on Form S-1 relating to
the public offering of the Units, including a form of prospectus subject to
completion, copies of which have heretofore been delivered to you, has been
prepared in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder, and has
been filed with the Commission under the Act and one or more amendments to such
registration statement may have been so filed. After the execution of this
Agreement, the Company will file with the Commission either (i) if such
registration statement, as it may have been amended, has been declared by the
Commission to be effective under the Act, a prospectus in the form most recently
included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or permitted by
Rule 424(b) under the Act and as have been provided to and approved by you prior
to the execution of this Agreement, or (ii) if such registration statement, as
it may have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement, including
a form of prospectus, a copy of which amendment has been furnished to and
approved by you prior to the execution of this Agreement. As used in this
Agreement, the term "Company" means Trans Global Services, Inc. and/or each of
its active subsidiaries ("Subsidiaries"). The term "Registration Statement"
means such registration statement, as amended at the time when it was or is
declared effective, including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A under the Act
and included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); and the term
"Prospectus" means the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act, or, if no prospectus is required to be filed pursuant
to said Rule 424(b), such term means the prospectus included in the Registration
Statement; except that if such registration statement or prospectus is amended
or such prospectus is supplemented, after the effective date of such
registration statement, the terms "Registration Statement" and "Prospectus"
shall include such registration statement and prospectus as so amended, and the
term "Prospectus" shall include the prospectus as so supplemented, or both, as
the case may be.
2
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus. At the time the Registration Statement
becomes effective and at all times subsequent thereto up to and on the First
Closing Date (as hereinafter defined) or the Option Closing Date, as the case
may be, (i) the Registration Statement and Prospectus will in all respects
conform to the requirements of the Act and the Rules and Regulations; and (ii)
neither the Registration Statement nor the Prospectus will include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make statements therein not misleading; provided,
however, that the Company makes no representations, warranties or agreements as
to information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Underwriter specifically for use
in the preparation thereof. It is understood that the statements set forth in
the Prospectus on page __ with respect to stabilization, the paragraph under the
heading "Underwriting" relating to concessions to certain dealers, and the
identity of counsel to the Underwriter under the heading "Legal Matters"
constitute for purposes of this Section and Section 6(b) the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
Registration Statement and Prospectus, as the case may be.
(c) The Company and the subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation with full corporate
power and authority to own their properties and conduct their business as
described in the Prospectus and are duly qualified or licensed to do business as
foreign corporations and are in good standing in each other jurisdiction in
which the nature of their business or the character or location of their
properties require such qualification, except where the failure to so qualify
will not materially adversely affect the Company's or Subsidiaries' business,
properties or financial condition. The Company owns all of the issued and
outstanding capital stock of the Subsidiaries.
(d) The authorized, issued and outstanding capital stock of
the Company as of September 30, 1996, is as set forth in the Company's financial
statements contained in the Registration Statement; the shares of issued and
outstanding capital stock of the Company and its Subsidiaries set forth therein
have been duly authorized, validly issued and are fully paid and nonassessable;
except as set forth in the Prospectus, no options, warrants, or other rights to
purchase, agreements or other obligations to issue, or agreements or other
rights to convert any obligation into, any shares of capital stock of the
Company or its Subsidiaries have been granted or entered into by the Company or
its Subsidiaries; and the Company's capital stock conforms to all statements
relating thereto contained in the Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized, and when
issued and delivered pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights of
any security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common Stock,
except as described in the Registration Statement.
3
The Warrants have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency or other laws affecting the right of
creditors generally or by general equitable principles, and holders thereof will
be entitled to the benefits provided by the warrant agreement pursuant to which
such Warrants are to be issued (the "Warrant Agreement"), which will be
substantially in the form filed as an exhibit to the Registration Statement. The
shares of Common Stock issuable upon exercise of the Warrants have been reserved
for issuance upon the exercise of the Warrants and when issued in accordance
with the terms of the Warrants and Warrant Agreement, will be duly and validly
authorized, validly issued, fully paid and non-assessable, and free of
preemptive rights and no personal liability will attach to the ownership
thereof. The Warrant Agreement has been duly authorized and, when executed and
delivered pursuant to this Agreement, will have been duly executed and delivered
and will constitute the valid and legally binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or other laws affecting the rights of
creditors generally or by general equitable principles.
The Shares and the Warrants contained in the Underwriter's
Options (as defined in the Registration Statement) have been duly authorized
and, when duly issued and delivered, such Shares and Warrants will constitute
valid and legally binding obligations of the Company enforceable in accordance
with their terms and entitled to the benefits provided by the Underwriter's
Options, except as enforceability may be limited by bankruptcy, insolvency or
other laws affecting the rights of creditors generally or by general equitable
principles and the indemnification contained in paragraph 7 of the Underwriter's
Options may be unenforceable. The shares of Common Stock included in the
Underwriter's Options (and the shares of Common Stock issuable upon exercise of
the Warrants included therein) when issued and sold, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights and
no personal liability will attach to the ownership thereof.
(f) This Agreement and the Underwriter's Options have been
duly and validly authorized, executed, and delivered by the Company. The Company
has full power and authority to authorize, issue, and sell the Units to be sold
by it hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is required
in connection with such authorization, execution and delivery or in connection
with the authorization, issuance, and sale of the Units or the Underwriter's
Options, except such as may be required under the Act, state securities laws or
by the National Association of Securities Dealers, Inc. (The "NASD").
4
(g) Except as described in the Prospectus, or which would not
have a material adverse effect on the condition (financial or otherwise),
business prospects, net worth or properties of the Company and the Subsidiaries
taken as a whole (a "Material Adverse Effect"), neither the Company nor its
Subsidiaries are in violation, breach or default of or under, and consummation
of the transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company or its Subsidiaries pursuant to the terms of
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or its Subsidiaries is a party or
by which the Company or its Subsidiaries may be bound or to which any of the
property or assets of the Company or its Subsidiaries is subject, nor will such
action result in any violation of the provisions of the certificate of
incorporation or the by-laws of the Company or its Subsidiaries, as amended, or
any statute or any order, rule or regulation applicable to the Company or its
Subsidiaries of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company or its Subsidiaries.
(h) Subject to the qualifications stated in the Prospectus, the Company and
its Subsidiaries have good and marketable title to all properties and assets
described in the Prospectus as owned by them, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to their business; all of the material
leases and subleases under which the Company or its Subsidiaries is the lessor
or sublessor of properties or assets or under which the Company or its
Subsidiaries hold properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, the Company and its Subsidiaries are not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and, to the best knowledge of the Company, no claim has been asserted
by anyone adverse to rights of the Company or its Subsidiaries as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company or its Subsidiaries
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus; and
the Company and its Subsidiaries own or lease all such properties described in
the Prospectus as are necessary to their operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus.
(i) Xxxxx Xxxxxxxx, P.C., who have given their report on
certain financial statements filed with the Commission as a part of the
Registration Statement, are with respect to the Company, independent public
accountants within the meaning of the Act and the Rules and Regulations.
(j) The financial statements, and schedules together with
related notes, set forth in the Prospectus or the Registration Statement present
fairly the financial position and results of operations and changes in cash flow
position of the Company and its Subsidiaries on the basis stated in the
Registration Statement, at the respective dates and for the respective periods
to which they apply. Said statements and schedules and related notes have been
prepared in accordance with generally accepted accounting principles applied on
a basis which is consistent during the periods involved except as disclosed in
the Prospectus and Registration Statement. The information set forth under the
caption "Selected Financial Data" in the Prospectus fairly present, on the basis
stated in the Prospectus, the information included therein.
5
(k) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus and except as otherwise disclosed or
contemplated therein, the Company and its Subsidiaries have not incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business, or entered into any transaction not in the ordinary course of
business, which would have a Material Adverse Effect, and there has not been any
change in the capital stock of, or any incurrence of any short-term or long-term
debt by, the Company or its Subsidiaries or any issuance of options, warrants or
other rights to purchase the capital stock of the Company or its Subsidiaries or
any material adverse change or any development involving, so far as the Company
or its Subsidiaries can now reasonably foresee a prospective adverse change in
the condition (financial or other), net worth, results of operations, business,
key personnel or properties of them which would have a Material Adverse Effect.
(l) Except as set forth in the Prospectus, there is not now pending or, to
the knowledge of the Company, threatened, any action, suit or proceeding to
which the Company or its Subsidiaries is a party before or by any court or
governmental agency or body, which might result in a Material Adverse Effect on
the Company or its Subsidiaries, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race; and no labor disputes involving the employees of the
Company or its Subsidiaries exist or to the knowledge of the Company or its
Subsidiaries are threatened which might be expected to have a Material Adverse
Effect.
(m) Except as disclosed in the Prospectus, (i) the Company and its
Subsidiaries have filed all necessary federal, state and foreign income and
franchise tax returns required to be filed as of the date hereof and have paid
all taxes shown as due thereon, and (ii) there is no tax deficiency which has
been, or to the knowledge of the Company, may be asserted against the Company or
its Subsidiaries which would result in a Material Adverse Effect.
(n) Except as disclosed in the Prospectus, the Company and its Subsidiaries
have sufficient licenses, permits, and other governmental authorizations
currently necessary for the conduct of their business or the ownership of their
properties as described in the Prospectus and is in all material respects
complying therewith and owns or possesses adequate rights to use all material
patents, patent applications, trademarks, service marks, trade-names, trademark
registrations, service xxxx registrations, copyrights, and licenses necessary
for the conduct of such businesses and have not received its notice of conflict
with the asserted rights of others in respect thereof. To the best knowledge of
the Company, none of the activities or business of the Company or its
Subsidiaries are in violation of, or cause the Company or its Subsidiaries to
violate, any law, rule, regulation, or order of the United States, any state,
county, or locality, or of any agency or body of the United States or of any
state, county or locality, the violation of which would have a Material Adverse
Effect.
(o) Neither the Company nor its Subsidiaries have, directly or indirectly,
at any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
and Subsidiaries' internal accounting controls and procedures are sufficient to
cause the Company and its Subsidiaries to comply in all material respects with
the Foreign Corrupt Practices Act of 1977, as amended.
6
(p) On the Closing Dates (as hereinafter defined) all transfer or other
taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Units hereunder will have been
fully paid or provided for by the Company and all laws imposing such taxes will
have been complied with in all material respects.
(q) All contracts and other documents of the Company and its Subsidiaries
which are, under the Rules and Regulations, required to be filed as exhibits to
the Registration Statement have been so filed.
(r) The Company has not entered into any agreement pursuant to which any
person is entitled either directly or indirectly to compensation from the
Company for services as a finder in connection with the proposed public
offering.
(s) Except as disclosed in the Prospectus, no officer, director, or
stockholder of the Company or its Subsidiaries has any NASD affiliation.
(t) No other firm, corporation or person has any rights to underwrite an
offering of any of the Company's securities.
(u) The Company is a reporting company under Section 12(g) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and as such, since
becoming a reporting company thereunder, the Company has made all required
filings, and all of such filings conform to the requirements of the Exchange Act
and the rules and regulations thereunder and none of such filings contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make statements therein not misleading.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, and upon the
basis of the representations, warranties, and agreements contained herein, the
Company agrees to issue and sell to the Underwriter, and the Underwriter agrees
to buy from the Company at $3.60 per Unit, at the place and time hereinafter
specified, 1,000,000 Units (the "First Units").
Delivery of the First Units against payment therefor shall take place at
the offices of Xxxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
(or at such other place as may be designated by agreement between the
Underwriter and the Company) at 10:00 a.m., New York time, ____________, 1997,
or at such later time and date as the Underwriter may designate in writing to
the Company at least two business days prior to such purchase, but not later
than _________, 1997, such time and date of payment and delivery for the First
Units being herein called the "First Closing Date."
7
(b) In addition, subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties and agreements contained
herein, the Company hereby grants an option to the Underwriter (the
"Over-Allotment Option") to purchase all or any part of an aggregate of 150,000
additional Units at the same price per Unit as the Underwriter shall pay for the
First Units being sold pursuant to the provisions of subsection (a) of this
Section 2 (such additional Units being referred to herein as the "Option
Units"). This option may be exercised within 45 days after the effective date of
the Registration Statement upon written notice by the Underwriter to the Company
advising as to the amount of Option Units as to which the option is being
exercised, the names and denominations in which the certificates for such Option
Units are to be registered and the time and date when such certificates are to
be delivered. Such time and date shall be determined by the Underwriter but
shall not be earlier than four nor later than ten full business days after the
exercise of said option (but in no event more than 55 days after the First
Closing Date), nor in any event prior to the First Closing Date, and such time
and date is referred to herein as the "Option Closing Date." Delivery of the
Option Units against payment therefor shall take place at the offices of
Xxxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or at
such other place as may be designated by agreement between the Underwriter and
the Company). The Option granted hereunder may be exercised only to cover
over-allotments in the sale by the Underwriter of First Units referred to in
subsection (a) above. No Option Units shall be delivered unless all First Units
shall have been delivered to the Underwriter as provided herein.
(c) The Company will make the certificates for the securities comprising
the Units to be purchased by the Underwriter hereunder available to the
Underwriter for inspection at least two full business days prior to the First
Closing Date or the Option Closing Date, as the case may be,(which are
collectively referred to herein as the "Closing Dates"). The certificates shall
be in such names and denominations as the Underwriter may request, at least
three full business days prior to the Closing Dates. Delivery of the
certificates at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Units to be purchased by
the Underwriter hereunder will be delivered by the Company to the Underwriter
for the account of the Underwriter against payment of the respective purchase
prices therefor by the Underwriter, by wire transfer or certified or bank
cashier's check in New York Clearing House Funds, payable to the order of the
Company.
In addition, in the event the Underwriter exercises the option to purchase
from the Company all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to or
upon the order of the Company by wire transfer or certified or bank cashier's
checks payable in New York Clearing House funds at the offices of Xxxxxxxxx &
Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or at such other
place as may be designated by agreement between the Underwriter and the
Company), at the time and date of delivery of such Units as required by the
provisions of subsection (b) above, against receipt of the certificates for such
Units by the Underwriter for the Underwriter's account registered in such names
and in such denominations as the Underwriter may reasonably request.
8
It is understood that the Underwriter proposes to offer the Units to be
purchased hereunder to the public upon the terms and conditions set forth in the
Registration Statement, after the Registration Statement is declared effective
by the Securities and Exchange Commission (the "SEC").
3. Covenants of the Company. The Company covenants and
agrees with the Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to be declared effective. If required, the Company will file the
Prospectus and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rule 424(b) under the Act. Upon
notification from the Commission that the Registration Statement has become
effective, the Company will so advise the Underwriter and will not at any time,
whether before or after the Effective Date, file any amendment to the
Registration Statement or supplement to the Prospectus of which the Underwriter
shall not previously have been advised and furnished with a copy or to which the
Underwriter or its counsel shall have reasonably objected in writing or which is
not in compliance with the Act and the Rules and Regulations. At any time prior
to the later of (A) the completion by the Underwriter of the distribution of the
Units contemplated hereby (but in no event more than nine months after the date
on which the Registration Statement shall have been declared effective) and (B)
25 days after the date on which the Registration Statement shall have been
declared effective, the Company will prepare and file with the Commission,
promptly upon the Underwriter's request, any amendments or supplements to the
Registration Statement or Prospectus which, in the opinion of counsel to the
Company and the Underwriter, may be reasonably necessary or advisable in
connection with the distribution of the Units.
As soon as the Company is advised thereof, the Company will advise the
Underwriter, and provide the Underwriter with copies of any written advice, of
the receipt of any comments of the Commission, of the effectiveness of any
post-effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made by
the Commission for an amendment of the Registration Statement or for
supplementing of the Prospectus or for additional information with respect
thereto, of the issuance by the Commission or any state or regulatory body of
any stop order or other order or threat thereof suspending the effectiveness of
the Registration Statement or any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the Units
for offering in any jurisdiction, or of the institution of any proceedings for
any of such purposes, and will use its best efforts to prevent the issuance of
any such order, and, if issued, to obtain as soon as possible the lifting
thereof.
The Company has caused to be delivered to the Underwriter copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and dealers to use the Prospectus in connection with the sale of
the Units for such period as in the opinion of counsel to the Underwriter and
the Company the use thereof is required to comply with the applicable provisions
of the Act and the Rules and Regulations.
9
In case of the happening, at any time within such period as a Prospectus is
required under the Act to be delivered in connection with sales by the
Underwriter or dealer, of any event of which the Company has knowledge and which
materially affects the Company or the securities of the Company, or which in the
opinion of counsel for the Company and counsel for the Underwriter should be set
forth in an amendment of the Registration Statement or a supplement to the
Prospectus in order to make the statements therein not then misleading, in light
of the circumstances existing at the time the Prospectus is required to be
delivered to a purchaser of the Units or in case it shall be necessary to amend
or supplement the Prospectus to comply with law or with the Rules and
Regulations, the Company will notify the Underwriter promptly and forthwith
prepare and furnish to the Underwriter copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as the
Underwriter may reasonably request, in order that the Prospectus, as so amended
or supplemented, will not contain any untrue statement of a material fact or
omit to state any material facts necessary in order to make the statements in
the Prospectus, in the light of the circumstances under which they are made, not
misleading. The preparation and furnishing of any such amendment or supplement
to the Registration Statement or amended Prospectus or supplement to be attached
to the Prospectus shall be without expense to the Underwriter, except that in
case the Underwriter is required, in connection with the sale of the Units to
deliver a Prospectus nine months or more after the effective date of the
Registration Statement, the Company will upon request of and at the expense of
the Underwriter, amend or supplement the Registration Statement and Prospectus
and furnish the Underwriter with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and Regulations and the
Exchange Act and the rules and regulations thereunder in connection with the
offering and issuance of the Units.
(b) The Company will furnish such information as may be
required and will otherwise cooperate and use its best efforts to qualify to
register the Units for sale under the securities or "Blue Sky" laws of such
jurisdictions as the Underwriter may reasonably designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent of service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Units. The Company will,
from time to time, prepare and file such statements and reports as are or may be
required to continue such qualification in effect for so long a period as the
counsel to the Company and the Underwriter deem reasonably necessary, but not
for a period of less than three (3) years.
10
(c) If the sale of the Units provided for herein is not consummated as a
result of the Company's actions or failure to take such actions as the
Underwriter reasonably believes are reasonably required to complete the
transaction, the Company shall pay all costs and expenses incurred by it which
are incident to the performance of the Company's obligations hereunder,
including but not limited to, all of the expenses itemized in Section 8,
including the actual accountable out-of-pocket expenses of the Underwriter
(including the reasonable fees and expenses of counsel to the Underwriter),
which shall not exceed $200,000. If the sale of the Units provided herein is not
consummated and the reasons therefore are reasonably related to a Material
Adverse Effect on the Company, the Company shall pay the Underwriter promptly
its actual out-of-pocket expenses not to exceed $100,000.
(d) The Company will use its best efforts (i) to cause a registration
statement under the Exchange Act to be declared effective concurrently with the
completion of this offering and will notify you in writing immediately upon the
effectiveness of such registration statement, and (ii) to obtain and keep
current a listing in the Standard & Poors or Xxxxx'x OTC Industrial Manual for a
period of five (5) years from the Effective Date.
(e) For so long as the Company is a reporting company under either Section
12(g) or 15(d) of the Exchange Act, the Company, at its expense, will furnish to
its stockholders an annual report (including financial statements audited by
independent public accountants), in reasonable detail and at its expense, will
furnish to the Underwriter during the period ending five (5) years from the date
hereof, (i) as soon as practicable after the end of each fiscal year, but no
earlier than the filing of such information with the Commission, a balance sheet
of the Company and any of its Subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and cash flow of the Company and any
Subsidiaries for such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent accountants; (ii) as
soon as practicable after the end of each of the first three fiscal quarters of
each fiscal year, but no earlier than the filing of such information with the
Commission, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are publicly available, a
copy of all reports (financial or other) mailed to security holders; (iv) as
soon as they are available, a copy of all non-confidential reports and financial
statements furnished to or filed with the Commission or any securities exchange
or automated quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time reasonably
request. In addition, the Company, at its own expense, shall deliver to the
Underwriter for a three (3) year period following the effective date, copies of
all transfer sheets (daily, etc.) relating to the Company's securities.
(f) In the event the Company has an active subsidiary or subsidiaries, such
financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
11
(g) The Company will deliver to the Underwriter at or before the First
Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon the Underwriter's order, from time
to time until the effective date of the Registration Statement, as many copies
of any Preliminary Prospectus filed with the Commission prior to the effective
date of the Registration Statement as the Underwriter may reasonably request.
The Company will deliver to the Underwriter on or promptly after the effective
date of the Registration Statement and thereafter for so long as a Prospectus is
required to be delivered under the Act, from time to time, as many copies of the
Prospectus, in final form, or as thereafter amended or supplemented, as the
Underwriter may from time to time reasonably request.
(h) The Company will deliver to the Underwriter as soon as it is
practicable copies of all reports filed with the Commission under the Exchange
Act.
(i) The Company will apply the net proceeds from the sale of the Units
substantially for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.
(j) The Company will promptly prepare and file with the Commission any
amendments or supplements to the Registration Statement, Preliminary Prospectus
or Prospectus and take any other action, which in the opinion of counsel to the
Underwriter and counsel to the Company, may be reasonably necessary or advisable
in connection with the distribution of the Units, and will use its best efforts
to cause the same to become effective as promptly as possible.
(k) The Company will reserve and keep available that maximum number of its
authorized but unissued securities which are issuable upon exercise of the
Warrants and Underwriter's Options and warrants thereunder outstanding from time
to time.
(l) For a period of twenty-four (24) months from the Effective Date, no
officers or directors, nor any 5% or greater shareholder of the Company's
securities prior to the offering, as well as all holders of restricted
securities of the Company, will, directly or indirectly, offer, sell (including
any short sale), grant any option for the sale of, transfer or gift (except for
estate planning or charitable transfers or other privates sales, provided the
transferees agree to be bound by the same restrictions on transfer), acquire any
option to dispose of, or otherwise dispose of any shares of capital stock
without the prior written consent of the Underwriter, other than as set forth in
the Registration Statement. In order to enforce this covenant, the Company shall
impose stop-transfer instructions with respect to the shares owned by such
persons prior to the offering until the end of such period (subject to any
exceptions to such limitation on transferability set forth in the Registration
Statement). In addition, all such persons shall waive any of their registration
rights with respect to all such securities for such twenty-four (24) month
period. In addition, the Company agrees not to file any other registration
statement to register any securities of the Company for such twenty-four (24)
month period, and will not grant any future registration rights without the
prior written consent of the Underwriter for the same twenty-four (24) month
periods.
12
If necessary to comply with any applicable Blue-sky Law, the shares held by such
shareholders will be escrowed, as required by such Blue-Sky Laws. Such twenty
four (24) month lock up period is modified as follows: Commencing 12 months from
the Effective Date (a) if the Common Stock is trading at $10 or more per share
and the average daily trading volume of the Common Stock is 50,000 shares or
more, in each case for a period of ten (10) consecutive trading days, then such
persons subject to such lock up shall be entitled to sell twenty five percent
(25%) of their holdings and (b) if the Common Stock is trading at $12 or more
per share and the average daily trading volume of the Common Stock is 50,000
shares or more, in each case for a period of ten (10) consecutive trading days,
then such persons subject to such lock up shall be entitled to sell an
additional twenty five percent (25%) of their holdings. In addition, the Company
shall not issue any shares of its capital stock (or securities convertible into
capital stock) for a twenty four (24) month period without the Underwriter's
consent, following the Effective Date other than (i) pursuant to the Warrants
(ii) options to purchase shares of Common Stock under employee stock option
plans in accordance with the succeeding sentence, so long as the vesting
provisions of such options do not result in greater than 300,000 shares of
Common Stock vesting in such 24-month period, and(iii) pursuant to
recapitalizations, acquisitions, mergers and other combinations (in which case
the Underwriter's consent shall not be unreasonably withheld). The Company may
grant options to purchase up to 300,000 shares of Common Stock under employee
stock option plans to the Company's employees, officers, directors or other
consultants or advisors during the twenty-four (24) month period following the
Effective Date without the prior written consent of the Underwriter. The grant
of additional options during such period will require the Underwriter's prior
written consent. With respect to such options to purchase 300,000 shares, the
Company may not grant options at exercise prices which are less than the Market
Price at the date of the grant without the prior written consent of the
Underwriter.
Shares of Common Stock issuable to employees (other than officers,
directors or 5% shareholders) under the Company's stock option plans shall be
subject to a 12-month lock-up period. The Company may file a S-8 Registration
Statement covering its option plan provided that any shares issuable that are
subject to the lock-up referred to in the preceeding sentence shall bear a
restrictive legend reflecting such lock-up.
For purposes of this Agreement, Market Price shall mean (i) the average
closing bid price for any ten (10) consecutive trading days ending within five
(5) days prior to the date of issuance of the Common Stock as reported by the
Nasdaq Market or the NASD Electronic Bulletin Board, or (ii) the last reported
sale price, for ten (10) consecutive business days ending within five (5) days
of the date of issuance on the primary exchange on which the Common Stock is
traded, if the Common Stock is traded on a national securities exchange.
(m) Upon completion of this offering, the Company will make all filings
required, including registration under the Exchange Act to obtain the listing of
the Units, Common Stock and Class E Warrants on the Nasdaq SmallCap Market
System, and will use its best efforts to effect and maintain such listing for at
least five years from the date of this Agreement.
(n) Except for the transactions contemplated by this Agreement, the Company
represents that it has not taken and agrees that it will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in the stabilization or manipulation
of the price of the Units, Shares, or the Warrants or to facilitate the sale or
resale of the Securities. 13
(o) On the First Closing Date and simultaneously with the delivery of the
Units, the Company shall execute and deliver to the Underwriter the
Underwriter's Options. The Underwriter's Options will be substantially in the
form filed as an Exhibit to the Registration Statement.
(p) Intentionally omitted.
(q) Upon the Closing Dates, the Company will have in force a key person
life insurance policy on the life of Xxxxxx Xxxxxxxx, in the amount of
$1,000,000.00 and will maintain such insurance during the three year period
commencing with the First Closing Date.
(r) So long as any Warrants are outstanding and the exercise price of the
Warrants is less than the market price of the Common Stock, the Company shall
use its best efforts to cause post-effective amendments, if required by the Act,
to the Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter and each
dealer as many copies of each such Prospectus as such Underwriter or dealer may
reasonably request. The Company shall not call for redemption any of the
Warrants unless a registration statement covering the securities underlying the
Warrants has been declared effective by the Commission and remains current at
least until the date fixed for redemption.
(s) For a period of five (5) years from the Effective Date, the Company, at
its expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) the Company's financial statements for
each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information and the filing of the Company's 10-Q quarterly
report, provided that the Company shall not be required to file a report of such
accountants relating to such review with the Commission.
(t) The Underwriter shall have the right to request the Company to use its
best efforts to nominate one (1) nominee of the Underwriter for election to the
Board of Directors for three (3) years following the Effective Date, and in each
case the Company will use its best efforts to cause such nominee to be elected
to the Board of Directors. Until such time as the Underwriter exercises its
right to require the Company to use its best efforts to cause a nominee of the
Underwriter to be elected to the Board of Directors and until such time as such
nominee begins to serve on the Board of Directors, the Company agrees to allow a
representative designated by the Underwriter from time to time to receive
timely, written notice of all Board of Directors meetings and notice of all
telephonic Board meetings and the right to attend all Board meetings and
participate in all telephonic Board meetings. The Underwriter shall also have
the right to obtain copies of the minutes from all Board of Directors meetings
for three (3) years following the Effective Date of the Registration Statement,
whether or not a representative of the Underwriter attends or participates in
any such Board meeting. The Company agrees to reimburse the Underwriter
immediately upon the Underwriter's request therefor of any reasonable travel and
lodging expenses directly incurred by the Underwriter in connection with its
representative attending Company Board meetings on the same basis for other
Board members. In addition, the Company shall compensate such representative as
it does all other outside directors of the Company.
14
(u) The Company agrees to enter into a two year financial consulting
agreement with the Underwriter whereby the Underwriter shall provide the Company
with financial advisory services following the closing in exchange for which the
Company shall pay the Underwriter an aggregate amount of $100,000 on the First
Closing Date.
(v) The Company agrees to pay the Underwriter a Warrant Solicitation fee of
6.0% of the exercise price of any of the Warrants exercised beginning one (1)
year after the Effective Date if (a) the Market Price of the Company's Common
Stock on the date the Warrant is exercised in greater than the exercise price of
the Warrant, (b) the exercise of the Warrant is solicited by the Underwriter and
the Underwriter is designated in writing by the holder of such Warrant as the
soliciting broker, (c) the Warrant is not held in a discretionary account, (d)
disclosure of the compensation arrangement is made upon the sale and exercise of
the Warrants, (e) soliciting the exercise is not in violation of Regulation M
under the Securities Exchange Act of 1934, and (f) solicitation of the exercise
is in compliance with the NASD Notice to Members 81-38 (September 22, 1981).
(w) For a period of three years from the Effective Date, at the request of
the Underwriter, the Company shall provide promptly, at the expense of the
Company, copies of the Company's daily transfer sheets furnished to it by its
transfer agent and copies of the securities position listings provided to it by
the Depository Trust Company.
(x) The Company agrees to hire a public relations firm reasonably
acceptable to the Underwriter and to retain such firm, or a replacement firm,
for a period of three years from the Effective Date.
(y) On or prior to the date hereof, the Company shall have entered into an
employment agreement with Xxxxxx Xxxxxxxx on terms and conditions satisfactory
to the Underwriter.
4. Conditions of Underwriters' Obligation. The obligations of the
Underwriter to purchase and pay for the Units which it has agreed to purchase
hereunder are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder,
and to the following conditions:
a) The Registration Statement shall have become effective and you shall
have received notice thereof not later than 10:00 a.m., New York time, on the
day following the date of this Agreement, or at such later time or on such later
date as to which the Underwriter may agree in writing; on or prior to the
Closing Dates no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that or a similar
purpose shall have been instituted or shall be pending or, to the Underwriter's
knowledge or to the knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for additional information
shall have been complied with to the satisfaction of the Commission; and no stop
order shall be in effect denying or suspending effectiveness of such
qualification nor shall any stop order proceedings with respect thereto be
instituted or pending or threatened. If required, the Prospectus shall have been
filed with the Commission in the manner and within the time period required by
Rule 424(b) under the Act.
15
(b) At the First Closing Date, you shall have received the opinion, dated
as of the First Closing Date, of Esanu Katsky, Xxxxxx & Siger, counsel for the
Company, in form and substance satisfactory to counsel for the Underwriter, to
the effect that:
(i) The Company and each of its active subsidiaries (the "Subsidiaries")
(a) has been duly incorporated and is a validly existing corporation in good
standing under the laws of the state of its incorporation with full corporate
power and authority to own its properties and to conduct its business as set
forth in the Registration Statement and Prospectus; and (b) is duly licensed or
qualified as a foreign corporation in all jurisdictions in which it owns or
leases real property except where failure to be so qualified or licensed would
have no material adverse effect; provided, that no opinion is given as to the
good standing of the Company in [specified states where not in good standing].
(ii) All of the issued and outstanding stock of each of the Subsidiaries is
owned by the Company.
(iii) The authorized capital stock of the Company at , 1997 is as set forth
under the caption "Capitalization" in the Prospectus; all of the outstanding
shares of Common Stock (a) are duly and validly authorized and issued, fully
paid and non-assessable; (b) do not have any, and were not issued in violation
of any, preemptive rights under the Company's certificate of incorporation or
by-laws or any other agreement known to us, and (c) are not subject to any
restrictions on voting or transfer known to such counsel except as described in
the Prospectus or as required by law.
(iv) The Company has authorized and reserved for issuance (a) the shares of
Common Stock issuable as part of the Units and as part of the units (the "UPO
Units") issuable pursuant to the Purchase Option, (b) the shares of Common Stock
issuable upon exercise of the Warrants or the Warrants issuable as part of the
UPO Units, pursuant to the terms of, and upon receipt of any consideration
required by, this Agreement, the Warrants, the Purchase Option and the Warrant
Agreement, as the case may be, and when issued upon such exercise, such shares
of Common Stock (A) will be duly and validly authorized and issued, fully paid
and non-assessable, (B) will not have been issued in violation of the
pre-emptive rights pursuant to the Company's certificate of incorporation or any
agreement known to such counsel and (C) will not be not subject to any
restrictions on voting or transfer known to such counsel other than as may be
imposed by the Act.
(v) The Warrants and the Unit Purchase Option conform to the descriptions
thereof that are contained in the Prospectus (excluding financial statements)
and, when issued as provided in this Agreement will constitute the valid,
binding and enforceable obligations of the Company.
(vi) To the best of our knowledge, neither the filing of the Registration
Statement nor the offering of the Units as contemplated by this Agreement gives
rise to any registration rights or other rights, other than those which have
been waived or satisfied, relating to the registration under the Act of any
shares of Common Stock, except that the holders of certain warrants which have
an exercise price of not less than $ per share have certain registration rights.
(vii) To the best of our knowledge, no consents, approvals, authorizations
or orders of agencies, officers or other regulatory authorities are necessary
for the valid authorization, issue or sale of the Securities pursuant to this
Agreement, except such as may be required under the Act or state securities or
blue sky laws.
16
(viii) The certificates evidencing the shares of Common Stock and Warrants
are in proper legal form; the holders of the Warrants have the right to purchase
shares of Common Stock on the terms and subject to the conditions set forth in
the Warrant Agreement.
(ix) This Agreement, the Warrant Agreement, the Purchase Option have been
duly authorized and executed by the Company and constitute the valid and binding
agreement of the Company.
(x) The Company has full power and lawful authority to authorize, issue and
sell the Securities on the terms and conditions set forth in this Agreement and
in the Registration Statement and Prospectus, and the execution and delivery of
this Agreement, the Warrant Agreement, and the Purchase Option, and the
consummation of the transactions contemplated hereby and thereby will not
conflict with, or constitute a default under, any indenture, mortgage, deed or
trust, note or any other agreement or instrument known to such counsel to which
the Company is now a party, the certificate of incorporation and by-laws of the
Company or, to the best of our knowledge, any law, order, rule or regulation,
writ, injunction or decree of any government, governmental instrumentality, or
court having jurisdiction over the Company or its business or properties.
(xi) We know of no actions, suits or proceedings at law or in equity of a
material nature pending, or to our knowledge, threatened, against the Company
before or by any state commission, regulatory body, or administrative agency or
other governmental body, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business or financial condition of the
Company or which question either (a) the validity of the Securities, this
Agreement, the Warrant Agreement or the Purchase Option, or (b) any action taken
or to be taken by the Company pursuant to the Underwriting Agreement, the
Warrant Agreement or the Purchase Option, which are not disclosed in or
contemplated by the Prospectus.
(xii) The Registration Statement has become effective under the Act and, to
the best of our knowledge, no order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Act.
(xiii) The Company is a reporting company pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company's
registration statement on Form 8-A pursuant to which the Preferred Stock and
Warrants were registered pursuant to the Exchange Act, has been declared
effective by the Commission, and, to the best of such counsel's knowledge, since
June 1995, the Company has filed all reports on Forms 10-KSB, 10-QSB and 8-K
which were required to be filed.
17
Furthermore, the Registration Statement and the Prospectus (except as to
the financial statements and other financial information contained therein and
thereto, as to which no opinion is expressed), comply as to form in all material
respects with the requirements of the Act and the rules and regulations (the
"Rules") of the Commission under the Act. In passing upon the form of such
documents, such counsel have assumed the correctness and completeness of the
statements made or included therein by the Company and takes no responsibility
for the accuracy, completeness or fairness of the statements contained therein
except insofar as such statements relate to the description of the Securities or
relate to such counsel. However, in the course of the preparation by the Company
of the Registration Statement and the Prospectus, such counsel had conferences
with officers and directors of the Company with a view to imparting to them a
clear understanding of the requirements of the Act and the Rules with reference
to the preparation of registration statements and prospectuses, and such
counsel's examination of the Registration Statement and the Prospectus and their
discussions in the above-mentioned conferences did not disclose to such counsel
any information which gave them reason to believe that the Registration
Statement, as of the effective date thereof (except as to the financial
statements and other financial information contained therein, as to which no
opinion is expressed), contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; or that the Prospectus (except as to
the financial statements and other financial information contained therein, as
to which no opinion is expressed) contained any untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
Such counsel have reviewed all contracts filed as exhibits to the Registration
Statement, and do not know of any agreements to which the Company is a party
required to be filed as exhibits to the Registration Statement which have not
been so filed.
Such opinion shall also cover such matters incident to the transactions
contemplated hereby as the Underwriter or counsel for the Underwriter shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law other than the law of the United
States or of the State of New York or the Delaware General Corporation Law upon
opinions of counsel satisfactory to you, in which case the opinion shall state
that they have no reason to believe that you and they are not entitled to so
rely.
(b) Intentionally Omitted.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related matters
shall be satisfactory to or approved by Xxxxxxxxx & Xxxxxxxxx, LLP, counsel to
the Underwriter.
(d) The Underwriter shall have received a letter prior to the effective
date of the Registration Statement and again on and as of the First Closing Date
from Xxxxx Xxxxxxxx, P.C., independent public accountants for the
Company, substantially in the form reasonably acceptable to the Underwriter.
18
(e) At each Closing Date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects with the same effect as if made on and as of each Closing Date taking
into account for the Option Closing Dates the effect of the transactions
contemplated hereby and the Company or its Subsidiaries shall have performed all
of its obligations hereunder and satisfied all the conditions on its part to be
satisfied at or prior to such Closing Date; (ii) the Registration Statement and
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and shall in all material respects conform to the
requirements thereof, and neither the Registration Statement nor the Prospectus
nor any amendment or supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; (iii) there shall
have been, since the respective dates as of which information is given, no
material adverse change, or to the Company or its Subsidiaries's knowledge, any
development involving a prospective material adverse change, in the business,
properties, condition (financial or otherwise), results of operations, capital
stock, long-term or short-term debt or general affairs of the Company or its
Subsidiaries from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration Statement, and
the Company or its Subsidiaries shall not have incurred any material liabilities
or entered into any material agreement not in the ordinary course of business
other than as referred to in the Registration Statement and Prospectus; (iv)
except as set forth in the Prospectus, no action, suit or proceeding at law or
in equity shall be pending or threatened against the Company or its Subsidiaries
which would be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against the Company or its
Subsidiaries before or by any commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable decision, ruling or finding
would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company and its Subsidiaries, taken as a whole and (v) you shall have received,
at the First Closing Date, a certificate signed by each of the President and the
principal operating officer of the Company, dated as of the First Closing Date,
evidencing compliance with the provisions of this subsection (f).
(f) Intentionally Omitted.
(g) Upon exercise of the option provided for in Section 2(b) hereof, the
obligations of the Underwriter to purchase and pay for the Option Units will be
subject (as of the date hereof and of the Option Closing Date) to the following
additional conditions:
(i) The Registration Statement shall remain effective at the Option Closing
Date, and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending, or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable request on the part of the
Commission for additional information shall have been complied with to the
satisfaction of the Commission.
19
(ii) At the Option Closing Date there shall have been delivered to you the
signed opinion of Esanu Xxxxx Xxxxxx & Siger, counsel to the Company, dated as
of the Option Closing Date, in form and substance reasonably satisfactory to
Xxxxxxxxx & Xxxxxxxxx, LLP, counsel to the Underwriter, which opinions shall be
substantially the same in scope and substance as the opinions furnished to you
at the initial Closing Date pursuant to Sections 4(b) hereof, except that such
opinions, where appropriate, shall cover the Option Units.
(iii) At the Option Closing Date there shall have been delivered to you a
certificate of the President and the principal operating officer of the Company,
dated the Option Closing Date, in form and substance reasonably satisfactory to
Xxxxxxxxx & Xxxxxxxxx, LLP, counsel to the Underwriter, substantially the same
in scope and substance as the certificate furnished to you at the First Closing
Date pursuant to Section 4(e) hereof.
(iv) At the Option Closing Date there shall have been delivered to you a
letter in form and substance satisfactory to you from Xxxxx Xxxxxxxx, P.C. dated
the Option Closing Date and addressed to the Underwriter confirming the
information in their letter referred to in Section 4(d) hereof and stating that
nothing has come to their attention during the period from the ending date of
their review referred to in said letter to a date not more than five business
days prior to the Option Closing Date, which would require any change in said
letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date in
connection with the sale and issuance of the Option Units shall be reasonably
satisfactory in form and substance to you, and you and Xxxxxxxxx & Xxxxxxxxx,
LLP, counsel to the Underwriter, shall have been furnished with all such
documents, certificates, and opinions as you may reasonably request in
connection with this transaction in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or conditions contained
herein.
(h) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to either of the
Closing Dates, for members of the NASD to execute transactions (as principal or
agent) in the Units, Common Stock or the Warrants and no proceedings for the
taking of such action shall have been instituted or shall be pending, or, to the
knowledge of the Underwriter or the Company, shall be contemplated by the
Commission or the NASD. The Company represents that at the date hereof it has no
knowledge that any such action is in fact contemplated by the Commission or the
NASD.
(i) If any of the conditions herein provided for in this Section shall not
have been fulfilled in all material respects as of the date indicated, this
Agreement and all obligations of the Underwriter under this Agreement may be
canceled at, or at any time prior to, either of the Closing Dates by the
Underwriter notifying the Company of such cancellation in writing or by telegram
at or prior to the applicable Closing Date. Any such cancellation shall be
without liability of the Underwriter to the Company.
20
5. Conditions of the Obligations of the Company. The obligation of the
Company to sell and deliver the Units is subject to the following conditions:
(a) The Registration Statement shall have become effective not later than
10:00 a.m. New York time, on the day following the date of this Agreement, or on
such later date as the Company and the Underwriter may agree in writing.
(b) At the Closing Dates, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in this
Section have been fulfilled on the First Closing Date but are not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Units on exercise of the
option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees (i) to indemnify and hold harmless the Underwriter
and each person, if any, who controls the Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act against any losses,
claims, damages, or liabilities, joint or several (which shall, for all purposes
of this Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees), to which such
Underwriter or such controlling person may become subject, under the Act or
otherwise, and (ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages, or liabilities; insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
relate to and arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any Blue Sky application or other document executed by
the Company specifically for that purpose containing written information
specifically furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Units under the securities
laws thereof (any such application, document or information being hereinafter
called a "Blue Sky Application"), or arise out of or are based upon the omission
or alleged omission to state in the Registration Statement, any Preliminary
Prospectus, Prospectus, or any amendment or supplement thereto, or in any Blue
Sky Application, a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
will not be required to indemnify the Underwriter and any controlling person or
be liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission is made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto, provided, further
that the indemnity with respect to any Preliminary Prospectus shall not be
applicable on account of any losses, claims, damages, liabilities, or litigation
arising from the sale of Units to any person if the misstatement or omission was
corrected in the Prospectus but a copy of the Prospectus was not delivered to
such person by the Underwriter in accordance with this Agreement at or prior to
the written confirmation of the sale to such person. This indemnity will be in
addition to any liability which the Company may otherwise have.
21
(b) The Underwriter will indemnify and hold harmless the Company, each of
its directors, each nominee (if any) for director named in the Prospectus, each
of its officers who have signed the Registration Statement and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any losses, claims, damages, or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and reasonable attorneys'
fees) to which the Company or any such director, nominee, officer, or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or any Blue Sky Application
in reliance upon and in conformity with written information furnished to the
Company by the Underwriter specifically for use in the preparation thereof and
for any violation by the Underwriter in the sale of such Units of any applicable
state or federal law or any rule, regulation or instruction thereunder relating
to violations based on unauthorized statements by Underwriter or its
representative, provided that such violation is not based upon any violation of
such law, rule, or regulation or instruction by the party claiming
indemnification or inaccurate or misleading information furnished by the Company
or its representatives, including information furnished to the Underwriter as
contemplated herein. This indemnity agreement will be in addition to any
liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section unless the omission so to notify prejudices the indemnifying party.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
22
The indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that the reasonable fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the indemnified party and the
indemnifying party and in the reasonable judgment of the counsel to the
indemnified party, it is advisable under the code of professional responsibility
for the indemnified party to be represented by seperate counsel (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
indemnified party, which firm shall be designated in writing by the indemnified
party). No settlement of any action against an indemnified party shall be made
without the consent of the indemnified party, which shall not be unreasonably
withheld in light of all factors of importance to such indemnified party. If it
is ultimately determined that indemnification is not permitted, then an
indemnified party will return all monies advanced to the indemnifying party with
interest thereon.
7. Contribution. In order to provide for just and equitable contribution
under the Act in any case in which the indemnification provided in Section 6
hereof is requested but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case,
then the Company and the Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) (after
contribution from others) such proportional amount of such losses, claims,
damages, or liabilities represented by the percentage that the underwriting
discount per Unit appearing on the cover page of the Prospectus plus all other
compensation paid to the Underwriter bears to the public offering price
appearing thereon and the Company shall be responsible for the remaining
portion, provided, however, that if such allocation is not permitted by
applicable law, then allocated in such proportion as is appropriate to reflect
relative benefits but also the relative fault of the Company and the Underwriter
and controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be determined
by reference to, among other things, whether in the case of an untrue statement
of a material fact or the omission to state a material fact, such statement or
omission relates to information supplied by the Company or the Underwriter and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such untrue statement or omission.
23
The Company and the Underwriter agree that it would not be just and equitable if
the respective obligations of the Company and the Underwriter to contribute
pursuant to this Section 7 were to be determined by pro rata or per capita
allocation of the aggregate damages or by any other method of allocation that
does not take account of the equitable considerations referred to in this
Section 7. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 1(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person who
controls the Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company, its officers, directors, and
controlling persons, and the Company, its officers, directors, and controlling
persons shall be entitled to contribution from the Underwriter to the full
extent permitted by law. The foregoing contribution agreement shall in no way
affect the contribution liabilities of any persons having liability under
Section 11 of the Act other than the Company and the Underwriter. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement; provided, however, that such
consent shall not be unreasonably withheld in light of all factors of importance
to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of the
Units by the Underwriter is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company including,
but not limited to, the fees and expenses of counsel to the Company and of the
Company's accountants; the costs and expenses incident to the preparation,
printing, filing, and distribution under the Act of the Registration Statement
(including the financial statements therein and all amendments and exhibits
thereto), Preliminary Prospectus, and the Prospectus, as amended or
supplemented, the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Units contemplated hereby; all expenses,
including reasonable fees and disbursements of counsel to the Underwriter, in
connection with the qualification of the Units under the state securities or
Blue Sky laws which the Underwriter shall designate (which legal fees (not
including filing fees or expenses) shall be $35,000); the cost of printing and
furnishing to the Underwriter copies of the Registration Statement, each
Preliminary Prospectus, if applicable, the Prospectus, this Agreement, and the
Blue Sky Memorandum, any fees relating to the listing of the Units, Common
Stock, and Warrants on NASDAQ or any other securities exchange; the cost of
printing the certificates representing the securities comprising the Units; the
fees of the transfer agent and warrant agent, reasonable and traditional
advertising costs, meetings and presentation costs; and costs of bound volumes
(3 sets for the Underwriter) and prospectus memorabilia (12 cubes for the
Underwriter). The Company shall pay any and all taxes (including any transfer,
franchise, capital stock, or other tax imposed by any jurisdiction) on sales of
the Units hereunder. The Company will also pay all costs and expenses incident
to the furnishing of any amended Prospectus or of any supplement to be attached
to the Prospectus as called for in Section 3(a) of this Agreement except as
otherwise set forth in said Section.
24
(b) In addition to the foregoing expenses the Company shall at the First
Closing Date pay to the Underwriter a non-accountable expense allowance of
$120,000. In the event the over-allotment option is exercised, the Company shall
pay to the Underwriter at the Option Closing Date an additional amount in the
aggregate equal to 3.0% of the gross proceeds received upon exercise of the
over-allotment option. In the event the transactions contemplated hereby are not
consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant,
representation, or warranty contained herein or because any other condition to
the Underwriter's obligations hereunder required to be fulfilled by the Company
is not fulfilled) the Company shall not be liable for any expenses of the
Underwriter, including the Underwriter's legal fees. In the event the
transactions contemplated hereby are not consummated by reason of the Company's
actions or failure to take such actions as the Underwriter reasonably believes
are reasonably required to complete the transaction contemplated herein, the
Company shall be liable, in addition to the expenses itemized in Section 8(a)
above, for the actual accountable out-of-pocket expenses of the Underwriter
(including reasonable legal fees and expenses of counsel to the Underwriter)
which shall not exceed $200,000 (less any amount previously paid or payable
pursuant to the next sentence). In the event the transactions contemplated
hereby are not consummated due to a Material Adverse Effect or to adverse market
conditions, the Company shall be liable for the actual out-of-pocket expenses of
the Underwriter, including reasonable legal fees, not to exceed in the aggregate
$100,000.
(c) Except as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter, against any losses, claims, damages, or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys' fees), to which the Underwriter or person may become subject insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. Effective Date. This Agreement shall become effective upon its
execution.
25
10. Termination.
(A) After this Agreement becomes effective, this Agreement, except for
Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 hereof, may be terminated at any time
prior to the First Closing Date, by you if in your judgment it is impracticable
to offer the sale or to enforce contracts made by the Representative for the
resale of the Units agreed to be purchased hereunder by reason of (i) the
Company or its Subsidiaries having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree, (ii)
trading in securities on the New York Stock Exchange or the American Stock
Exchange having been suspended or limited, (iii) material governmental
restrictions having been imposed on trading in securities generally (not in
force and effect on the date hereof), (iv) a banking moratorium having been
declared by federal or New York state authorities, (v) an outbreak of major
international hostilities involving the United States or other substantial
national or international calamity has occurred, (vi) a pending or threatened
material legal or governmental proceeding or action relating generally to the
Company's or its Subsidiaries business, or a notification having been received
by the Company or its Subsidiaries of the threat of any such proceeding or
action, which would materially adversely affect the Company or its Subsidiaries;
(vii) except as contemplated by the Prospectus, the Company or its Subsidiaries
is merged or consolidated into or acquired by another company or group or there
exists a binding legal commitment for the foregoing or any other material change
of ownership or control occurs; (viii) the passage by the Congress of the United
States or by any state legislative body of similar impact, of any act or
measure, or the adoption of any orders, rules or regulations by any governmental
body or any authoritative accounting institute or board, or any governmental
executive, which is reasonably believed likely by the Representative to have a
material adverse impact on the business, financial condition or financial
statements of the Company or its Subsidiaries; (ix) any material adverse change
in the financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement, or (x) any material adverse change
having occurred, since the respective dates of which information is given in the
Registration Statement and Prospectus, in the earnings, business prospects or
general condition of the Company and its Subsidiaries, taken as a whole,
financial or otherwise, whether or not arising in the ordinary course of
business.
(b) If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, the
Company shall be promptly notified by the Underwriter, by telephone or telegram,
confirmed by letter.
11. Underwriter's Options. At or before the First Closing Date, the Company
will sell the Underwriter or its designees for a consideration of $.001 per
option and upon the terms and conditions set forth in the form of the
Underwriter's Options annexed as an exhibit to the Registration Statement,
Underwriter's Options to purchase 100,000 Units. In the event of conflict in the
terms of this Agreement and the Underwriter's Options with respect to language
relating to the Underwriter's Options, the language of the Underwriter's Options
shall control.
27
12. Covenants of the Underwriter. You covenant and agree with the Company
as follows:
(a) Compliance with Laws. In connection with the offer and sale of Units,
you shall comply with any applicable requirements of the Act, the Exchange Act,
the NASD and the applicable state securities or "Blue Sky" laws, and the rules
and regulations thereunder.
(b) Accuracy of Information. No information supplied by you for use in the
Registration Statement, Preliminary Prospectus, Prospectus or Blue Sky
Application will contain any untrue statements of a material fact or omit to
state any material fact necessary to make such information not misleading.
(c) No Additional Information. You will not give any information or make
any representation in connection with the offering of the Units other than that
contained in the Prospectus.
(d) Sale of Units. You shall solicit, directly or through Selected Dealers,
purchasers of the Units only in the jurisdictions in which you have been advised
by the Company that such solicitation can be made, and in which you or the
soliciting Selected Dealer, as the case may be, are qualified to so act.
13. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company and the Underwriter and the undertakings set forth in
or made pursuant to this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the Underwriter, the
Company, or any of its officers or directors or any controlling person and will
survive delivery of and payment of the Units and the termination of this
Agreement.
14. Notice. Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed, delivered, or telecopied
and confirmed to them at Xxxxxxxxx Xxxxxx, Inc., Xxx Xxxxxxx Xxxx Xxxxx, 0xx
Xx., Xxx Xxxx, XX 00000, with a copy sent to Xxxxxxxxx & Xxxxxxxxx, LLP, 000
Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxx Xxxxxxxxx, Esq., or if sent
to the Company, will be mailed, delivered, or telecopied and confirmed to it at
0000 Xxxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxxxx, XX 00000 with a copy sent to Esanu
Katsky Xxxxxx & Siger, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxx X.
Xxxxxxxx, P.C. Notice shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication.
15. Parties in Interest. The Agreement herein set forth is made solely for
the benefit of the Underwriter, the Company, any person controlling the Company
or the Underwriter, and directors of the Company, nominees for directors (if
any) named in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors, assigns
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser, as
such purchaser, from the Underwriter of the Units.
16. Applicable Law. This Agreement will be governed by, and construed in
accordance with, of the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
28
17. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto and delivered to the other parties (including by fax, followed by
original copies by overnight mail).
18. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings, and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in writing, signed by the
Underwriter and the Company.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it will become a binding
agreement between the Company and the Underwriter in accordance with its terms.
Very truly yours,
TRANS GLOBAL SERVICES, INC.
By: ____________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
XXXXXXXXX XXXXXX, INC.
By: __________________________
Name:
Title:
