UNDERWRITING AGREEMENT
Dated: 1998
XXXXX XXXX & CO., INC.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Pursuant to this Underwriting Agreement (this "Agreement"),
(1) PRIDE AUTOMOTIVE GROUP, INC., a Delaware corporation (the "Company"),
proposes to issue and sell to Xxxxx Xxxx & Co., Inc. (the "Underwriter" or
"you"), an aggregate of 1,080,000 shares (the "Company Firm Shares") of the
common stock, par value $.001 per share, of the Company (the "Common Stock"),
and (ii) each of the stockholders of the Company named in Schedule A hereto (the
"Selling Stockholders"), acting severally and not jointly, proposes to sell to
you the respective number of shares of Common Stock set forth opposite the
Selling Stockholders' names on Schedule A for an aggregate of 170,000 shares of
Common Stock (the "Selling Stockholder Firm Shares"; and together with the
Company Firm Shares, the "Firm Shares").
In addition, the Company proposes to grant to the Underwriter
the Over-Allotment Option, referred to and defined in Section 2(c) hereof, to
purchase all or any part of an aggregate of 187,500 additional shares of Common
Stock (the "Option Shares") and the Company proposes to issue to you the
Underwriter's Warrant, referred to and defined in Section 1 2 hereof, to
purchase certain further shares of Common Stock.
The aggregate of Firms Shares together with the aggregate of
187,500 Option Shares are herein collectively called the "Shares." The Shares
and the shares of Common Stock issuable upon exercise of the Underwriter's
Warrant, are herein collectively called the "Securities." The term
"Underwriter's Counsel" shall mean the firm of Gersten, Savage, Xxxxxxxxx &
Xxxxxxxxxx, LLP, counsel to the Underwriter, and the term "Company Counsel"
shall mean the firm of Xxxxxxx & Xxxxxxx, counsel to the Company. Unless the
context otherwise requires, all references herein to a "Section" shall mean the
appropriate Section of this Agreement.
You have advised the Company and the Selling Stockholders that
the Underwriter desires to purchase the Firm Shares as herein provided. The
Company and the Selling Stockholders confirm the agreements made by them with
respect to the purchase of the Firm Shares as well as the Option Shares by the
Underwriter, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SELLING STOCKHOLDERS.
(a) The Company represents and warrants to, and agrees with, the
Underwriter that:
(i) Registration Statement; Prospectus. A registration statement (File
No.33 ) on Form SB-2 relating to the public offering of the Securities (the
"Offering"), including a preliminary form of prospectus, copies of which have
heretofore been delivered to you, has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933 (the "Act"), and the rules
and regulations of the Securities and Exchange Commission (the "Commission")
promulgated thereunder (the "Rules and Regulations"), and has been filed with
the Commission under the Act. As used herein, the term "Preliminary Prospectus"
shall mean each prospectus filed pursuant to Rule 430 or Rule 424(a) of the
Rules and Regulations. The Preliminary Prospectus bore the legend required by
Item 501 of Regulation S-B under the Act and the Rules and Regulations. Such
registration statement (including all financial statements, schedules and
exhibits) as amended at the time it becomes effective and the final prospectus
included therein are herein respectively called the "Registration Statement" and
the "Prospectus," except that (i) if the prospectus filed by the Company
pursuant to Rule 424(b) or Rule 430A of the Rules and Regulations shall differ
from such final prospectus as then amended, then the term "Prospectus" shall
instead mean the prospectus first filed pursuant to said Rule 424(b) or Rule
430A, and (ii) if such registration statement is amended or such prospectus is
amended or supplemented after the effective date of such registration statement
and prior to the Option Closing Date (as defined in Section 2(c) hereto) then
(unless the context necessarily requires otherwise) the term "Registration
Statement" shall include such registration statement as so amended, and the term
"Prospectus" shall include such prospectus as so amended or supplemented, as the
case may be.
(ii) Contents of Registration Statement. On the Effective Date, and at all
times subsequent thereto for so long as the delivery of a prospectus is required
in connection with the offering or sale of any of the Securities, (a) the
Registration Statement and the Prospectus shall in all material respects conform
to the requirements of the Act and the Rules and Regulations, and (b) neither
the Registration Statement nor the Prospectus shall include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary or make statements therein in light of the circumstances in
which they were made, 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 with respect to
stabilization, the material set forth under the caption "UNDERWRITING," the
information on the cover page of the Prospectus regarding the underwriting
arrangements and the identity of the Underwriter's Counsel under the caption
"LEGAL MATTERS," which information the Underwriter hereby represents and
warrants to the Company is true and correct in all material respects and does
not omit to state any material fact required to be stated therein or necessary
to make statements therein, in light of the circumstances in which they were
made, not misleading, constitute the only information furnished in writing by or
on behalf of the Underwriters for inclusion in the Registration Statement and
Prospectus, as the case may be.
(iii) Organization, Standing, Etc. The Company and each of its subsidiaries
(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 power and corporate 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 businesses
or the character or location of their properties requires such qualification,
except where failure so to qualify will not have a material adverse effect on
the business, properties or financial condition of the Company or its
Subsidiaries.
(iv) Capitalization. The authorized, issued and outstanding capital stock
of the Company as of the date of the Prospectus is as set forth in the
Prospectus under the caption "CAPITALIZATION." The shares of Common Stock issued
and outstanding on the Effective Date have been duly authorized, validly issued
and are fully paid and non-assessable. No options, warrants or other rights to
purchase, agreements or other obligations to issue, or agreements or other
rights to convert any obligation into, any shares of capital stock of the
Company have been granted or entered into by the Company, except as expressly
described in the Prospectus. The Securities conform to all statements relating
thereto contained in the Registration Statement or the Prospectus.
(v) Securities. The Securities and the Underwriter's Warrant have been duly
authorized and, when issued and delivered against payment therefor pursuant to
this Agreement, or the Underwriter's Warrant, as the case may be, will be duly
authorized, validly issued, fully paid and non-assessable and free of preemptive
rights of any security holder of the Company. Neither the filing of the
Registration Statement nor the offering or sale of any of the Securities or the
Underwriter's Warrant as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any securities of the Company, except as described in the
Registration Statement.
(vi) Authority, Etc. This Agreement, the Underwriter's Warrant and the
Financial Consulting Agreement (as hereinafter defined), have been duly and
validly authorized, executed and delivered by the Company and, assuming due
execution of this Agreement and such other agreements by the other party or
parties hereto and thereto, constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms. The Company has full right, power and lawful authority to authorize,
issue and sell the Securities and the Underwriter's Warrant on the terms and
conditions set forth herein. All consents, approvals, authorizations and orders
of any court or governmental authority which are required in connection with the
authorization, execution and delivery of such agreements, the authorization,
issue and sale of the Securities and the Underwriter's Warrant, and the
consummation of the transactions contemplated hereby have been obtained.
(vii) No Conflict. Except as described in the Prospectus, the Company is
not in violation, breach or default of or under, and consummation of the
transactions hereby contemplated and fulfillment of the terms of this Agreement
will not conflict with or result in a breach of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance pursuant to the terms
of, any contract, indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary may be bound or to which any of
the property or assets of the Company or any Subsidiary is subject, nor will
such action result in any violation of the provisions of the Articles of
Incorporation or the By-laws of the Company or any Subsidiary, as amended to
date, or any statute or any order, rule or regulation applicable to the Company
or any Subsidiary, or of any court or of any regulatory authority or other
governmental body having jurisdiction over the Company or any Subsidiary.
(viii) Assets. Subject to the qualifications stated in the Prospectus: (a)
the Company and each Subsidiary have good and marketable title to all properties
and assets described in the Prospectus as owned by them, including without
limitation intellectual property, free and clear of all liens, charges,
encumbrances or restrictions, except such as do not materially affect the value
of such properties or assets and do not materially interfere with the use made
or proposed to be made of such assets or properties by the Company and/or the
Subsidiaries or are not materially significant or important in relation to the
business of the Company or the Subsidiaries; (b) all of the material leases and
subleases under which the Company and/or the Subsidiaries is the lessor or
sublessor of properties or assets or under which the Company and/or the
Subsidiaries holds properties or assets as lessee or sublessee, as described in
the Prospectus, are in full force and effect and, except as described in the
Prospectus, the Company and/or the 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 no claim has been asserted by any party adverse to the
rights of the Company and/or the Subsidiaries as lessor, sublessor, lessee or
sublessee under any such lease or sublease, or affecting or questioning the
right of the Company and/or the 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 (c) the Company and each
Subsidiary, owns or leases all such assets and 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.
(ix) lndependent Accountants. Civvals, Chartered Accountants, who have
given their report on certain financial statements filed or to be filed with the
Commission as a part of the Registration Statement, and which are included in
the Prospectus, are with respect to the Company and its Subsidiaries,
independent public accountants as required by the Act and the Rules and
Regulations.
(x) Financial Statements. The financial statements, together with related
notes, set forth in the Registration Statement and the Prospectus present fairly
the financial position, results of operations, changes in stockholders' equity
and cash flows of the Company and the Subsidiaries on the basis stated in the
Registration Statement, at the respective dates and for the respective periods
to which they apply. Such financial statements and related notes have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the entire period involved, except to the extent
disclosed therein. The Selected Financial
Data included in the Registration Statement and the Prospectus present fairly
the information shown therein and have been prepared on a basis consistent with
that of the financial statements included in the Registration Statement and the
Prospectus.
(xi) No Material Change. Except as otherwise set forth in the Prospectus,
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, neither the Company nor any
Subsidiary have: (i) incurred any material liability or obligation, direct or
contingent, or entered into any material transaction other than in the ordinary
course of business; (ii) effected or experienced any change in its capital stock
or incurred any long-term debt, (iii) issued any options, warrants or other
rights to acquire its capital stock; (iv) declared, paid or made any dividend or
distribution of any kind on its capital stock; or (v) effected or experienced
any material adverse change, or development involving a prospective material
adverse change, in its financial position, net worth, results of operations,
business or business prospects, assets or properties or key personnel.
(xii) Litigation. Except as set forth in the Prospectus, there is not now
pending nor, to the knowledge of the Company or any Subsidiary, threatened, any
action, suit or proceeding (including any related to environmental matters or
discrimination on the basis of age, sex, religion or race), whether or not in
the ordinary course of business, to which the Company or any Subsidiary is a
party or its business or property is subject, before or by any court or
governmental authority, which, if determined adversely to the Company or any
Subsidiary, would have a material adverse effect on the financial position, net
worth, or results of operations, business or business prospects, assets or
property of the Company or any Subsidiary; and no labor disputes involving the
employees of the Company or any Subsidiary exist which would materially
adversely affect the business, property, financial position or results of
operations of the Company or any Subsidiary.
(xiii) No Unlawful Prospectuses. The Company has not distributed any
prospectus or other offering material in connection with the Offering
contemplated herein, other than any Preliminary Prospectus, the Prospectus or
other material permitted by the Act and the Rules and Regulations.
(xiv) Taxes. Except as disclosed in the Prospectus, the Company and each
Subsidiary have filed all necessary federal, state, local and foreign income and
franchise tax returns and have paid all taxes shown as due thereon on or before
the date such taxes are due to be paid; and there is no tax deficiency which has
been or, to the knowledge of the Company or any Subsidiary, might be asserted
against the Company or any Subsidiary.
(xv) Licenses, Etc. The Company and each Subsidiary have in effect all
necessary licenses, permits and other governmental authorizations currently
required for the conduct of their businesses or the ownership of their property,
as described in the Prospectus, and are in all material respects in compliance
therewith. The Company and each Subsidiary own or possess adequate rights to use
all material patents, patent applications, trademarks, xxxx registrations,
copyrights and
licenses disclosed in the Prospectus and/or which are necessary for the
conduct of such business, and except as disclosed in the Prospectus neither
the Company nor any Subsidiary have received any notice of conflict with the
asserted rights of others in respect thereof. To the knowledge of the Company,
none of the activities or business of the Company and its Subsidiaries is in
violation of, or would cause the Company or any Subsidiary to violate, any
law, rule, regulation or order of the United States, any country, state,
county or locality, the violation of which would have a material adverse
effect upon the financial position, net worth, results of operations, business
or business prospects, assets or property of the Company.
(xvi) No Prohibited Payments. The Company has not, directly or indirectly
at any time: (i) made any contribution 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 federal, state, local 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
internal accounting controls and procedures of the Company are sufficient to
cause the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(xvii) Transfer Taxes. On the Closing Dates (as defined in Section 2(d)
hereof), all transfer and other taxes (including franchise, capital stock and
other taxes, 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
Shares to the Underwriters hereunder shall have been fully paid or provided for
by the Company and the Selling Stockholders, and all laws imposing such taxes
shall have been fully complied with.
(xviii) Exhibits. All contracts and other documents of the Company which
are, under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(xix) Stockholder Agreements, Registration Rights. Except as described in
the Prospectus, no security holder of the Company has any rights with respect to
the purchase, sale or registration of any Securities, and all registration
rights with respect to the Offering have been waived or complied with.
(xx) No Stabilization or Manipulation. The Company has not taken and will
not take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities hereunder.
(xxi) No Finders. Except for this Agreement and any other agreements with
the Underwriter, 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.
(xxii) Lock-up Agreements. The Company has obtained from each officer,
director (the "Shareholders"), Lock-Up agreements in the form previously
delivered.
(b) Each of the Selling Stockholders, severally and not
jointly, represents and warrants to, and agrees with, the Underwriter as of the
date hereof, each of subparagraphs (i) through (xxii), inclusive, of subsection
(a) of this Section 1 and as follows:
(i) The execution and delivery of this Agreement and the consummation
of the transactions herein and therein contemplated will not result in a
breach by such Selling Stockholder of, or constitute a default by such
Selling Stockholder under, any material indenture, deed or trust, contract
or other agreement or instrument or any decree, judgment or order to which
such Selling Stockholder is a party or by which such Selling Stockholder
may be bound.
(ii) Such Selling Stockholder has and will have, at the First Closing
Date, good and marketable title to the Shares to be sold by such Selling
Stockholder hereunder, free and clear of any pledge, lien, security
interest, encumbrance, claim or equity, created by or arising through the
Selling Stockholder other than pursuant to this Agreement; such Selling
Stockholder has full right, power and authority to sell, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder; and
upon delivery of the Shares to be sold by such Selling Stockholder
hereunder and payment of the purchase price therefor as herein
contemplated, the Underwriter will receive good and marketable title to the
Shares purchased by it from such Selling Stockholder, free and clear of any
pledge, lien, security interest, encumbrance, claim or equity.
(iii) Such Selling Stockholder has duly executed and delivered in the
form heretofore furnished to the Underwriter, a power of attorney and
custody agreement (the "Power of Attorney and Custody Agreement") with
______________as the attorney-in-fact and the custodian (the
"Attorney-in-Fact" and the "Custodian", respectively); the Attorney-in-Fact
is authorized to execute and deliver this Agreement and the certificates
referred to in Section 4(k) or that may be required pursuant to Section
4(h) on behalf of such Selling Stockholder, to authorize the delivery of
the Shares to be sold by such Selling Stockholder hereunder, to duly
endorse (in blank or otherwise) the certificate or certificates
representing such Shares, to accept payment therefor, and otherwise to act
on behalf of such payment therefor, and otherwise to act on behalf of such
Seller in connection with this Agreement.
(iv) All authorizations, approvals and consents necessary for the
execution and delivery by such Selling Stockholder of the Power of Attorney
and Custody Agreement, the execution and delivery by or on behalf of such
Selling Stockholder of this Agreement, and the sale and delivery of the
Shares to be sold by such Selling Stockholder hereunder and thereunder
(other than, at the time of the execution hereof, the issuance of the order
of the Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state
securities laws), have been obtained and are in full force and effect; and
such Selling Stockholder has the full right, power and authority to enter
into this Agreement and the Power of Attorney and Custody
Agreement and to sell, transfer and deliver the Shares to be sold by
such Selling Stockholder hereunder.
(v) For a period of ___ days from the date hereof, such Selling
Stockholder will not, without the prior written consent of the Underwriter,
directly or indirectly, offer to sell, grant any option for the sale of, or
otherwise dispose of, any Common Stock of the Company or any securities
convertible into Common Stock owned by such Selling Stockholder or with
respect to which such Selling Stockholder has the power of disposition,
other than to the Underwriter pursuant to this Agreement.
(vi) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security or the Company
to facilitate the sale or exercise of the Shares.
(vii) Certificates in negotiable form for all Shares to be sold by
such Selling Stockholder hereunder have been placed in custody with the
Custodian by or for the benefit of such Selling Stockholder for the
purposes or effecting delivery by such Selling Stockholder hereunder.
2. PURCHASE, DELIVERY AND SALE OF THE SHARES.
(a) Purchase Price for the Shares.
The Shares shall be sold to and purchased by the Underwriter hereunder at
the purchase price of $4.50 per Share (that being the public offering price of
$5.00 per Share less an underwriting discount of 10 percent) (the "Purchase
Price").
(b) Firm Shares.
(i) Subject to the terms and conditions of this Agreement, and on the
basis of the representations, warranties and agreements herein contained the
Company and the Selling Stockholders agree to issue and sell to the Underwriter,
and the Underwriter agrees to buy from the Company and the Selling Stockholders
at the Purchase Price, the Firm Shares.
(ii) Delivery of the Firm Shares against payment therefor shall take
place at the offices of the Underwriter (or at such other place as may be
designated by agreement between you and the Company) at 10:00 a.m., Eastern
Daylight Time, on _______ , 1998, or at such later time and date, not later than
five (5) business days after the Effective Date, as you may designate (such time
and date of payment and delivery for the Firm Shares being herein called the
"First Closing Date"). Time shall be of the essence and delivery of the Firm
Shares at the time and place specified in this Section 2(b)(ii) is a further
condition to the obligations of the Underwriter hereunder.
(c) Option Shares.
(i) In addition, subject to the terms and conditions of this
Agreement, and on the basis of the representations, warranties and agreements
herein contained, the Company and the Selling Stockholders hereby grant to the
Underwriter an option (the "Over-Allotment Option"), to purchase from the
Company all or any part of 187,500 Option Shares at the Purchase Price.
(ii) The Over-Allotment Option may be exercised by the Underwriter, in
whole or in part, within 45 calendar days after the Effective Date, upon written
notice by you to the Company, advising the Company of the number of Option
Shares as to which the Over-Allotment Option is being exercised, the names and
denominations in which the certificates for the Option Shares are to be
registered, and the time and date when such certificates are to be delivered.
Such time and date shall be determined by you but shall not be less than two nor
more than 10 business days after exercise of the Over-Allotment Option, nor in
any event prior to the First Closing Date (such time and date being herein
called the "Option Closing Date"). Delivery of the Option Shares against payment
therefor shall take place at the Underwriter's Offices. Time shall be of the
essence and delivery at the time and place specified in this Section 2(c)(ii) is
a further condition to the obligations of the Underwriter hereunder.
(iii) The Over-Allotment may be exercised only to cover
over-allotments in the sale by the Underwriter of Firm Shares.
(d) Delivery of Certificates; Payment.
(i) The Company and the Selling Stockholders shall make the
certificates for the Shares to be purchased hereunder available to you for
checking at least one full business day prior to the First Closing Date or the
Option Closing Date (each, a "Closing Date"), as the case may be. The
certificates shall be in such names and denominations as you may request at
least two business days prior to the relevant Closing Date. Time shall be of the
essence and the availability of the certificates at the time and place specified
in this Section 2(d)(1) is a further condition to the obligations of the
Underwriter hereunder.
(ii) On the First Closing Date, the Company and the Selling
Stockholders shall deliver to you for the account of the Underwriter definitive
engraved certificates in negotiable form representing all of the Shares
comprising the Firm Shares to be sold by the Company and the Selling
Stockholders, against payment of the Purchase Prices therefor by you, for your
account, by certified or bank cashier's checks payable in New York Clearing
House funds to the order of the Company and each Selling Stockholder in the
appropriate amounts.
(iii) In addition, if and to the extent that the Underwriter
exercises the Over-Allotment Option, then on the Option Closing Date the Company
shall deliver to you for your
account, definitive engraved certificates in negotiable form representing the
Shares and the Warrants comprising the Option Securities to be sold by the
Company, against payment of the Purchase Prices therefor by you for your
account, by certified or bank cashier's checks payable in next day funds to the
order of the Company.
(iv) It is understood that the Underwriter proposes to offer the
Firm Shares to be purchased hereunder to the public, upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement becomes effective.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the Underwriter that:
(a) Registration.
(i) The Company shall use its best effort to cause the Registration
Statement to become effective and, upon notification from the Commission that
the Registration Statement has become effective, shall so advise you and shall
not at any time, whether before or after the Effective Date, file any amendment
to the Registration Statement or any amendment or supplement to the Prospectus
of which you shall not previously have been advised and furnished with a copy,
or to which you or Underwriter's Counsel shall have objected in writing, or
which is not in compliance with the Act and the Rules and Regulations.
(ii) Promptly after you or the Company shall have been advised thereof, you
shall advise the Company or the Company shall I advise you, as the case may be,
and confirm such advice in writing, of (A) the receipt of any comments of the
Commission, (B) the effectiveness of any post-effective amendment to the
Registration Statement, (C) the filing of any supplement to the Prospectus or
any amended Prospectus, (D) any request made by the Commission for amendment of
the Registration Statement or amendment or supplementing of the Prospectus, or
for additional information with respect thereto, or (E) the issuance by the
Commission or any state or regulatory body of any stop order or other order
denying or suspending the effectiveness of the Registration Statement, or
preventing or suspending the use of any Preliminary Prospectus, or suspending
the qualification of the Securities for offering in any jurisdiction, or
otherwise preventing or impairing the Offering, or the institution or threat of
any proceeding for any of such purposes. The Company and you shall not acquiesce
in such order or proceeding, and shall instead actively defend such order or
proceeding, unless the Company and you agree in writing to such acquiescence.
(iii) The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and selected dealers to use the Prospectus in connection with
the sale of the Shares for such period as in the opinion of Underwriter's
Counsel the use thereof is required to comply with the applicable provisions of
the Act
and the Rules and Regulations. In case of the happening, at any time within such
period as a prospectus is required under the Act to be delivered in connection
with sales by the Underwriter or a dealer, of any event of which the Company has
knowledge and which materially affects the Company or the Securities, or which
in the opinion of Company Counsel or of Underwriter's Counsel should be set
forth in an amendment to the Registration Statement or an amendment or
supplement to the Prospectus in order to make the statement made 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 Shares, or in case
it shall be necessary to amend or supplement the Prospectus to comply with the
Act or the Rules and Regulations, the Company shall notify you 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 you may reasonably request, in order that the Prospectus, as so
amended or supplemented, shall not contain any untrue statement of a material
fact or omit to state any material fact 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 each such amendment
to the Registration Statement, amended Prospectus or supplement to be attached
to the Prospectus shall be without expense to the Underwriter. If the
Underwriter is required, in connection with the sale of the Securities, to
deliver a prospectus nine months or more after the Effective Date, the Company
shall upon your request, amend the Registration Statement and amend or
supplement the Prospectus, or file a new registration statement, if necessary,
and furnish the Underwriter with reasonable quantities of prospectuses complying
with section 10(a)(3) of the Act.
(iv) The Company will deliver to you at or before the First Closing Date
two signed copies of the Registration Statement including all financial
statements and exhibits filed therewith, and of all amendments thereto. The
Company will deliver to or upon your order, from time to time until the
Effective Date as many copies of any Preliminary Prospectus filed with the
commission prior to the Effective Date as you may reasonably request. The
Company will deliver to you on the Effective Date and thereafter for so long as
a Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriter may from time to time reasonably request.
(v) The Company shall comply with the Act, the Rules and Regulations, and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder in connection with the offering and
issuance of the Securities in all material respects.
(b) Blue Sky. The Company shall, at its own expense, use its best
efforts to qualify or register the Securities for sale (or obtain an
exemption from registration) under the securities or "blue sky" laws of
such jurisdictions as you may designate, and shall make such applications
and furnish such information to Underwriter's Counsel as may be required
for that purpose, and shall comply with such laws; provided, however, that
the Company shall not be required to qualify as a foreign corporation or a
dealer in securities or to execute a general consent to service of process
in any jurisdiction in any action other than one arising out of the
offering or sale of the
Securities. The Company shall bear all of the expense of such qualifications and
registrations, including without limitation the legal fees and disbursements of
Underwriter's Counsel, which fees, exclusive of disbursements, shall not exceed
$35,000 (unless otherwise agreed). After each Closing Date the Company shall, at
its own expense, from time to time prepare and file such statements and reports
as may be required to continue each such qualification (or maintain such
exemption from registration) in effect for so long a period as required by law,
regulation or administrative policy in connection with the offering of the
Securities. In addition, the Company shall engage Underwriter's Counsel to
provide the Underwriter, at the Closing and quarterly thereafter, until such
time as the Common Stock is listed on the New York Stock Exchange or the
American Stock Exchange or quoted on NASDAQ/NMS, with a memorandum, setting
forth those states in which the Common Stock may be traded in non-issuer
transactions under the Blue Sky laws of the 50 states. The Company shall pay
such counsel a one-time fee of $7,500 at the Closing for such opinions.
(c)Prospectus Copies. The Company shall deliver to you on or before
the First Closing Date a copy of the Registration Statement including all
financial statements, schedules and exhibits filed therewith, and of all
amendments thereto. The Company shall deliver to or on the order of the
Underwriter, from time to time until the Effective Date, as many copies of
any Preliminary Prospectus filed with the Commission prior to the Effective
Date as the Underwriter may reasonably request. The Company shall deliver
to the Underwriter on the Effective Date, and thereafter for so long as a
prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriter may from time to time reasonably request.
(d) Amendments and Supplements. The Company shall, promptly upon your
request, prepare and file with the Commission any amendments to the
Registration Statement, and any amendments or supplements to the
Preliminary Prospectus or the Prospectus, and take any other action which
in the reasonable opinion of Underwriter's Counsel and Company Counsel may
be reasonably necessary or advisable in connection with the distribution of
the Securities, and shall use its best efforts to cause the same to become
effective as promptly as possible.
(e) Certain Market Practices. The Company has not taken, and shall not
take, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result in, or which has constituted,
the stabilization or manipulation of the price of the Securities to
facilitate the sale or resale thereof.
(f) Certain Representations. Neither the Company nor any
representative of the Company has made or shall make any written or oral
representation in connection with the Offering and sale of the Securities
or the Underwriter's Warrant that is not contained in the Prospectus, which
is otherwise inconsistent with or in contravention of anything contained in
the Prospectus, or which shall constitute a violation of the Act, the Rules
and Regulations, the Exchange Act or the rules and regulations promulgated
under the Exchange Act.
(g) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Securities substantially for the purposes set forth in the
Prospectus under the caption "USE OF PROCEEDS," and shall file such reports
with the Commission with respect to the sale of the Securities and the
application of the proceeds therefrom as may be required pursuant to Rule
463 of the Rules and Regulations.
(h) Twelve Months' Earnings Statement. The Company shall make
generally available to its security holders and deliver to you as soon as
it is practicable so to do, but in no event later than 90 days after the
end of twelve months after the close of its Current fiscal quarter, an
earnings statement (which need not be audited) covering a period of at
least 12 consecutive months beginning after the Effective Date, which shall
satisfy the requirements of section 11 (a) of the Act.
(i) NASDAQ Exchange Listings, Etc. The Company shall immediately make
all filings required to seek approval for the quotation of the Securities
on the NASDAQ Small Cap Market ("NASDAQ") and shall use its best efforts to
effect and maintain such approval for at least five years from the
Effective Date. Within 10 days after the Effective Date, the Company shall
also use its best efforts to list itself in Xxxxx'x OTC Industrial Manual,
Standard & Poor's or other recognized securities manual acceptable to the
Underwriter and to cause such listing to be maintained for five years from
the Effective Date.
(j) Board of Directors. For a period of five (5) years from the
Effective Date, the Company shall allow an observer designated by the
Underwriter and reasonably acceptable to the Company, to receive notice of
and to attend all meetings of the Board of Directors of the Company and
shall be compensated in the same manner as are non-employee directors of
the Company. The Company shall hold at least four (4) meetings per year and
the observer will be indemnified by the Company against any claims arising
out of his participation at Board Meetings and shall be compensated for all
reasonable travel and lodging expenses incurred.
(k) Periodic Reports. For so long as the Company is a reporting
company under section 12(g) or section 15(d) of the Exchange Act, the
Company shall, at its own expense, furnish to its stockholders an annual
report (including financial statements audited by certified public
accountants) in reasonable detail. In addition, during the period ending
five years from the date hereof, the Company shall, at its own expense,
furnish to you: (i) within 90 days of the end of each fiscal year, a
balance sheet of the Company and its Subsidiaries as at the end of such
fiscal year, together with statements of income, stockholders' equity and
cash flows of the Company and its Subsidiaries as at the end of such fiscal
year, all in reasonable detail and accompanied by a copy of the certificate
or report thereon of certified public accountants; (ii) as soon as they are
available, a copy of all reports (financial or otherwise) distributed to
security holders; (iii) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed
with the Commission; and (iv) such other information as you may from time
to time reasonably request. The
financial statements referred to herein shall be on a consolidated basis to the
extent the accounts of the Company and its Subsidiaries are consolidated in
reports furnished to its stockholders generally.
(l) Certain Options. For a period of two (2) years following the First
Closing Date, the Company shall not, without your prior written consent,
grant any options, warrants or other rights to purchase shares of Common
Stock at a price less than the lesser of the Public Offering price of the
Shares or the market price of the Common Stock.
(m) Form S-8 Registrations. For a period of two (2) years following
the First Closing Date, the Company shall not register or otherwise
facilitate the registration of any of its securities issuable upon the
exercise of options, warrants (other than the Warrants and the
Underwriter's Warrant) or other rights, whether by means of a Registration
Statement on Form S-8 or otherwise, without your prior written consent.
(n) Future Sales. For a period of two (2) years following the First
Closing Date, the Company shall not issue, sell or otherwise dispose of any
securities of the Company without your prior written consent, which consent
shall not be unreasonably withheld; provided, however, that the Company may
at any time issue shares of Common Stock pursuant to the exercise of the
Underwriter's Warrant, and options, warrants or conversion rights issued
and outstanding on the Effective Date and described in the Prospectus.
(o) Regulation S Sales. For a period of two (2) years following the
First Closing Date, the Company shall not issue or sell any securities
pursuant to Regulation S of the Rules and Regulations under the Act,
without your prior written consent.
(p) Agreements with Directors and Officers. The Company shall deliver
written agreements of each of the Company's directors and officers entered
into with the Underwriter (the "Lock-up Agreements") prior to the Effective
Date pursuant to which said director or officer shall (x) agree not to
sell, assign, hypothecate, pledge, transfer or otherwise dispose of any
shares of Common Stock owned by them, or subsequently acquired by them upon
the exercise of any options or warrants or conversion of any convertible
security of the Company, directly or indirectly, for a period of
twenty-four (24) months following the Effective Date, except with the prior
written consent of the Underwriter, which consent shall not be unreasonably
withheld; (y) authorize the Company to place a restrictive legend on all
certificates evidencing securities owned by them advising of the
restriction referred to in clause (x) above, and (z) authorize the Company
to issue appropriate stop transfer instructions to the Transfer Agent for
the Common Stock noting the restriction referred to in clause (x) above.
(q) Available Shares. The Company shall reserve and at all times keep
available that maximum number of its authorized but unissued Securities
which are issuable upon exercise of the Underwriter's Warrant, in each case
taking into account the anti-dilution provisions
thereof.
(r) Financial Consulting Agreement. On the First Closing Date and
simultaneously with the delivery of the Firm Shares, the Company shall
execute and deliver to you an agreement with you, in the form previously
delivered to the Company by you, regarding your services as a financial
consultant to the Company (the "Financial Consulting Agreement").
(s) Management. On each Closing Date, the President of the Company
shall be Xxxx Xxxxxxxx, and the Chief Financial Officer of the Company
shall be Xxxx Xxxxxxxx. On or prior to the Effective Date, the Company
shall have (A) entered into employment agreements with Messrs. Xxxxxxxx and
Averbuch on terms satisfactory to the Underwriter and (B) obtained "key
man" life insurance coverage on the life of Xx. Xxxxxxxx, naming the
Company as beneficiary and having a face value of at least $1,000,000, for
terms, and with an insurance agency, mutually agreed upon by the Company
and you. The Company shall use its best efforts to maintain such insurance
during the three-year period commencing on the First Closing Date.
(t) Stock Transfer Sheets. The Company shall instruct its transfer
agent to deliver to you copies of all advance sheets showing the daily
transfer of the outstanding shares of Common Stock sold by the Company in
the public offering and shall, at its own expense, furnish you with
Depository Trust Company stock transfer sheets on a weekly basis for the
period ending three (3) years from the First Closing Date.
(u) Public Relations. Prior to the Effective Date the Company shall
have retained a public relations firm reasonably acceptable to you, and
shall continue to retain such firm, or an alternate firm reasonably
acceptable to you, for a period of two years.
(v) Bound Volumes. Within 120 days from the First Closing Date, the
Company shall deliver to you, at the Company's expense, two bound volumes
in form and content acceptable to you, containing the Registration
Statement and all exhibits filed therewith and all amendments thereto, and
all other agreements, correspondence, filings, certificates and other
documents filed and/or delivered in connection with the Offering.
(w) Right of First Refusal. (i) The Company shall: grant to the
Underwriter a preferential right on the terms and subject to the conditions
set forth in Sections 3(r) and 3(p), for a period of three (3) years from
the Effective Date, to purchase for its account, or to sell for the account
of the Company or its present affiliates or subsidiaries or any of its
stockholders listed in the Prospectus under the caption "PRINCIPAL
STOCKHOLDERS" (the "Principal Stockholders"), any securities of the Company
or its Subsidiaries or future subsidiaries, on terms not more favorable to
the Company or such present or future subsidiary or affiliate or the
Principal Stockholders than they can secure elsewhere, to purchase or sell
any such securities. If the Underwriter fails to notify the Company in
writing of its intention to act as underwriter or placement agent or
otherwise participate
or introduce a third party to participate in such offering within fifteen (15)
days after receipt of a notice containing such proposal, then the Underwriter
shall have no further claim or right with respect to the proposal contained in
such notice. If thereafter, such proposal is materially modified, the Company,
and each present or future affiliate or subsidiary or its Principal Stockholders
shall in all respects have the same obligations and adopt the same procedures
with respect to such proposal as are provided hereinabove with respect to the
original proposal; (ii) if the Underwriter acts as underwriter or placement
agent with respect to such offering or introduces a third party (other than an
underwriter) which participates in such offering, then the Underwriter shall
receive, as compensation for services rendered, ten (10%) percent of the
aggregate consideration received by the Company through the Underwriter or the
party introduced by the Underwriter and warrants to purchase an amount of
securities equal to ten (10%) percent of the securities sold by the Company in
such offering through the Underwriter or the party introduced by the Underwriter
at an exercise price per security equal to the offering price of such
securities. If the Underwriter introduces another underwriter who acts as
underwriter with respect to such offering, then the Underwriter shall be
entitled to receive two and one-half (2 1/2%) percent of the aggregate
consideration received by the Company through such underwriter and warrants to
purchase an amount of securities equal to two and one-half (2 1/2%) percent of
the securities sold by the Company in such offering through such underwriter;
(iii) if the Underwriter is offered the right of first refusal and agrees to
perform such functions, but fails to perform, the Underwriter will not be
entitled to any such compensation, and waives its right of first refusal with
respect to future offerings unless such failure to perform is caused by the
Company; and (iv) if the Underwriter does not perform any of the functions set
forth in (ii) above and (iii) does not apply to such transaction, the
Underwriter shall be entitled to receive an aggregate of two and one-half (2
1/2%) percent of the aggregate consideration received by the Company and
warrants to purchase an amount of securities equal to two and one-half (2 1/2%)
percent of the securities sold by the Company in such offering at an exercise
price per security equal to the offering price of such securities.
4. CONDITIONS TO UNDERWRITER'S OBLIGATIONS. The obligations of
the Underwriter to purchase and pay for the Securities which they have agreed to
purchase hereunder are subject to the accuracy (as of the date hereof and as of
each Closing Date) of and compliance with the representations and warranties of
the Company and the Selling Stockholders contained herein, the performance by
the Company and the Selling Stockholders of all of their respective obligations
hereunder and the following further conditions:
(a) Effective Registration Statement; No Stop Order. The Registration
Statement shall have become effective and you shall have received notice
thereof not later than 6:00 p.m., New York time, on the date of this
Agreement, or at such later time or on such later date as to which you may
agree in writing. In addition, on each Closing Date (i) no stop order
denying or suspending the effectiveness of the Registration Statement shall
be in effect, and no proceedings for that or any similar purpose shall have
been instituted or shall be pending or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission, and (ii)
all requests on the part of the Commission for additional information shall
have been complied with to the reasonable
satisfaction of Underwriter's Counsel.
(b) Opinion of Company Counsel. On the First Closing Date, you shall
have received the opinion, dated as of the First Closing Date, of Company
Counsel, in form and substance satisfactory to the Underwriter's Counsel,
to the effect that:
(i) the Company and its 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 requires
such qualification, except where failure to so qualify will not have a
material adverse effect on the business, properties or financial
condition of the Company or its Subsidiaries;
(ii) (A) the authorized capitalization of the Company as of the
date of the Prospectus was as is set forth in the Prospectus under the
caption "CAPITALIZATION;" (B) all of the shares of capital stock now
outstanding have been duly authorized and validly issued, are fully
paid and non-assessable, conform in all material respects to the
description thereof contained in the Prospectus, have not been issued
in violation of the preemptive rights of any stockholder and, except
as described in the Prospectus, are not subject to any restrictions
upon the voting or transfer thereof; (C) all have been duly authorized
and, when issued and delivered to the Underwriter against payment
therefor as provided herein, shall be validly issued, fully paid and
non-assessable, shall not have been issued in violation of the
preemptive rights of any stockholder, and no personal liability shall
attach to the ownership thereof; (D) the stockholders of the Company
do not have any preemptive rights or other rights to subscribe for or
purchase, and except for the transfer restrictions imposed by Rule 144
of the Rules and Regulations promulgated under the Act or contained in
the Lock-up Agreements executed with the Underwriter, there are no
restrictions upon the voting or transfer of, any of the Securities;
(E) the Shares and the Underwriter's Warrant conform in all material
respects to the respective descriptions thereof contained in the
Prospectus; (F) all issuances of the Company's securities have been
made in compliance with, or under an exemption from, the Act and
applicable state securities laws; (G) a sufficient number of shares of
Common Stock has been reserved, for all times when the Underwriter's
Warrant is outstanding, for issuance upon exercise of the
Underwriter's Warrant; and (H) to the knowledge of such counsel,
neither the filing of the Registration Statement nor the offering or
sale of the Securities as contemplated by this Agreement gives rise to
any registration rights or other rights, other than those which have
been effectively waived or satisfied or described in the Prospectus,
for or relating to the registration of any securities of the Company;
(iii) the certificates evidencing the Shares are each in valid
and proper legal form;
(iv) this Agreement, the Underwriter's Warrant and the Financial
Consulting Agreement have been duly and validly authorized, executed
and delivered by the Company and (assuming due execution and delivery
thereof by the Underwriter all of such agreements are, or when duly
executed shall be, the valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms (except
as enforceability may be limited by bankruptcy, insolvency or other
laws affecting the rights of creditors generally); provided, however,
that no opinion need to be expressed as to the enforceability of the
indemnity provisions contained in Section 6 or the contribution
provisions contained in Section 7;
(v) to the knowledge of such counsel, other than as described in
the Prospectus (A) there is no pending, threatened or contemplated
legal or governmental proceeding affecting the Company which could
materially and adversely affect the business, property, operations,
condition (financial or otherwise) or earnings of the Company, or
which questions the validity of the Offering, the Securities, this
Agreement, the Underwriter's Warrant or the Financial Consulting
Agreement or of any action taken or to be taken by the Company
pursuant thereto; and (B) there is no legal or governmental regulatory
proceeding required to be described or referred to in the Registration
Statement which is not so described or referred to;
(vi) to the knowledge of such counsel, (A) the Company is not in
violation of or in default under this Agreement, the Underwriter's
Warrant or the Financial Consulting Agreement; and (B) to the
knowledge of such counsel, the execution and delivery hereof and
thereof and consummation of the transactions herein or therein
contemplated shall not result in a material violation of, or
constitute a default under, the Certificate of Incorporation or
By-laws of the Company, both as amended to date, or any material
obligation, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness, or in any material
contract, indenture, mortgage, loan agreement, lease, joint venture or
other agreement or instrument to which the Company is a party or by
which the assets of the Company is bound, or any material order, rule,
regulation, writ, injunction or decree of any government, governmental
instrumentality or court applicable to the Company;
(vii) to the knowledge of such counsel, (a) the Company and each
Subsidiary has obtained, or is in the process of obtaining, all
licenses, permits and other governmental authorizations necessary to
the conduct of their business as described in the Prospectus, (b) such
obtained licenses, permits and other governmental authorizations are
in full force and effect, and (c) the Company and each Subsidiary is
in all material respects complying therewith;
(viii) the Registration Statement has become effective under the
Act, and to the knowledge of such counsel, no stop order denying or
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that or any similar purpose have been
instituted or are pending before or threatened by the Commission;
(ix) the Registration Statement and the Prospectus (except for
the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which
counsel need not express an opinion) comply as to form in all material
respects with the Act and the Rules and Regulations;
(x) all descriptions contained in the Registration Statement and
the Prospectus, and any amendments or supplements thereto, of
contracts and other documents are accurate and fairly present the
information required to be described, and such counsel is familiar
with all contracts and other documents referred to in the Registration
Statement and the Prospectus, and any such amendment or supplement, or
filed as exhibits to the Registration Statement and, to the knowledge
of such counsel, no contract, document, license or permit of a
character required to be summarized or described therein or to be
filed as an exhibit thereto is not so summarized, described or filed.
(xi) the statements in the Registration Statement and the
Prospectus under the captions "Risk Factors," "Use of Proceeds,"
"Business," "Management," and "Description of Securities," which
purport to summarize the provisions of agreements, licenses, statutes
or rules and regulations, have been reviewed by such counsel and are
accurate summaries in all material respects;
(xii) except for registration under the Act and registration or
qualification of the Securities under applicable state or foreign
securities or blue sky laws, no authorization, approval, consent or
license of any governmental or regulatory authority or agency is
necessary in connection with: (A) the authorization, issuance, sale,
transfer or delivery of the Securities by the Company and the Selling
Stockholders in accordance with this Agreement; (B) the execution,
delivery and performance of this Agreement by the Company and the
Selling Stockholders or the taking of any action contemplated herein;
(C) the issuance of the Underwriter's Warrant in accordance with this
Agreement or the Securities issuable upon exercise thereof; or the
taking of any action contemplated herein.
Such opinion shall also state that Company Counsel's examination of the
Registration Statement and its discussions with the Company and its independent
auditors did not disclose any information which gives Company Counsel reason to
believe that the Registration Statement (other than the financial statements and
other financial and statistical information as to which counsel need not express
an opinion) at the time it became effective contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or that the
Prospectus (other than the schedules, financial statements and other financial
and statistical information as to which no view is expressed) at the time it
became effective contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus (other than the
financial statements and other financial and statistical information as to which
counsel need not express an opinion) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. In addition, such opinion shall also cover such matters incident to
the transactions contemplated hereby as you or Underwriter's Counsel shall
reasonably request. In
rendering such opinion, Company Counsel may rely as to matters of fact upon
certificates of officers of the Company, and of public officials, and may rely
as to all matters of law other than the law of the United States and the General
Corporation law of the State of Delaware 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 so to rely.
(e) Corporate Proceedings. All corporate proceedings and
other legal matters relating to this Agreement, the Registration Statement, the
Prospectus and other related matters shall be reasonably satisfactory to or
approved by Underwriter's Counsel.
(f) Comfort Letters. Prior to the Effective Date, and again
on and as of the First Closing Date, you shall have received letters from
Civvals, Chartered Accountants, certified public accountants for the Company in
form and substance satisfactory to Underwriter's Counsel.
(g) Bring Down. At each of the Closing Dates, (i) the
representations and warranties of the Company contained in this Agreement shall
be true and correct with the same effect as if made on and as of such Closing
Date, and the Company shall have performed all of its obligations hereunder and
satisfied all the conditions to be satisfied at or prior to such Closing Date;
(ii) the Registration Statement and the Prospectus 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
of the Act and the Rules and Regulations, and neither the Registration Statement
nor the Prospectus shall contain any untrue statement of a material fact or omit
to state any material fact required to be stated or which they were made, not
misleading; (iii) there shall have been, since the respective dates as of which
information is given, no material adverse change in the business, property,
operations, condition (financial or otherwise), earnings, capital stock,
long-term or short-term debt or general affairs of the Company from that set
forth in the Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the Effective
Date, and the Company shall not have incurred any material liabilities or
entered into any material agreement other than as referred to in the
Registration Statement and Prospectus other than in the ordinary course of
business; and (iv) except as set forth in the Prospectus, no action, suit or
proceeding shall be pending or threatened against the Company before or by any
commission, board or administrative agency in the United States or elsewhere,
wherein an unfavorable decision, ruling or finding would materially adversely
affect the business, property, operations, condition (financial or otherwise),
earnings or general affairs of the Company. In addition, you shall have
received, at the First Closing Date, certificates signed by the respective
principal executive officers and principal financial officers of the Company,
dated as of the First Closing Date, evidencing compliance with the provisions of
this Section 4(g).
(h) Transfer and Warrant Agent. On or before the Effective Date, the
Company shall have appointed Continental Stock Transfer & Trust Company (or
other agent mutually
acceptable to the Company and you), as its transfer agent and warrant agent to
transfer all of the Shares issued and sold by the Company and sold by the
Selling Stockholders in the Offering, as well as to transfer other shares of the
Common Stock outstanding from time to time.
(i) Certain Further Matters. On each Closing Date, Underwriter's Counsel
shall have been furnished with all such other documents and certificates as they
may reasonably request for the purpose of enabling them to render their legal
opinion to the Underwriter and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements, the
performance of any of the covenants, or the fulfillment of any of the
conditions, herein contained.
(j) Additional Conditions. Upon exercise of the Over-Allotment Option,
the Underwriter's obligations to purchase and pay for the Option Shares shall be
subject (as of the date hereof and as of the Option Closing Date) to the
following conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, no stop order denying or suspending the
effectiveness thereof shall have been issued, and no proceedings for
that or any similar 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 all reasonable requests on the
part of the Commission for additional information shall have been
complied with to the satisfaction of Underwriter's Counsel.
(ii) On the Option Closing Date there shall have been delivered
to you the signed opinion of Company Counsel, dated as of the Option
Closing Date, in form and substance satisfactory to Underwriter's
Counsel, which opinion shall be substantially the same in scope and
substance as the opinion furnished to you on the First Closing Date
pursuant to Section 4(b), except that such opinion, where appropriate,
shall cover the Option Shares rather than the Firm Shares. If the
First Closing Date is the same as the Option Closing Date, such
opinions may be combined.
(iii) All proceedings taken at or prior to the Option Closing
Date in connection with the same and issuance of the Option Shares
shall be satisfactory in form and substance to you and you and
Underwriter's Counsel 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.
(iv) On the Option Closing Date there shall have been delivered
to you letters in form and substance satisfactory to you from Civvals,
Chartered Accountants, dated the Option Closing Date and addressed to
you, confirming the information in their letters referred to in
Section 4(f) as of the date thereof and stating that, without any
additional investigation required, nothing has come to their attention
during the period from the ending date of their review referred to in
such letters to a date not more than five (5) banking days prior to
the Option Closing Date which
would require any change in such letters if they were required to
be dated the Option Closing Date.
If any of the conditions herein provided for in this Section shall not have been
completely fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be canceled at, or at
any time prior to, each Closing Date by your notifying the Company of such
cancellation in writing or by telecopy at or prior to the applicable Closing
Date. Any such cancellation shall be without liability of the Underwriter,
except as otherwise provided herein.
(k) At the First Closing Date the Underwriter shall have received a
certificate of the Attorney-in-Fact for each of the Selling Stockholders, dated
as of the First Closing Date, to the effect that (i) the representations and
warranties of each Selling Stockholder contained in Section 1 (b) are true and
correct with the same force and effect as though expressly made at and as of the
First Closing Date and (ii) each Selling Stockholder has compiled with all
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the First Closing Date. The Attorney-in-Fact shall be
entitled to rely upon certificates of the Selling Stockholders in giving its
certificate.
5. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company and the Selling Stockholders to sell and deliver the Securities
are subject to the following conditions:
(a) Effective Registration Statement. The Registration Statement shall have
become effective not later than 6:00 p.m. Eastern time, on the date of this
Agreement, or at such later time or on such later date as the Company and you
may agree in writing.
(b) No Stop Order. On the applicable Closing Date, no stop order denying or
suspending the effectiveness of the Registration Statement shall have been
issued under the Act or any proceedings therefor initiated or threatened by the
Commission.
(c) Payment for Securities. On the applicable Closing Date, you shall have
made payment, for the account of the Underwriter, of the aggregate Purchase
Price for the Securities then being purchased by certified or bank cashier's
checks payable in next day funds to the order of the Company.
If the conditions to the obligations of the Company and the Selling
Stockholders provided by this Section 5 have been fulfilled on the First Closing
Date but are not fulfilled after the First Closing Date and prior to the Option
Closing Date, then only the obligation of the Company to sell and deliver the
Option Shares upon exercise of the Over-Allotment Option shall be affected.
6. INDEMNIFICATION.
(a) Indemnification by the Company. As used in this Agreement, the term
"Liabilities" shall mean any and all losses, claims, damages and liabilities,
and actions and proceedings in respect thereof (including without limitation all
reasonable costs of defense and investigation and all attorneys' fees) including
without limitation those asserted by any party to this Agreement against any
other party to this Agreement. The Company and the Selling Stockholders hereby
indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning of the Act, from and against all
Liabilities, joint or several, to which the Underwriter or such controlling
person may become subject, under the Act or otherwise, insofar as such
Liabilities arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of any material fact, in light of the circumstances in which it
was made, contained in (A) the Registration Statement or any amendment thereto,
or the Prospectus or any Preliminary Prospectus, or any amendment or supplement
thereto, or (B) any "blue sky" application or other document executed by the
Company specifically for that purpose, or based upon written information
furnished by the Company, filed in any state or other jurisdiction in order to
qualify any or all of the Securities under the securities laws thereof (any such
application, document or information being herein called a "Blue Sky
Application"); or (ii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, or the Prospectus or any
Preliminary 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, in light of the circumstances in which it was made,
not misleading; provided, however, that the Company and the Selling Stockholders
shall not be liable in any such case to the extent, but only to the extent, that
any such Liabilities arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission (x) made in reliance
upon and in conformity with written information furnished to the Company through
you by or on behalf of the Underwriter specifically for use in the preparation
of the Registration Statement or any such amendment thereto, or the Prospectus
or any such Preliminary Prospectus, or any such amendment or supplement thereto,
or any such Blue Sky Application or (y) corrected by the final Prospectus and
the failure of the Underwriter to deliver the final Prospectus. The foregoing
indemnity shall be in addition to any other liability, which the Company may
otherwise have.
(b) Indemnification by Underwriter. The Underwriter hereby indemnifies and
holds harmless the Company, each of its directors, each nominee (if any) for
director named in the Prospectus, each of its officers who have signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of the Act, and the Selling Stockholders from and against all
Liabilities to which the Company or any such director, nominee, officer or
controlling person and/or the Selling Stockholders may become subject under the
Act or otherwise, insofar as such Liabilities arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any amendment thereto, or the Prospectus or any
Preliminary Prospectus, or any amendment or supplement thereto, or (ii) 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 any such Liabilities arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement or any amendment
thereto, or the Prospectus or any Preliminary Prospectus, or any amendment or
supplement thereto, in reliance upon and in
conformity with written information furnished to the Company through you, by or
on behalf of the Underwriter, specifically for use in the preparation thereof.
In no event shall the Underwriter be liable under this Section 6(b) for any
amount in excess of the compensation received by such Underwriter, in the form
of underwriting discounts or otherwise, pursuant to this Agreement or any other
agreement contemplated hereby. The foregoing indemnity shall be in addition to
any other liability, which any Underwriter may otherwise have.
(c) Procedure. Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify in writing the indemnifying party of the
commencement thereof, but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 6 unless the rights of the indemnifying party
have been prejudiced by such omission or delay. In case any, such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall 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 hereof, 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 shall not
be liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided, however, that the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party, or (ii) the named parties to any such action (including any impleaded
parties) include both such indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it which are different from or in addition to those
available to the indemnifying party or that the indemnified and indemnifying
party have conflicting interests which would make it inappropriate for the same
counsel to represent both of them (in which case the indemnifying party shall
have the right to assume the defense of such action on behalf of the 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). 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.
7. CONTRIBUTION. In order to provide for just and equitable contribution
under the Act in any case in which (a) any indemnified party makes claims for
indemnification pursuant to
Section 6 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that the express provisions of
Section 6 provide for indemnification in such case, or (b) contribution under
the Act may be required on the part of any indemnified party, then such
indemnified party and each indemnifying party (if more than one) shall
contribute to the aggregate Liabilities to which it may be subject, in either
such case (after contribution from others) in such proportions that the
Underwriter is responsible for the portion of such Liabilities represented by
the percentage that the underwriting discount per Share appearing on the cover
page of the Prospectus bears to the public offering price per Share, appearing
thereon, and the Company and/or the Selling Stockholders shall be responsible
for the remaining portion; provided, however, that if such allocation is not
permitted by applicable law, then the relative fault of the Company, the Selling
Stockholders and the Underwriter in connection with the statements or omissions
which resulted in such Liabilities 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 material
fact or the omission to state a material fact, such statement or omission
relates to information supplied by the Company, the Selling Stockholders, or the
Underwriter, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company, the Selling Stockholders and the Underwriter agree that it would not be
just and equitable if the respective obligations of the Company, the Selling
Stockholders, and the Underwriter to contribute pursuant to this Section 7 were
to be determined by pro rata or per capita allocation of the aggregate
Liabilities or by any other method of allocation that does not take account of
the equitable considerations referred to in the first sentence of this Section
7. However, the contribution of the Underwriter shall not be in excess of the
cash compensation received by the Underwriter, in the form of underwriting
discounts or otherwise, pursuant to this Agreement or any other agreement
contemplated hereby. No person guilty of a fraudulent misrepresentation (within
the meaning of section 11 (f) of the Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. As used in
this Section 7, the term "Company" shall include 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 Section 7 is not permitted by
law, then each indemnified party and each person who controls an indemnified
party shall be entitled to contribution from each indemnifying party to the
fullest 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) Certain Costs and Expenses. Whether or not this Agreement becomes
effective or the sale of the Securities to the Underwriter is consummated, the
Company shall pay all
costs and expenses incident to the issuance, offering, sale and delivery of the
Securities and the performance of its obligations under this Agreement,
including without limitation: (i) all fees and expenses of the Company's legal
counsel and accountants; (ii) all costs and expenses incident to the
preparation, printing, filing, distribution and mailing of the Registration
Statement (including the financial statements contained therein and all exhibits
and amendments thereto), each Preliminary Prospectus and the Prospectus, each as
amended or supplemented, this Agreement and the other underwriting documents, as
well as the other agreements and documents referred to herein and the Blue Sky
Memorandum; each in such quantities as you shall deem necessary; (iii) all fees
of NASD required in connection with the filing required by NASD to be made by
the Underwriter with respect to the Offering; (iv) all expenses, including fees
(but not in excess of the amount set forth in Section 3(b) and disbursements of
Underwriter's Counsel in connection with the qualification of the Securities
under the "blue sky" laws which you shall designate; (v) all costs and expenses
of printing the respective certificates representing the Shares; (vi) the
expense of placing one or more "tombstone" advertisements or promotional
materials as directed by you and of Offering memorabilia; (vii) all costs and
expenses associated with due diligence meetings and presentations (including the
payment for road show conference centers); (viii) any and all taxes (including
without limitation any transfer, franchise, capital stock or another tax imposed
by any jurisdiction) on sales of the Securities to the Underwriter hereunder;
and (ix) all costs and expenses incident to the furnishing of any amended
Prospectus or any supplement to be attached to the Prospectus as required by
Sections 3(a) and 3(d), except as otherwise provided by said Sections.
(b) Underwriter's Expense Allowance. In addition to the expenses described
in Section 8(a), the Company shall on the First Closing Date pay to you, based
on the number of Firm Shares to be sold by the Company, the balance of a
non-accountable expense allowance (which shall include fees of Underwriter's
Counsel exclusive of the fees referred to in Section 3(b) of $________ (that
being an amount equal to three percent (3%) of the gross proceeds received upon
sale of the Firm Securities), of which $_ has been paid to you prior to the date
hereof. In the event that the Over-Allotment Option is exercised, then the
Company shall on the Option Closing Date pay to you, based on the number of
Option Shares sold by the Company, an additional amount equal to three percent
(3%) of the gross proceeds received upon sale of any of the Option Shares sold
to you by the Company. In the event that the transactions contemplated hereby
fail to be consummated for any reason, then you shall return to the Company that
portion of $ ___________ heretofore paid by the Company to the extent that it
has not been utilized by you in connection with the Offering for accountable
out-of-pocket expenses; provided, however, that if such failure is due to 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, then the Company shall
be liable for your accountable out-of-pocket expenses to the full extent thereof
(with credit given to the $ ________ paid).
(c) No Finders. No person is entitled either directly or indirectly to
compensation from the Company, the Underwriter or any other person for services
as a finder in connection with the Offering, and the Company hereby indemnifies
and holds harmless the
Underwriter, and the Underwriter hereby indemnifies and holds harmless the
Company from and against all Liabilities, joint or several, to which the
indemnified party may become subject insofar as such Liabilities 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 Offering by reason of such person's or entity's influence or
prior contact with the indemnifying party.
9. [RESERVED].
10. EFFECTIVE DATE. The Agreement shall become effective upon
its execution, except that you may, at your option, delay its effectiveness
until 10:00 a.m., Eastern time, on the first full business day following the
Effective Date, or at such earlier time after the Effective Date as you in your
discretion shall first commence the Public Offering by the Underwriter of any of
the Securities. The time of the Public Offering shall mean the time of release
by you of the first newspaper advertisement with respect to the Securities, or
the time when the Securities are first generally offered by you to dealers by
letter or telegram, whichever shall first occur. This Agreement may be
terminated by you at any time before it becomes effective as provided above,
except that the provisions of Sections 3(w), 6, 7, 8, 13, 14, 15 and 16 shall
remain in effect notwithstanding such termination.
11. TERMINATION.
(a) Grounds for Termination. This Agreement, except for Sections
3(w), 6, 7, 8, 1 3, 14, 15 and 16, may be terminated at any time prior to the
First Closing Date, and the Over-Allotment Option, if exercised, may be canceled
at any time prior to the Option Closing Date, by you if in your sole judgment it
is impracticable to offer for sale or to enforce contracts made by the
Underwriter for the resale of the Securities agreed to be purchased hereunder,
by reason of: (i) the Company having sustained a material 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 Nasdaq Stock Market having been suspended or
limited; (iii) material governmental restrictions having been imposed on trading
in securities generally which are not in force and effect on the date hereof;
(iv) a banking moratorium having been declared by federal or New York State
authorities; (v) an outbreak or significant escalation of major international
hostilities or other national or international calamity having occurred; (vi)
the passage by the Congress of the United States or by any state legislative
body of similar impact, of any act or measure, or the adoption of any orders,
rules or regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is reasonably believed
likely by you to have a material adverse impact on the business, financial
condition or financial statements of the Company; (vii) any material adverse
change in the financial or securities markets beyond normal fluctuations in the
United States having occurred since the date of this Agreement; or (viii) any
material adverse change having occurred, since the respective dates for which
information is given in the Registration Statement and Prospectus, in the
earnings, business, prospects or condition (financial or otherwise)
of the Company, whether or not arising in the ordinary course of business.
(b) Notification. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided by this Section 11 or by
Section 10, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
12. UNDERWRITER'S WARRANT. On the First Closing Date, the Company shall
issue and sell to you, for a total purchase price of $10.00, and upon the terms
and conditions set forth in the form of Underwriter's Warrant filed as an
exhibit to the Registration Statement, a warrant entitling you to purchase up to
125,000 Shares (the "Underwriter's Warrant"). In the event of conflict in the
terms of this Agreement and the Underwriter's Warrant, the terms and conditions
of the Underwriter's Warrant shall control.
13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties, covenants and
other statements of the Company, the Selling Stockholders and the Underwriter
set forth in Sections 3, 6, 7 and 8 of this Agreement shall remain in full force
and effect regardless of any investigation made by or on behalf of any other
party, and shall survive delivery of and payment for the Securities and the
termination of this Agreement. The Company and the Selling Stockholders hereby
indemnify and hold harmless the Underwriter from and against all Liabilities,
joint or several, to which the Underwriter may become subject insofar as such
Liabilities arise out of or are based upon the breach or failure of any of the
provisions of Sections 3, 6, 7 and 8.
14. NOTICES. All communications hereunder shall be in writing and, except
as otherwise expressly provided herein, if sent to you, shall be mailed,
delivered or telegraphed and confirmed to you at the address first set forth
above, to the attention of the President, with a copy sent to Xxx X. Xxxxxxxxx,
Esq., Gersten, Savage, Xxxxxxxxx & Xxxxxxxxxx, LLP, 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000; or if sent to the Company, shall be mailed, delivered, or
telegraphed and confirmed to it at Pride Automotive Group, Inc., Pride House,
Watford Metro Centre, Tolpits Lane, Watford Hertfordshire, WDI 8SB England,
Attention: President, with a copy sent to Xxxxxxx & Xxxxxxx, 1 0 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxx Xxxxxxx, Esq.
15. PARTIES IN INTEREST. This Agreement is made solely for the benefit of
the Underwriter, the Selling Stockholders, the Company, and, to the extent
expressed, any person controlling the Company or the Underwriter, as the case
may be, and the directors of the Company, nominees for directors of the Company
(if any) named in the Prospectus, officers of the Company who have signed the
Registration Statement, and their respective executors, administrators,
successors and 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, from the Underwriter of the Securities.
16. APPLICABLE LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to agreements
made and to be performed entirely within such State.
17. COUNTERPARTS. This Agreement may be executed in two or more counterpart
copies, each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
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 parties in accordance with its terms.
Very truly yours,
PRIDE AUTOMOTIVE GROUP, INC.
By:____________________________________
Name:
Title:
THE SELLING STOCKHOLDERS
By:____________________________________
As Attorney-in-Fact, acting on behalf of each of
the Selling Stockholders named in Schedule A
hereto
Accepted as of the date first above written:
XXXXX XXXX & CO., INC.
By: ____________________________
Name:
Title:
