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EXHIBIT 1.1
MEDICAL SCIENCE SYSTEMS, INC.
2,000,000 SHARES
OF COMMON STOCK
UNDERWRITING AGREEMENT
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Nutmeg Securities ,Ltd.
000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Dear Sirs:
Medical Science Systems, Inc., a Texas corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters"), two million shares of common stock of the Company
(the "Securities"). The Company hereby confirms the agreement made by it with
respect to the purchase of the Securities by the Underwriter, which Securities
are more fully described in the Registration Statement referred to below. Nutmeg
Securities, Ltd. is referred to herein as the "Underwriter" or the
"Representative."
You have advised the Company that the Underwriters desire to act on a firm
commitment basis to publicly offer and sell the Securities for the Company and
that you are authorized to execute this Agreement. The Company confirms the
agreement made by it with respect to the relationship with the Underwriters as
follows:
1. Filing of Registration Statement with S.E.C. and Definitions. A
Registration Statement and Prospectus on Form SB-2 (File No. 333-37441) with
respect to the Securities has been carefully and accurately prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the published rules and regulations (the "Rules and
Regulations") thereunder or under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and has been filed with the Securities and Exchange
Commission (the "Commission") and such other states that the Underwriter deems
necessary in its discretion to so file to permit a public offering and trading
thereunder. Such registration statement, including the prospectus, Part II, and
all financial schedules and exhibits thereto, as amended at the time when it
shall become effective, is herein referred to as the "Registration Statement,"
and the prospectus included as part of the Registration Statement on file with
the Commission that discloses all the information that was omitted from the
prospectus on the effective date pursuant to Rule 430A of the Rules and
Regulations with any changes contained in any prospectus filed with the
Commission by the Company with the Underwriters consent after the effective date
of the Registration Statement, is herein referred to as the "Final Prospectus."
The prospectus included as part of the Registration Statement of the Company and
in any amendments thereto prior to the effective date of the Registration
Statement is referred to herein as a "Preliminary Prospectus."
2. Discount, Delivery, and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement, and on the basis
of the representations, warranties, and agreements herein contained, the Company
agrees to sell to, and the Underwriters agree to buy from the Company at a
purchase price of $ per share before any underwriter expense allowances, an
aggregate of 2,000,000 shares of Common Stock, on a firm commitment basis (the
"Initial Securities").
It is understood that the Underwriters propose to offer the Securities to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
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(b) Delivery of the Securities against payment of the purchase price
therefor by certified or official bank check or checks or wire transfer in
next-day funds, payable to the order of the Company shall take place at the
offices of the clearing broker for the Underwriter at New York City, within
three (3) business days after the Securities are first traded (or such other
place as may be designated by agreement between you and the Company) at 11:00
A.M., New York time or such time and date as you and the Company may agree upon
in writing, such time and date of payment and delivery for the Securities being
herein called (the "Initial Closing Date").
The Company will make the certificates for the shares of Common Stock and
Underwriters' Warrants (as defined herein) to be purchased by the Underwriters
hereunder available to the Underwriter for inspection and packaging at least one
(1) full business day prior to the Initial Closing Date. The certificates shall
be in such names and denominations as the Underwriter may request to the Company
in writing at least two (2) full business days prior to any closing date.
(c) 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 grants an option to the Underwriters to purchase up to an additional
300,000 shares of Common Stock ("Option Securities") at the same terms as the
Underwriters shall pay for the Initial Securities being sold by the Company
pursuant to the provisions of Section 2(a) hereof. This option may be exercised
from time to time, for the purpose of covering overallotments, within thirty
(30) days after (i) the effective date of the Registration Statement if the
Company has elected not to rely on Rule 430A under the Rules and Regulations or
(ii) the date of this Agreement if the Company has elected to rely upon Rule
430A under the Rules and Regulations, upon written notice by the Underwriter
setting forth the number of Option Securities as to which the Underwriter is
exercising the option and the time and date at which such certificates are to be
delivered. Such time and date shall be determined by the Underwriter but shall
not be earlier than four (4) nor later than ten (10) full business days after
the date of the exercise of said option. Nothing herein shall obligate the
Underwriter to make any overallotment.
(d) Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered at the closing by the
Company to the Underwriters against payment of the purchase price by the
Underwriters by certified or bank cashier's checks or wire transfer in next day
funds payable to the order of the Company.
(e) The information set forth under "Underwriting" in any preliminary
prospectus and Prospectus relating to the Securities and the information set
forth in the last paragraph on the front cover page, under the last paragraph on
page 2 concerning stabilization and over-allotment by the Underwriters, and
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriter to the Company for inclusion therein,
and you represent and warrant to the Company that the statements made therein
are correct.
(f) On the Initial Closing Date, the Company shall issue and sell to the
Underwriters, warrants (the "Underwriters' Warrants") at a purchase price of
$.001 per Underwriters' Warrant, which shall entitle the holders thereof to
purchase an aggregate of 200,000 shares of Common Stock. The shares of common
stock issuable upon the exercise of the Underwriters' Warrants are hereinafter
referred to as the "Warrant Shares" (collectively with the Underwriters'
Warrants, the "Underwriters' Securities"). The Underwriters' Warrants shall be
exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at a price equaling one hundred
sixty five percent (165%) of the initial public offering price of the
Securities. The form of Underwriters' Warrant shall be substantially in the
form filed as an Exhibit to the Registration Statement. Payment for the
Underwriters' Warrants shall be made on the Initial Closing Date.
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3. Representations and Warranties of the Company.
(a) The Company represents and warrants to you as follows:
(i) The Company has prepared and filed with the Commission a
registration statement, and an amendment or amendments thereto, on Form SB-2
(No. 333-37441), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities, the Underwriters' Warrant
and the Warrant Shares (sometimes referred to herein collectively as the
"Registered Securities"), under the Act, which registration statement and
amendment or amendments have been prepared by the Company in conformity with the
requirements of the Act, and the Rules and Regulations. The Company will
promptly file a further amendment to said registration statement in the form
heretofore delivered to the Underwriter and will not file any other amendment
thereto to which the Underwriter shall have objected verbally or in writing
after having been furnished with a copy thereof. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, any schedules, exhibits and all other
documents filed as a part thereof or that may be incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Rules and Regulations), is
hereinafter called the "Registration Statement," and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations, is hereinafter called the "Prospectus."
(ii) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Prospectus or the
Registration Statement and no proceeding for an order suspending the
effectiveness of the Registration Statement or any of the Company's securities
has been instituted or is pending or threatened. Each such Prospectus and/or any
supplement thereto has conformed in all material respects with the requirements
of the Act and the Rules and Regulations and on its date did not include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading, in light of the circumstances
under which they were made and (i) the Prospectus and/or any supplement thereto
will contain all statements which are required to be stated therein by the Act
and Rules and Regulations, and (ii) the Prospectus and/or any supplement thereto
will not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances under which they were
made; provided, however, that no representations, warranties or agreements are
made hereunder as to information contained in or omitted from the Prospectus in
reliance upon, and in conformity with, the written information furnished to the
Company by you as set forth in Section 2(e) above.
(iii) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of its incorporation,
with full power and authority (corporate and other) to own its properties and
conduct its businesses as described in the Prospectus and is duly qualified to
do business as a foreign corporation in good standing in all other jurisdictions
in which the nature of its business or the character or location of its
properties requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the business, properties or
operations of the Company and the subsidiaries as a whole.
(iv) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, the Option Securities and the
Underwriters' Securities and to enter into both this Agreement and the
Underwriters' Warrant, and to consummate the transactions provided for in such
agreements, and each of such agreements has been duly and properly authorized,
and on the Initial Closing Date will be duly and properly executed and delivered
by the Company. This Agreement constitutes, and on the Initial Closing Date the
Underwriters' Warrant will then constitute, valid and binding agreements,
enforceable in accordance with their respective terms (except as the
enforceability thereof may be limited by bankruptcy or other similar laws
affecting the rights of creditors generally or by general equitable principles
and except as the enforcement of indemnification provisions may be limited by
federal or state securities laws).
(v) Except as disclosed in the Prospectus, the Company is not in
violation of its respective certificate or articles of incorporation or bylaws
or in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material bond, debenture, note
or other evidence of indebtedness or in any material contract, indenture,
mortgage, loan agreement, lease, joint venture, partnership or other agreement
or
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instrument to which the Company is a party or by which it may be bound or is not
in material violation of any law, order, rule, regulation, writ, injunction or
decree of any governmental instrumentality or court, domestic or foreign; and
the execution and delivery of this Agreement, the Underwriters' Warrant
Agreement; and the consummation of the transactions contemplated therein and in
the Prospectus and compliance with the terms of each such agreement will not
conflict with, or result in a material breach of any of the terms, conditions or
provisions of, or constitute a material default under, or result in the
imposition of any material lien, charge or encumbrance upon any of the property
or assets of the Company pursuant to, any material bond, debenture, note or
other evidence of indebtedness or any material contract, indenture, mortgage,
loan agreement, lease, joint venture, partnership or other agreement or
instrument to which the Company is a party nor will such action result in the
material violation by the Company of any of the provisions of its respective
certificate or articles of incorporation or bylaws or any law, order, rule,
regulation, writ, injunction, decree of any government, governmental
instrumentality or court, domestic or foreign, except where such violation will
not have a material adverse effect on the financial condition of the Company.
(vi) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus and the Company will have the adjusted
capitalization set forth therein on the Initial Closing Date; all of the shares
of issued and outstanding capital stock of the Company set forth therein have
been duly authorized, validly issued and are fully paid and nonassessable; the
holders thereof do not have any rights of rescission with respect therefor and
are not subject to personal liability for any obligations of the Company by
reason of being stockholders under the laws of the State in which the Company is
incorporated; none of such outstanding capital stock is subject to or was issued
in violation of any preemptive or similar rights of any stockholder of the
Company; and such capital stock (including the Securities, the Option Securities
and the Underwriters' Securities) conforms in all material respects to all
statements relating thereto contained in the Prospectus.
(vii) The Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement or as
described in the Prospectus. The Securities, the Option Securities and the
Underwriters' Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and will conform to the respective
descriptions thereof contained in the Prospectus; except for payment of the
applicable purchase price paid upon exercise of the options or warrants, as the
case may be the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities, the Option Securities and the Underwriters'
Securities has been duly and validly taken; and the certificates representing
the Securities, the Option Securities and the Underwriters' Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities, the Option Securities and the Underwriters' Securities
to be sold by the Company hereunder, the Underwriter will acquire good and
marketable title to such Securities, Option Securities and Underwriters'
Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction of any kind whatsoever other than
restrictions as may be imposed under the securities laws.
(viii) The Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described or referred
to in the Prospectus or which are not materially significant or important in
relation to its business or which have been incurred in the ordinary course of
business; except as described in the Prospectus all of the leases and subleases
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and the Company is not
in material default in respect of any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone adverse to the
Company's rights as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above or affecting or questioning the Company's
right to the continued possession of the leased or subleased premises or assets
under any such lease or sublease; and the Company owns or leases all such
properties as are necessary to its operations as now conducted and as
contemplated to be conducted, except as otherwise stated in the Prospectus.
(ix) The financial statements, together with related notes, set forth
in the Prospectus fairly present the financial position and results of
operations of the Company at the respective dates and for the respective periods
to which they apply. Said statements and related notes have been prepared in
accordance with generally accepted
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accounting principles applied on a basis which is consistent in all material
respects during the periods involved but any stub period has not been audited by
an independent accounting firm. There has been no material adverse change or
material development involving a prospective change in the condition, financial
or otherwise, or in the prospects, value, operation, properties, business or
results of operations of the Company whether or not arising in the ordinary
course of business, since the date of the financial statements included in the
Registration Statement and the Prospectus.
(x) Subsequent to the respective dates as of which information is given in
the Prospectus as it may be amended or supplemented, and except as described in
the Prospectus, the Company has not, directly or indirectly, incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business or entered into any transactions not in the ordinary course of
business, which are material to the business of the Company as a whole and there
has not been any change in the capital stock of, or any incurrence of long term
debts by, the Company or any issuance of options, warrants or rights to purchase
the capital stock of the Company or declaration or payment of any dividend on
the capital stock of the Company or any material adverse change in the condition
(financial or other), net worth or results of operations of the Company as a
whole and the Company has not become a party to, any material litigation whether
or not in the ordinary course of business.
(xi) To the knowledge of the Company, there is no pending or threatened,
action, suit or proceeding to which the Company is a party before or by any
court or governmental agency or body, which might result in any material adverse
change in the condition (financial or other), business or prospects of the
Company as a whole or might materially and adversely affect the properties or
assets of the Company as a whole nor are there any actions, suits or proceedings
against the Company related to environmental matters or related to
discrimination on the basis of age, sex, religion or race which might be
expected to materially and adversely affect the conduct of the business,
property, operations, financial condition or earnings of the Company as a whole;
and no labor disturbance by the employees of the Company individually exists or
is, to the knowledge of the Company, imminent which might be expected to
materially and adversely affect the conduct of the business, property,
operations, financial condition or earnings of the Company as a whole.
(xii) Except as may be disclosed in the Prospectus, the Company has
properly prepared and filed all necessary federal, state, local and foreign
income and franchise tax returns, has paid all taxes shown as due thereon, has
established adequate reserves for such taxes which are not yet due and payable,
and does not have any tax deficiency or claims outstanding, proposed or assessed
against it.
(xiii) The Company has sufficient licenses, permits, right to use trade or
service marks and other governmental authorizations currently required for the
conduct of its business as now being conducted and as contemplated to be
conducted and the Company is in all material respects complying therewith.
Except as set forth in the Prospectus, the expiration of any such licenses,
permits, or other governmental authorizations would not materially affect the
Company's operations. To its knowledge, none of the activities or businesses of
the Company are in material violation of, or cause the Company to materially
violate any law, rule, regulations, or order of the United States, any state,
county or locality, or of any agency or body of the United States or of any
state, county or locality.
(xiv) The Company has not at any time (i) made any contributions to any
candidate for political office in violation of law, or failed to disclose fully
any such contribution, or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi public duties, other than payments required or allowed by applicable law.
(xv) Except as set forth in the Prospectus the Company knows of no
outstanding claims for services either in the nature of a finder's fee,
brokerage fee or otherwise with respect to this financing for which the Company
or the Underwriters may be responsible, or which may affect the Underwriters'
compensation as determined by the National Association of Securities Dealers,
Inc. ("NASD") except as otherwise disclosed in the Prospectus or known by the
Underwriters.
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(xvi) The Company has its property adequately insured against loss or
damage by fire and maintains such other insurance as is customarily maintained
by companies in the same or similar business.
(xvii) The Underwriters' Warrants herein described are duly and validly
authorized and upon delivery to the Representative in accordance herewith will
be duly issued and legal, valid and binding obligations of the Company, except
as the enforceability thereof may be limited by bankruptcy or other similar laws
affecting the rights of creditors generally or by equitable principles, and
except as the enforcement of indemnification provisions may be limited by
federal or state securities laws.
The Underwriters' Securities issuable upon exercise of any of the
Underwriters' Warrants have been duly authorized, and when issued upon
payment of the exercise price therefor, will be validly issued, fully paid and
nonassessable.
(xviii) Except as set forth in the Prospectus, no default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, installment sale agreement, lease, deed
of trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement, purchase order, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
the property or assets (tangible or intangible) of the Company is subject or
affected.
(xix) To the best of the Company's knowledge it has generally enjoyed a
satisfactory employer-employee relationship with its employees and, to the best
of its knowledge, is in substantial compliance in all material respects with all
federal, state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours. To the best of the Company's knowledge, there are no pending
investigations involving the Company, by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. To the best of the Company's
knowledge, there is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or to its knowledge involving the Company, or any predecessor entity, and none
has ever occurred. To the best of the Company's knowledge, no representation
question is pending respecting the employees of the Company, and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company. To the best of the Company's knowledge, no grievance or arbitration
proceeding is pending or to its knowledge threatened under any expired or
existing collective bargaining agreements of the Company. No labor dispute with
the employees of the Company is pending, or, to its knowledge is imminent; and
the Company is not aware of any pending or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors which
may result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company.
(xx) Except as may be set forth in the Registration Statement, the Company
does not maintain, sponsor or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(l) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute, now or
at any time previously, to a defined benefit plan, as defined in Section 3(35)
of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Internal Revenue Code (the "Code"), which could subject the Company
to any tax penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all material reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply with
Code Section 401 (a), stating that such ERISA Plan and the attendant trust are
qualified thereunder. The Company has never completely or partially withdrawn
from a "multiemployer plan."
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(xxi) None of the Company, or any of its employees, directors,
stockholders, or affiliates (within the meaning of the Rules and Regulations)
has taken or will take, directly or indirectly, any action designed to or which
has constituted or which might be expected to cause or result in, under the
Exchange Act, or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities,
Option Securities, Underwriters' Securities or otherwise.
(xxii) None of the patents, patent applications, trademarks, service marks,
trade names, copyrights, and licenses and rights to the foregoing presently
owned or held by the Company, are in dispute or, to the best knowledge of the
Company's management are in any conflict with the right of any other person or
entity. The Company (i) except as disclosed in the Prospectus owns or has the
right to use, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing, and except as set forth in the Prospectus or otherwise disclosed
to the Underwriters in writing, to the best knowledge of the Company's
management is not obligated or under any liability whatsoever to make any
material payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, service xxxx, trade
name, copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
(xxiii) Except as disclosed in the Prospectus the Company owns and has
adequate right to use to the best knowledge of the Company's management all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company. The Company is not aware of
any such development of similar or identical trade secrets or technical
information by others. The Company has valid and binding confidentiality
agreements with all of its officers, covering its intellectual property (subject
to the equitable powers of any court), which agreements have remaining terms of
at least two years from the effective date of the Registration Statement except
where the failure to have such agreements would not materially and adversely
effect the Company's business taken as a whole. The Company has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus, to be owned or leased by it
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not yet due
and payable.
(xxiv) Singer Lewak Xxxxxxxxx & Xxxxxxxxx LLP, whose reports are filed
with the Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
(xxv) The Company has agreed to cause to be duly executed agreements
pursuant to which each of the Company's officers and directors have agreed not
to, directly or indirectly, sell, assign, transfer, or otherwise dispose of any
shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) for a period of not less than twelve (12) months following such
effective date without the prior written consent of the Underwriter. The Company
will cause the Transfer Agent, as defined below, to xxxx an appropriate legend
on the face of stock certificates representing all of such securities and to
place "stop transfer" orders on the Company's stock ledgers.
(xxvi) The Registered Securities have been approved for listing on NASDAQ
or an Exchange.
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(xxvii) Except as set forth in the Prospectus or disclosed in writing to
the Underwriter (which writing specifically refers to this Section), no officer
or director of the Company, holder of 5% or more of securities of the Company or
any "affiliate" or "associate" (as these terms are defined in Rule 405
promulgated under the Rules and Regulations) of any of the foregoing persons or
entities has or has had, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficiary interest in any contract or agreement to which the Company is
a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Relationships and Related Party Transactions" or
disclosed in writing to the Underwriter (which writing specifically refers to
this Section) there are no existing agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company, and any officer, director, principal
stockholder of the Company, or any partner, affiliate or associate of any of the
foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to the Underwriters' counsel (as defined
herein) shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(xxix) Each of the minute books of the Company has been made available to
the Underwriters and contains a complete summary of all meetings and actions of
the directors and stockholders of the Company, since the time of its
incorporation and reflect all transactions referred to in such minutes
accurately in all respects.
(xxx) Intentionally left blank.
(xxxi) Except and only to the extent described in the Prospectus or
disclosed in writing to the Underwriter (which writing specifically refers to
this Section), no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to require
the Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company. Except as disclosed in the Prospectus, all rights so described or
disclosed have been waived or have not been triggered with respect to the
transactions contemplated by this Agreement and the Representatives' Warrant
Agreement (including the warrants issuable thereunder).
(xxxii) The Company has not entered into any employment agreements with its
executive officers, except as disclosed in the Prospectus.
(xxxiii) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Registered Securities pursuant to
the Prospectus and the Registration Statement, the issuance of the Underwriters'
Warrants, the performance of this Agreement, the Underwriters' Warrant, and the
transactions contemplated hereby and thereby, including without limitation, any
waiver of any preemptive, first refusal or other rights that any entity or
person may have for the issue and/or sale of any of the Securities, the Option
Securities and the Underwriters' Securities, except such as have been or may be
obtained under the Act, otherwise or may be required under state securities or
blue sky laws in connection with the Underwriters' purchase and distribution of
the Securities, the Option Securities and the Underwriters' Securities to be
sold by the Company hereunder or may be required by the Rules of the National
Association of Securities Dealer, Inc. ("NASD").
(xxxiv) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or businesses may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, enforceable
against the Company, in accordance with their respective terms. The descriptions
in the Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be
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shown with respect thereto by Form SB-2, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
(xxxv) Within the past five (5) years, none of the Company's
independent public accountants has brought to the attention of the Company's
management any "material weakness" as defined in the Statement of Auditing
Standard No. 60 in any of the Company's internal controls.
4. Covenants of the Company. The Company covenants and agrees with you that:
(a) It will cooperate in all respects in making the Prospectus effective
and will not at any time, whether before or after the effective date, file any
amendment to or supplement to the Prospectus of which you shall not previously
have been advised and furnished with a copy or to which you or your counsel
shall have reasonably objected or which is not in material compliance with the
Act and the Rules and Regulations or applicable state law.
As soon as the Company is advised thereof, the Company will advise you, and
confirm the advice in writing, of the receipt of any comments of the Commission
or any state securities department, when the Registration Statement becomes
effective if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A, of the effectiveness of any post-effective amendment to the Registration
Statement or Prospectus, or the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission or any state
securities department for amendment of the Prospectus or for supplementing of
the Prospectus or for additional information with respect thereto, of the
issuance of any stop order suspending the effectiveness of the Prospectus or any
order preventing or suspending the use of any Prospectus or any order suspending
trading in the Common Stock of the Company, or of the suspension of the
qualification of the Securities, the Option Securities or the Underwriters'
Securities for offering in any jurisdiction, or of the institution of any
proceedings for any such purposes, and will use its best efforts to prevent the
issuance of any such order and, if issued, to obtain as soon as possible the
lifting or dismissal thereof.
The Company has caused to be delivered to you copies of such Prospectus,
and the Company has consented and hereby consents to the use of such copies for
the purposes permitted by law. The Company authorizes you and the dealers to use
the Prospectus and such copies of the Prospectus in connection with the sale of
the Securities, the Option Securities and the Underwriters' Securities for such
period as in the opinion of your counsel and our counsel the use thereof is
required to comply with the applicable provisions of the Act and the Rules and
Regulations. The Company will prepare and file with the states, promptly upon
your request, any such amendments or supplements to the Prospectus, and take any
other action, as, in the opinion of your counsel, may be necessary or advisable
in connection with the initial sale of the Securities, the Option Securities and
the Underwriters' Securities and will use its best efforts to cause the same to
become effective as promptly as possible.
The Company shall file the Prospectus (in form and substance satisfactory
to the Underwriter) or transmit the Prospectus by a means reasonably calculated
to result in filing with the Commission pursuant to rule 424(b)(1) or pursuant
to Rule 424(b)(3) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement, and (ii) the fifth business day after the effective date of the
Registration Statement.
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 the initial sale of
the Securities, the Option Securities and the Underwriters' Securities, of any
event of which the Company has knowledge and which materially affects the
Company, or the securities thereof, and which should be set forth in an
amendment of or a supplement to the Prospectus in order to make the statements
therein not then misleading, in light of the circumstances existing at the time
the Prospectus is required under the Act to be delivered, or in case it shall be
necessary to amend or supplement the Prospectus to comply with the Act, the
Rules and Regulations or any other law, the Company will forthwith prepare and
furnish to you copies of such
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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, will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they are made. The preparation and furnishing of any
such amendment or supplement to the Prospectus or supplement to be attached to
the Prospectus shall be without expense to you.
The Company will to the best of its ability comply with the Act, the
Exchange Act and applicable state securities laws so as to permit the initial
offer and sales of the Securities, the Option Securities and the Underwriters'
Securities under the Act, the Rules and Regulations, and applicable state
securities laws.
(b) It will cooperate to qualify the Securities and the Option Securities
and the Underwriters' Securities for initial sale under the securities laws
of such jurisdictions as you may designate and will make such applications and
furnish such information as may be required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or a dealer in
securities. The Company will, from time to time, prepare and file such
statements and reports as are or may be required to continue such qualification
in effect for so long as the Underwriter may reasonably request.
(c) So long as any of the Securities, the Option Securities or the
Underwriters' Securities remain outstanding in the hands of the public, the
Company, at its expense, will annually furnish to its shareholders a report of
its operations to include financial statements audited by independent public
accountants, and will furnish to the Underwriter as soon as practicable after
the end of each fiscal year, a balance sheet of the Company as at the end of
such fiscal year, together with statements of operations, shareholders' equity,
and changes in cash flow of the Company for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon of
independent public accountants.
(d) It will deliver to you at or before the Initial Closing Date three
signed copies of the Registration Statement including all financial statements
and exhibits filed therewith, whether or not incorporated by reference. The
Company will deliver to you, from time to time until the effective date of the
Prospectus, as many copies of the Prospectus as you may reasonably request. The
Company will deliver to you on the effective date of the Prospectus and
thereafter for so long as a Prospectus is required to be delivered under the Act
and the Rules and Regulations as many copies of the Prospectus, in final form,
or as thereafter amended or supplemented, as you may from time to time
reasonably request.
(e) The Company will apply the net proceeds from the sale of the Securities
and the Option Securities substantially in the manner set forth under "Use of
Proceeds" in the Prospectus. No portion of the proceeds shall be used, directly
or indirectly, to acquire any securities issued by the Company, without the
prior written consent of the Underwriter.
(f) As soon as it is practicable, but in any event not later than the first
(1st) day of the fifteenth (15th) full calendar month following the effective
date of the Registration Statement, the Company will make available to its
security holders and the Underwriter an earnings statement (which need not be
audited) covering a period of at least twelve (12) consecutive months beginning
after the effective date of the Registration Statement, which shall satisfy the
requirements of Section 11(a) of the Act and Rule 158(a) of the Rules and
Regulations.
(g) Non-Accountable Expense Allowance and other Costs and Expenses. The
Company shall pay to the Underwriter at each closing date, and to be deducted
from the purchase price for the Securities and the Option Securities, an amount
equal to three percent (3%) of the gross proceeds received by the Company from
the sale of the Securities and the Option Securities at such closing date less
in the case of the Initial Closing Date, the sum of $50,000 previously paid by
the Company. If the sale of the Securities by the Underwriter is not consummated
for any reason not attributable to the Underwriter, or if (i) the Company
withdraws the Registration Statement from the Commission or does not proceed
with the public offering, or (ii) the representations in Section 3 hereof are
not correct or the covenants cannot be complied with, or (iii) there has been a
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materially adverse change in the condition, prospects or obligations of the
Company or a materially adverse change in stock market conditions from current
conditions, all as determined by the Underwriter, then the Company shall
reimburse the Underwriter for its out of pocket expenses including without
limitation, its legal fees and disbursements all on an accountable basis but not
to exceed $75,000 (less the $50,000 previously paid by the Company), and if any
excess remains from the advance previously paid, such excess will be returned to
the Company.
(h) Costs and Expenses. Subject to the provisions above the Company will
pay all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement and Prospectus (including the fee of the Commission, any securities
exchange and the NASD in connection with the filing required by the NASD
relating to the offering of the Securities contemplated hereby); all expenses,
including fees of counsel, which shall be due and payable on the Closing Date in
connection with the qualification of the Securities under the state securities
or blue sky laws; the cost of furnishing to you copies of the Prospectus, this
Agreement, the cost of printing the certificates representing the Securities and
of preparing and photocopying the Underwriting Agreement and related
Underwriting documents, the cost of three Underwriters' bound volumes, any
advertising costs and expenses, including but not limited to the Company's
expenses on "road show" information meetings and presentations, prospectus
memorabilia, issue and transfer taxes, if any. The Company will also pay all
costs and expenses incident to the furnishing of any amended Prospectus of or
any supplement to be attached to the Prospectus.
(i) As a condition of the closing, the Company shall obtain from its
officers and directors of the Company written commitments restricting the sale
of 100% of their common stock for (12) months after the closing.
(j) During a date five years after the date hereof, the Company will make
available to its shareholders, as soon as practicable, and deliver to the
Underwriter:
(1) as soon as they are available, copies of all reports (financial or
other) mailed to shareholders;
(2) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any
securities exchange;
(3) every press release and every material news item or article of
interest to the financial community in respect of the Company or its
affairs which was prepared and released by or on behalf of the Company; and
(4) any additional information of a public nature concerning the
Company (and any future subsidiaries) or its businesses which the
Underwriter may request.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(k) The Company will maintain a Transfer Agent and, if necessary under the
jurisdiction of incorporation of the Company, a Registrar (which may be the same
entity as the Transfer Agent) for its Common Stock.
(l) The Company will furnish to the Underwriters or on the Underwriters'
order, without charge, at such place as the Underwriters may designate, copies
of each Preliminary Prospectus, the Final Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which copies
will be signed and will include all financial statements and exhibits), the
Prospectus and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriters may request.
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(m) Neither the Company nor any of its officers, directors, stockholders or
any of its affiliates will take, directly or indirectly, any action designed to,
or which might in the future reasonably be expected to cause or result in
stabilization or manipulation of the price of any of the Company's securities.
(n) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(o) The Company shall cause the Securities to be listed on the NASDAQ Small
Cap Market or on an exchange for a period of five (5) years from the date
hereof, and use its best efforts to maintain the listing of the Securities to
the extent they are outstanding.
(p) As soon as practicable, (i) before the effective date of the
Registration Statement, file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities and (ii) but in no event
more than 30 days from the effective date of the Registration Statement, take
all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and/or Xxxxx'x OTC Manual and to continue such
inclusion for a period of not less than five years if the securities are not
listed on an exchange.
(q) Until the completion of the distribution of the Securities, the Company
shall not without the prior written consent of the Underwriter and its counsel
which consent shall not be unreasonably withheld or delayed, issue, directly or
indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in 'the ordinary course'
of the Company's business consistent with past practices with respect to the
Company's operations.
(r) Until the earlier of (i) five (5) years from the date hereof or (ii)
the sale to the public of the Warrant Shares, the Company will not take any
action or actions which may prevent or disqualify the Company's use of Form SB-2
(or other appropriate form) for the registration under the Act of the Warrant
Shares and the Underwriters' Securities.
5. Conditions of the Underwriters' Obligations. The obligation of the
Underwriters to offer and sell the Securities and the Option Securities is
subject to the accuracy (as of the date hereof, and as of the Closing Dates) of
and compliance with the representations and warranties of the Company to the
performance by it of its agreement and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective as and when
cleared by the Commission, and you shall have received notice thereof, on
or prior to any closing date no stop order suspending the effectiveness of
the Prospectus shall have been issued and no proceedings for that or
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; any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel to the Underwriter; and qualification, under the securities laws of
such states as you may designate, of the issue and sale of the Securities
upon the terms and conditions herein set forth or contemplated and
containing no provision unacceptable to you shall have been secured, and no
stop order shall be in effect denying or suspending effectiveness of such
qualification nor shall any stop order proceedings with respect thereto be
instituted or pending or threatened under such law.
(b) On any closing date and, with respect to the letter referred to in
subparagraph (iii), as of the date hereof, you shall have received:
(i) the opinion, together with such number of signed or
photostatic copies of such opinion as you may reasonably request,
addressed to you by Jeffers, Wilson, Xxxxx & Xxxx, LLP, counsel for
the Company, in form
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and substance reasonably satisfactory to the Underwriter and Xxxxxxx
X. Xxxxxx, Esq., counsel to the Underwriter, dated each such closing
date, to the effect that:
(A) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the
jurisdiction in which it is incorporated and has all necessary
corporate power and authority to carry on its business as
described in the Prospectus.
(B) The Company is qualified to do business in each
jurisdiction in which conducting its business requires such
qualification, except where the failure to be so qualified would
not have a material adverse effect on the Company's business or
assets.
(C) The Company has the full corporate power and authority
to enter into this Agreement, the Underwriters' Warrant and to
consummate the transactions provided for therein and each such
Agreement has been duly and validly authorized, executed and
delivered by the Company. Each of this Agreement and the
Underwriters' Warrant, assuming due authorization, execution and
delivery by each other party thereto, constitutes a legal, valid
and binding agreement of the Company enforceable against the
Company in accordance with its terms, subject to bankruptcy,
insolvency or similar laws governing the rights of creditors and
to general equitable principles, and provided that no opinion
need be given as to the enforceability of any indemnification or
contribution provisions, and none of the Company's execution or
delivery of this Agreement, or the Underwriters' Warrant, its
performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of
its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts
with or will conflict with or results or will result in any
material breach or violation of any of the terms or provisions
of, or constitutes or will constitute a material default under,
or result in the creation or imposition of any material lien,
charge, claim, encumbrance, pledge, security interest, defect or
other restriction of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the
terms of (A) the articles of incorporation or by-laws of the
Company, (B) to the knowledge of such counsel, any material
license, contract, indenture, mortgage, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound, or (C) to
the knowledge of such counsel, any statute, judgment, decree,
order, rule or regulation applicable to the Company, whether
domestic or foreign.
(D) The Company had authorized and outstanding capital stock
as set forth in the Prospectus under the heading "Capitalization"
as of the date set forth therein, and all of such issued and
outstanding shares of capital stock have been duly and validly
authorized and issued, and to the knowledge of such counsel are
fully paid and nonassessable, and to the knowledge of such
counsel no stockholder of the Company is entitled to any
preemptive rights to subscribe for, or purchase shares of the
capital stock and to the knowledge of such counsel none of such
securities were issued in violation of the preemptive rights of
any holders of any securities of the Company.
(E) To the knowledge of such counsel, the Company is not a
party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement,
the Underwriters' Warrant, and except as described in the
Prospectus. The Common Stock, the warrants and the Underwriters'
Warrants each conforms in all material respects to the respective
descriptions thereof contained in the Prospectus. The outstanding
shares of Common Stock, the Underwriters' Warrants and the
Warrant Shares, upon issuance and delivery and payment therefore
in the manner described herein, in the Underwriters' Warrant and
in the Underwriters' Agreement, as the case may be, will be duly
authorized, validly issued, fully paid and nonassessable. There
are no preemptive or other rights to subscribe for or to
purchase, or any restriction upon the voting or transfer of, any
shares of Common Stock pursuant to the Company's articles of
incorporation, by-laws, other governing documents or any
agreement or other instrument known to such counsel to which the
Company is a party or by which it is bound.
(F) The certificates representing the Securities comprising
the Common Stock are in due and proper form and the Underwriters'
Warrants have been duly authorized and reserved for issuance and
when issued and delivered
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in accordance with the terms of the Underwriters' Warrant, will
be duly and validly issued, fully paid and nonassessable.
(G) To the knowledge of such counsel, there are no claims,
suits or other legal proceedings pending or threatened against
the Company in any court or before or by any governmental body
which might materially affect the business of the Company or the
financial condition of the Company as a whole, except as set
forth in or contemplated by the Prospectus.
(H) Based on oral and/or written advice from the staff of
the Commission, the Registration Statement has become effective
and, to the knowledge of such counsel, no stop order suspending
the effectiveness of the Prospectus is in effect and no
proceedings for that purpose are pending before, or threatened
by, federal or by a state securities administrator.
(I) To the knowledge of such counsel, there are no legal or
governmental proceedings, actions, arbitrations, investigations,
inquiries or the like pending or threatened against the Company
of a character required to be disclosed in the Prospectus which
have not been so disclosed, questions the validity of the capital
stock of the Company or this Agreement or the Underwriters'
Warrant or might adversely affect the condition, financial or
otherwise, or the prospects of the Company or which could
adversely affect the Company's ability to perform any of its
obligations under this Agreement, or the Underwriters' Warrant.
(J) To such counsel's knowledge, there are no material
agreements, contracts or other documents known to such counsel
required by the Act to be described in the Registration Statement
and the Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto, and
to such counsel's knowledge (A) the exhibits which have been
filed are correct copies of the documents of which they purport
to be copies; (B) the descriptions in the Registration Statement
and the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company is a party or
by which it is bound, including any document to which the Company
is a party or by which it is bound incorporated by reference into
the Prospectus and any supplement or amendment thereto, are
accurate in all material respects and fairly represent the
information required to be shown by Form SB-2.
(K) No consent, approval, order or authorization from any
regulatory board, agency or instrumentality having jurisdiction
over the Company, or its properties (other than registration
under the Act or qualification under state or foreign securities
law or approval by the NASD) is required for the valid
authorization, issuance, sale and delivery of the Securities, the
Option Securities or the Underwriters' Warrant.
(L) The statements in the Prospectus under "Risk Factors-
Dependence on Key Personnel and Consultants, Control by Existing
Shareholders," "Indemnification of Officers and Directors,"
"Description of the Securities," and "Shares Eligible For Future
Sale" have been reviewed by such counsel, and insofar as they
refer to statements of law, descriptions of statutes, licenses,
rules or regulations or legal conclusions, are correct in all
material respects.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other
representatives of the Company, the Underwriters, Underwriter's
Counsel and the independent certified public accountants of the
Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were
discussed, and although they have not certified the accuracy or
completeness of the statements contained in the Registration
Statement or the Prospectus, nothing has come to the attention of
such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later
date on which Option Shares are to be purchased, the Registration
Statement and any amendment or supplement, when such documents
became effective or were filed with the Commission (other than
the financial
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statements including the notes thereto and supporting schedules
and other financial and statistical information derived
therefrom, as to which such counsel need express no comment)
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading, or at the Closing
Date or any later date on which the Option Shares are to be
purchased, as the case may be, the Prospectus and any amendment
or supplement thereto (other than the financial statements
including the notes thereto and other financial and statistical
information derived therefrom, as to which such counsel need
express no comment) contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
Such opinion shall also cover such other matters incident to
the transactions contemplated hereby and the offering Prospectus
as you or counsel to the Underwriter shall reasonably request. In
rendering such opinion, to the extent deemed reasonable by them,
such counsel may rely upon certificates of any officer of the
Company or public officials as to matters of fact of which the
maker of such certificate has knowledge.
(ii) a certificate, signed by the Chief Executive Officer and the
Chief Financial Officer of the Company dated the Closing Date, to the
effect that with regard to the Company, each of the conditions set
forth in Section 5(d) have been satisfied.
(iii) a letter, addressed to the Underwriter and in form and
substance satisfactory to the Underwriter in all respects (including
the nonmaterial nature of the changes or decreases, if any, referred
to in clause (D) below), from, Singer Lewak Xxxxxxxxx & Xxxxxxxxx LLP
dated, respectively, as of the effective date of the Registration
Statement and as of the Closing Date, as the case may be:
(A) Confirming that they are independent public accountants
with respect to the Company and its consolidated subsidiaries, if
any, within the meaning of the Act and the applicable published
Rules and Regulations.
(B) Stating that, in their opinion, the financial
statements, related notes and schedules of the Company and its
consolidated subsidiaries, if any, included in the Registration
Statement examined by them comply as to form in all material
respects with the applicable accounting requirements of the Act
and the published Rules and Regulations thereunder.
(C) Stating that, with respect to the period from December
31, 1996, to a specified date (the specified date") not earlier
than five (5) business days prior to the date of such letter,
they have read the minutes of meetings of the shareholders and
board of directors (and various committees thereof) of the
Company and its consolidated subsidiaries, if any, for the period
from December 31, 1996 through the specified date, and made
inquiries of officers of the Company and its consolidated
subsidiaries, if any, responsible for financial and accounting
matters and, especially as to whether there was any decrease in
sales, income before extraordinary items or net income as
compared with the corresponding period in the preceding year; or
any change in the capital stock of the Company or any change in
the longterm debt or any increase in the short-term bank
borrowings or any decrease in net current assets or net assets of
the Company or of any of its consolidated subsidiaries, if any,
and further stating that while such procedures and inquiries do
not constitute an examination made in accordance with generally
accepted auditing standards, nothing came to their attention
which caused them to believe that during the period from December
31, 1996, through the specified date there were any decreases as
compared with the corresponding period in the preceding year in
sales, income before extraordinary items or net income; or any
change in the capital stock of the Company or consolidated
subsidiary, if any, or any change in the long term debt or any
increase in the short-term bank borrowings (other than any
increase in short-term bank borrowings in the ordinary course of
business) of the Company or any consolidated subsidiary, if any,
or any decrease in the net current assets or net assets of the
Company or any consolidated subsidiary, if any; and
(D) Stating that they have carried out certain specified
procedures (specifically set forth in such letter or letters) as
specified by the Underwriter (after consultations with Singer
Lewak Xxxxxxxxx & Xxxxxxxxx LLP relating to such procedures),
not constituting an audit, with respect to certain tables,
statistics and other financial data in the Prospectus specified
by the Underwriter and such financial data not included in the
Prospectus but from which information in the Prospectus is
derived, and which have been obtained from the general accounting
records of the Company or consolidated subsidiaries, if any, or
from such accounting records by analysis or computation, and
having compared such financial data with the accounting records
of the Company or the consolidated subsidiaries, if any, stating
that they have found such financial data to agree with the
accounting records of the Company.
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(c) All corporate proceedings and other legal matters relating to this
Agreement, the Prospectus and other related matters shall be satisfactory
to or approved by counsel to the Underwriter and you shall have received
from Jeffers, Wilson, Xxxxx & Xxxx, LLP a signed opinion dated as of each
closing date, with respect to the incorporation of the Company, the
validity of the Securities, the form of the Prospectus, (other than the
financial statements together with related notes and other financial and
statistical data contained in the Prospectus or omitted therefrom, as to
which such counsel need express no opinion), the execution of this
Agreement and other related matters as you may reasonably require.
(d) At each closing date, (i) the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects with the same effect as if made on and as of such closing
date; (ii) the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations and in all material
respects conform to the requirements thereof, and neither the Prospectus
nor any amendment or supplement thereto shall contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary, in light of the circumstances under which they were
made, in order to make the statements therein not misleading; (iii) there
shall have been since the respective dates as of which information is given
no material adverse change in the business, properties or condition
(financial or otherwise), results of operations, capital stock, longterm
debt or general affairs of the Company from that set forth in the
Prospectus, except changes which the Prospectus indicates might occur after
the effective date of the Prospectus, and the Company shall not have
incurred any material liabilities or material obligations, direct or
contingent, or entered into any material transaction, contract or agreement
not in the ordinary course of business other than as referred to in the
Prospectus and which would be required to be set forth in the Prospectus;
and (iv) except as set forth in the Prospectus, no action, suit or
proceeding at law or in equity shall be pending or threatened against the
Company which would be required to be set forth in the Prospectus, and no
proceedings shall be pending or threatened against the Company or any
subsidiary before or by any commission, board or administrative agency in
the United States or elsewhere, wherein an unfavorable decision, ruling or
finding would materially and adversely affect the business, property,
condition (financial or otherwise), results of operations or general
affairs of the Company.
(e) On the Initial Closing Date, the Company shall have executed and
delivered to the Underwriter, (i) the Underwriters' Warrant substantially
in the form filed as an Exhibit to the Registration Statement in final form
and substance satisfactory to the Underwriter, and (ii) the Underwriters'
Warrants in such denominations and to such designees as shall have been
provided to the Company.
(f) On or before the Initial Closing Date, the Securities shall have
been duly approved for listing on an exchange or on NASDAQ, Small Cap
Market or National Market.
(g) On or before the Initial Closing Date, there shall have been
delivered to the Underwriter all of the Lock-up Agreements required to be
delivered pursuant to Section 3(a)(xxv) and 4(h), in form and substance
satisfactory to the Underwriter and Underwriter's counsel.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Initial Closing Date or the relevant Option Closing Date, as
the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
6. Conditions of the Company's Obligations. The obligation of the Company
to sell and deliver the Securities is subject to the following:
(a) The provisions regarding the effective date, as described in
Section 10.
(b) At the Initial Closing Date, no stop order suspending the
effectiveness of the Prospectus shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission or by any
state securities department.
(c) Tender of payment by the Underwriters in accord with Section 2
hereof.
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7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
its employees and each person, if any, who controls you within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or several
(which shall, for any purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
each Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission made in the Prospectus, or such amendment or supplement to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, which is in reliance upon and in conformity
with written information furnished by the Company to you specifically for use in
the preparation thereof, and provided further that the indemnity agreement
contained in this subsection (a) shall not inure to the benefit of you with
respect to any person asserting any such loss, claim, damage or liability who
has purchased the Securities which are the subject thereof if you or any
participants failed to send or give a copy of the Prospectus to such person at
or prior to the written confirmation of the sale of such Securities to such
person and except that, with respect to any untrue statement or omission or any
alleged untrue statement or omission, made in any Pre-Effective Prospectus, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Underwriter (or to any person controlling any such underwriter)
from whom the person asserting any such loss, claim, damage or liability
purchased the securities concerned to the extent that such untrue statement or
omission, or alleged untrue statement or omission, has been corrected in a later
Pre-Effective Prospectus or in the Final Prospectus unless the Underwriter
circulated a later Pre-Effective Prospectus or the Final Prospectus to such
person.
(b) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers, each person, if any, who controls the
Company within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission was made in the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by you specifically for use in the preparation thereof. This indemnity
will be in addition to any liability which any Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party, similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that, if the indemnified party is you or a person who controls you, the fees and
expenses of such
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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 you or such controlling person and the indemnifying party
and you or such controlling person shall have been advised by such counsel that
there is a conflict of interest which would prevent counsel for the indemnifying
party from representing the indemnifying party and you or such controlling
person (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of you or such controlling person, 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 or which are consolidated into the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for you
and all such controlling persons, which firm shall be designated in writing by
you). 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.
8. Contribution. In order to provide for just and equitable contribution
tinder the Act in any case in which (i) the indemnifying party makes a claim for
indemnification pursuant to Section 7 hereof but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of the
Underwriters, then the Company and the Underwriters in the aggregate shall
contribute to the aggregate losses, claims, damages, or liabilities to which
they may be subject (which shall, for all purposes of this Agreement, include,
but not be limited to, all costs of defense and investigation and all attorneys'
fees) in either such case (after contribution from others) in such proportions
that the Underwriters are responsible in the aggregate for that portion of such
losses, claims, damages or liabilities determined by multiplying the total
amount of such losses, claims, damages or liabilities times the difference
between the public offering price and the commission to the Underwriters and
dividing the product thereof by the public offering price, and the Company, if
applicable, shall be responsible for that portion of such losses, claims,
damages or liabilities times the commission to the Underwriters and dividing the
product thereof by the public offering price; provided, however, that the
Underwriters shall not be required to so contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder if such allocation is not permitted by applicable law, then the
relative fault of the Company and the Underwriters in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 12(2) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The foregoing contribution agreement shall in no
way affect the contribution liabilities of any person having liability under
Section 12 of the Act other than the Company and the Underwriter. As used in
this paragraph, the term "Underwriters" includes any person who controls the
Underwriters within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then any
Underwriter and each person who controls any Underwriter shall be entitled to
contribution from the Company, to the full extent permitted by law.
9. Effective Date. This Agreement shall become effective at 10:00 a.m. New
York time on the next full business day following the effective date of the
Registration Statement, or at such other time after the effective date of the
Prospectus as you in your discretion shall first commence the public offering of
any of the Securities covered thereby, provided, however, that at all times the
provisions of Sections 7, 8, 9 and 11 shall be effective.
10. Termination.
(a) This Agreement, may be terminated at any time prior to the Closing Date
by you if in your judgment it is impracticable to offer for sale or to enforce
contracts made by you for the sale of the Securities agreed to be sold hereunder
by reason of (i) the Company as a whole 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 of the Company having been suspended by a
state securities administrator or by the Commission, (iii) material governmental
restrictions having been imposed on trading in
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securities generally (not in force and effect on the date hereof) or trading on
the New York Stock Exchange, American Stock Exchange, or in the over-the-counter
market shall have been suspended, (iv) a banking moratorium having been declared
by federal or New York State authorities, (v) an outbreak or escalation of
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 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 believed likely by you to have a material
impact on the business, financial condition or financial statements of the
Company; or (vii) any material adverse change having occurred, since the
respective dates as of which information is given in the Prospectus, in the
condition, financial or otherwise, of the Company as a whole, whether or not
arising in the ordinary course of business, (viii) Xxxx X. Xxxxx, Xxxxxxx X.
Xxxxxxx and Xxxxxxx X. Xxxxxx cease to be employed by the Company in their
present capacity; (ix) the Securities are not listed the American Stock Exchange
or any other exchange or on NASDAQ.
(b) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 10 or in Section 9, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
11. Representations, Warrants and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company (or its officers) and the Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of the Underwriters, the Company, or
any of their officers or directors and will survive delivery of and payment for
the Securities.
12. Notices. All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to you, will be mailed, delivered
or telephoned and confirmed to you at, Nutmeg Securities, Ltd., 000 Xxxx Xxxx
Xxxx, Xxxxxxxx, XX 00000 Attn: Xxxxxx X. Xxxxxxxxx, Director, Investment Banking
Division; to the Company at 0000 XxxXxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx Xxxxx,
XX 00000.
13. Parties in Interest. This Agreement is made solely for the benefit of
the Underwriter(s), and the Company, and their respective controlling persons,
directors and officers, and their respective successors, assigns, executors and
administrators. No other person shall acquire or have any right under or by
virtue of this Agreement.
14. Headings. The Section headings in this Agreement have been inserted as
a matter of convenience of reference and are not a part of this Agreement.
15. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, without giving effect to
conflict of law principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
instrument.
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If the foregoing correctly sets forth the understanding between the Company
and you, as Representative of the several underwriters, please so indicate in
the space provided below for such purpose, whereupon this letter and your
acceptance shall constitute a binding agreement between us.
Very truly yours,
Medical Science Systems,Inc.
By:
------------------------
Xxxx X. Xxxxx, President
Accepted as of the date first above written:
Nutmeg Securities, Ltd.
As Representative of the several Underwriters
By:
--------------------------------------
(Authorized Officer)
(Vice) President
Director, Investment Banking Division
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EXHIBIT A
SCHEDULE I
UNDERWRITERS
Shares of
Underwriters Common Stock
------------ ------------
Nutmeg Securities, Ltd.
Millennium Financial Group, Inc.
---------
TOTAL 2,000,000
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