EXHIBIT 1.1
2,000,000 Units, each Unit Consisting of
One (1) Share of Common Stock and
One Redeemable Common Stock Purchase Warrant
of
99 CENT STUFF, INC.
FORM OF
UNDERWRITING AGREEMENT
Boca Raton, Florida
2002
vFinance Investments, Inc.,
as Representative of the
several Underwriters named in
Schedule I
c/o 0000 Xxxxx Xxxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Ladies and Gentlemen:
99 Cent Stuff, Inc., a Florida corporation (the "Company"), proposes to
issue and sell 2,000,000 units (the "Units"), each Unit comprised of: one (1)
share ("Share") of the Company's common stock, par value $.01 per share (the
"Common Stock") and one (1) Redeemable Common Stock Purchase Warrant (the
"Warrants") in a public offering ("Offering"). The 2,000,000 Units, Shares and
Warrants (together, referred to as the "Firm Securities") and together with all
or any part of the up to 300,000 additional Units subject to the overallotment
option described in Section 2(b) hereof (the "Overallotment Securities") are
hereinafter collectively referred to as the "Securities." This agreement
confirms the agreement by the underwriters named in Schedule I ("Underwriters")
to purchase the Firm Securities from the Company upon the terms and conditions
contained herein. vFinance Investments, Inc. shall act as representative (the
"Representative") of the several underwriters.
The Company also proposes to issue and sell to the Underwriters, an
option (the "Underwriters' Unit Purchase Option") pursuant to the Underwriters'
Purchase Option Agreement (the "Underwriters' Unit Purchase Option Agreement")
for the purchase of an aggregate of 10% of the number of Units being sold (the
"Underwriters' Option Units"), as provided in Section 3(d) hereof. The
Securities, the Underwriters' Purchase Option Agreement and Underwriters' Option
Units are more fully described in the Registration Statement (as defined in
Subsection 1(a) hereof) and the Prospectus (as defined in Subsection 1(a)
hereof) referred to below. Unless the context otherwise requires, all references
to the "Company" shall include 99 Cent Stuff, LLC and all presently existing
subsidiaries and any entities acquired by the Company on or prior to the Closing
Date (defined in Subsection 2(c) hereof). All representations, warranties and
opinions of counsel required hereunder shall cover any such subsidiaries and
acquired entities.
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the
Underwriters as of the date hereof, and as of the Closing Date and any
Overallotment Closing Date (as defined in Subsection 2(c) hereof), if any, as
follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form SB-2 (SEC File
No. 333-92048) including any related preliminary prospectus (each a "Preliminary
Prospectus"), for the registration of the offer and sale of Securities under the
Securities Act of 1933, as amended (the "Act"), which registration statement and
any amendment or amendments have been prepared by the Company in conformity with
the requirements of the Act and the rules and regulations of the Commission
under the Act. The Registration Statement with respect to the Securities,
including any Preliminary Prospectus, copies of which have heretofore been
delivered to the Representative, has been prepared by the Company in conformity
with the requirements of the Act and the rules and regulations thereunder.
Following execution of this Agreement, the Company will promptly file (i) if the
Registration Statement has been declared effective by the Commission, (A) a Term
Sheet (as defined in the Rules and Regulations (as hereinafter defined))
pursuant to Rule 434 under the Act or (B) a Prospectus under Rules 430A and/or
424(b) under the Act, in either case in form satisfactory to the Representative
or (ii) in the event the registration statement has not been declared effective,
a further amendment to said registration statement in the form heretofore
delivered to the Underwriter and will not, before the registration statement
becomes effective, file any other amendment thereto unless the Representative
shall have consented thereto 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, schedules,
exhibits and all other documents filed as a part thereof and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430A of the Rules and Regulations)(as hereinafter defined), 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." For purposes hereof, "Rules and
Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part thereof and no
proceedings for a stop order have been instituted or are pending or, to the best
knowledge of the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and the Prospectus at the time of filing thereof
conformed in all material respects with the requirements of the Act and the
Rules and Regulations, and neither the Preliminary Prospectus, the Registration
Statement nor the Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Overallotment
Closing Date (as hereinafter defined) and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all material statements which are required to be stated therein in
compliance with the Act and the Rules and Regulations, and will in all material
respects conform to the requirements of the Act and the Rules and Regulations;
neither the Registration Statement, nor any amendment thereto, at the time the
Registration Statement or such amendment is declared effective under the Act,
will 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, and the Prospectus at the time the Registration
Statement becomes effective, at the Closing Date and at any Overallotment
Closing Date, will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty does not apply to statements made
or statements omitted in reliance upon and in conformity with information
supplied to the Company in writing by or on behalf of the Underwriters expressly
for use in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(d) The Company has been duly incorporated and is now, and at
the Closing Date and any Overallotment Closing Date will be, validly existing as
a corporation in good standing under the laws of the State of Florida. Other
than as described in the Registration Statement, the Company does not own,
directly or indirectly, an interest in any corporation, partnership, trust,
joint venture or other business entity. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of its properties or the character of its
operations require such qualification to do business, except where the failure
to so qualify would not have a material adverse effect on the Company. The
Company has all requisite corporate power and authority, and has obtained any
and all necessary applications, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus; the Company is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations except where the failure to comply would not
have a material adverse effect upon the Company; and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operation of the Company.
The disclosures, if any, in the Registration Statement concerning the effects of
federal, state, local, and foreign laws, rules and regulations on the Company's
business as currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and will have the adjusted capitalization set forth therein on the Closing Date
and the Overallotment Closing Date, if any, based upon the assumptions set forth
therein. The Company is not a party to or bound by any instrument, agreement or
other arrangement providing for the Company to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement, the
Underwriters' Unit Purchase Option and as otherwise described in the Prospectus
under the Section, "Description of Capital Stock." The Securities, the
Underwriters' Unit Purchase Option and the Underwriters, Option Units and all
other securities issued or issuable by the Company conform or, when issued and
paid for, will conform in all respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company, or similar contractual rights granted by the Company to subscribe for
or purchase securities. The Securities, the Underwriters' Unit Purchase Option
and the Underwriters' Option Units to be issued and sold by the Company
hereunder, and upon payment therefor, are not and will not be subject to any
preemptive or other similar rights of any stockholder to subscribe for or
purchase securities, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof and thereof, will be validly
issued, fully paid and non-assessable and will conform to the descriptions
thereof contained in the Prospectus, and the holders thereof will not be subject
to any liability solely as such holders. All corporate action required to be
taken for the authorization, issuance and sale of the Securities, the
Underwriters' Unit Purchase Option and the Underwriters' Option Units has been
duly and validly taken; and the certificates, if any, representing the
Securities and the Underwriters' Option Units will be in due and proper form.
Upon the issuance and delivery pursuant to the terms hereof of the Securities to
be sold to the Underwriter by the Company hereunder, the Underwriter will
acquire good and marketable title to such Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
Other than as described in the Prospectus, there has been no material adverse
change or development involving a prospective change in the condition, financial
or otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business, or results of operation of the Company, whether
or not arising in the ordinary course of business, since the dates of the
financial statements included in the Registration Statement and th Prospectus
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company, conform in all material respects to the descriptions
thereof contained in the Registration Statement and in the Prospectus.
(g) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(h) Daszhal Xxxxxx LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are each independent
certified public accountant as required by the Act and the Rules and
Regulations.
(i) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, payroll
withholding taxes and taxes payable under Chapters 21 through 24 of the Internal
Revenue Code of 1986 (the "Code"), (ii) has furnished all tax and information
returns it is required to furnish pursuant to the Code, and has established
adequate reserves for such taxes which are not due and payable, and (iii) does
not have knowledge of any tax deficiency or claims outstanding, proposed or
assessed against it.
(j) The Company maintains insurance, which is in full force
and effect, of the types and in the amounts which it reasonably believes to be
adequate for its business, including, but not limited to, personal injury and
product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(k) There is no action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or, to the knowledge of the Company, threatened
against (or circumstances that may give rise to the same), or involving the
properties or business of the Company which: (i) questions the validity of the
capital stock of the Company or this Agreement or of any action taken or to be
taken by the Company pursuant to or in connection with this Agreement; (ii) is
required to be disclosed in the Registration Statement which is not so disclosed
(and such proceedings as are summarized in the Registration Statement are
accurately summarized in all respects); or (iii) might materially affect the
condition, financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operations of
the Company.
(1) The Company has full legal right, power and authority to
enter into this Agreement, the Underwriters' Purchase Option Agreement, the
Warrant Agreement, and the Consulting Agreement (as described in Section 4(w)
hereof) and to consummate the transactions provided for in such agreements; and
this Agreement, the Underwriters' Purchase Option Agreement and the Consulting
Agreement have each been duly authorized, executed and delivered by the Company.
Each of this Agreement, the Underwriters, Purchase Option Agreement and the
Consulting Agreement, constitutes a legally valid and binding agreement of the
Company, subject to due authorization, execution and delivery by the
Underwriter, enforceable against the Company in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors, rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law). Neither the
Company's execution or delivery of this Agreement, the Warrant Agreement, the
Underwriters' Purchase Option Agreement, or the Consulting Agreement, its
performance hereunder and thereunder, its consummation of the transactions
contemplated herein and therein, nor 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
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any
material lien, charge, claim, encumbrance, pledge, security interest defect or
other restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of: (i) the
Certificate of Incorporation or By-Laws of the Company; (ii) any 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 the Company is bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(m) 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 Securities pursuant to
the Prospectus and the Registration Statement, the performance of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' purchase and distribution of the
Firm Securities and Overallotment Securities to be sold by the Company
hereunder; or (ii) the issuance and delivery of the Underwriters' Unit Purchase
Option or the Underwriters' Option Units.
(n) All executed agreements or copies of executed agreements
(whether electronically scanned or otherwise) filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
may be bound or to which any of its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company, and constitute legally valid and binding agreements of the Company,
enforceable against it in accordance with their respective terms, except to the
extent there is no material adverse effect upon the Company. The descriptions
contained in the Registration Statement of material contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Rules and
Regulations and there are no material contracts, government grants,
collaborative relationships, or other documents which are required by the Act or
the Rules and Regulations 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.
(o) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business; or
(v) made any material changes in or affecting the general affairs, management,
financial operations, stockholders equity or results of operations of the
Company.
(p) No default exists in the due performance and observance of
any material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which any of
the Company may be bound or to which any of its property or assets (tangible or
intangible) of the Company is subject or affected except where such default does
not, and will not, have a material adverse effect upon the Company.
(q) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours.
(r) Except as disclosed in the Prospectus, the Company does
not presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed to, any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan" or a "multi-employer
plan" as such terms are defined in Sections 3(2), 3(l) and 3(37) respectively of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). Except as disclosed in the Prospectus, 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.
(s) The Company is not aware of any violation in any material
respect of any domestic or foreign laws, ordinances or governmental rules or
regulations to which it is subject.
(t) No holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for 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.
(u) Neither the Company, nor, to the Company's best knowledge
after due inquiry, any of its employees, directors, stockholders or affiliates
(within the meaning of the Rules and Regulations) has taken, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or otherwise.
(v) To its knowledge after reasonable investigation, none of
the trademarks, service marks, trade names and copyrights, or licenses and
rights to the foregoing presently owned or held by the Company are in dispute or
are in any conflict with the right of any other person or entity within the
Company's current area of operations nor has the Company received notice of any
of the foregoing. Except as described in the Prospectus, the Company: (i) owns
or has the right to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all 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
th foregoing; and (ii) is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any 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.
(w) To its knowledge after reasonable investigation, the
Company owns and has the unrestricted right to use all trade secrets,
trade-marks, trade names, designs, processes, works of authorship, and computer
programs (collectively herein "Intellectual Property") required for or incident
to the operation and sale of all products and services sold or proposed to be
sold by the Company, free and clear of and without violating any right, lien, or
claim of others, including without limitation, former employers of its
employees. The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all the Intellectual Property material to
its operations.
(x) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property 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 liens for taxes or assessments not yet due and
payable.
(y) On or before the effective date of the Registration
Statement, the Company shall cause to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's stockholders
holding in excess of 5% shares of the Company's Common Stock (including persons
holding securities convertible into Common Stock under Section 13(d) of the
Exchange Act) and its officers and directors, has agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber any of their shares of
Common Stock or other securities (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein for a
period of 24 months after the closing date of the Offering without the prior
written consent of the Underwriter. Provided, however, for the period beginning
24 months following the Closing Date of the offering, such principals,
shareholders, officers and/or directors may make bonafide gifts, provided that
such recipients execute a new lock-up agreement for the remainder of any term
thereof and such new recipient's transactions are during the term of such
lock-up consummated through and with the assistance of the representatives. 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 shares of
Common Stock.
(z) The Company has not incurred any liability and there are
no arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or any other
arrangements, agreements, understandings, payments or issuances with respect to
the Company or any of its officers, directors, employees or affiliates that may
adversely affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
(aa) The Firm Securities have been approved for quotation on
the Nasdaq SmallCap Stock Market, Inc. and the Boston Stock Exchange subject to
official notice of issuance.
(bb) Neither the Company nor any of its respective officers,
employees, agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company;
and (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(cc) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any such person or entity or the Company, 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, except with respect to the beneficial ownership
of not more than 1% of the outstanding shares of capital stock of any
publicly-held entity; or (ii) a beneficial 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 Transactions", 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, or principal stockholder of the Company, or
any affiliate or associate of any such person or entity.
(dd) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(ee) The Company has entered into an employment agreement with
Xxxxxxx Xxxxxxxxx as described in the Prospectus. The Company has obtained key
person life insurance with an insurer rated at least AA or better in the most
recent addition of "Best's Life Reports" in the amount of $2,000,000 on the life
of Xxxxxxx Xxxxxxxxx. Such insurance shall be maintained in full force and
effect for a period of three years. The Company shall be the sole beneficiary of
such policy.
(ff) No securities of the Company have been sold by the
Company in the last three fiscal years, except as disclosed in Part II of the
Registration Statement.
(gg) The minute books of the Company have been made available
to Underwriters' Counsel and contain a complete summary of all meetings and
actions of the Board of Directors and Stockholders of the Company since its date
of formation. The stock ledgers of the Company are correct and accurate and
reflect the record ownership of all owners of the Company's capital stock. All
persons who are owners of 5% or more of the Common Stock of the Company as set
forth in the section of the Prospectus entitled "Principal Stockholders" are
properly included therein and all transactions between "promoters" of the
Company and the Company have been properly described in accordance with SEC
Rules and Regulations.
(hh) Except as disclosed in writing to the Underwriters, no
officer, or director or stockholder of the Company has any affiliation or
association with any member of the NASD.
(ii) Effective ___________, 2002, 99 Cent Stuff, LLC will
transfer all of its assets to 99 Cent Stuff, Inc. 99 Cent Stuff, LLC in exchange
for an aggregate of 6,000,000 shares of 99 Cent Stuff, Inc.'s common stock. Xx.
Xxxxxxxxx will contribute to the capital of 99 Cent Stuff, Inc. the $14.6
million of loans and all current interest owed to him at the date of such
contribution.
2. Purchase, Sale and Delivery of the Securities and Agreement to
Issue Underwriters' Purchase Option
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to Underwriters and each Underwriter
agrees, severally and not jointly, to purchase from the Company the respective
number of Firm Securities set forth in Schedule A hereto opposite its name,
subject to Section (b) hereof at the price per Unit set forth below in Section
2(c).
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase severally and not jointly, up to an additional 300,000
Units. The option granted hereby will expire 45 days after the date of the
Prospectus, and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Firm Securities upon notice by the Underwriters
through the Representative to the Company, setting forth the number of
Overallotment Securities as to which the Underwriter is then exercising the
option and the time and date of payment and delivery for such Overallotment
Securities. Any such time and date of delivery shall be determined by the
Representative, but shall not be later than seven full business days after the
exercise of sai option, nor in any event prior to the Closing Date, as defined
in paragraph (c) below, unless otherwise agreed to between the Representative
and the Company. In the event such option is exercised, the Underwriters shall
purchase such number of Overallotment Securities then being purchased which
shall have been allocated to the Underwriters, and which such shall have agreed
to purchase, subject in each case to such adjustments as the Underwriters in
their discretion shall make to eliminate any sales or purchases of fractional
Securities. Nothing herein contained shall obligate the Underwriters to make any
over-allotments. No Overallotment Securities shall be delivered unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Representative, vFinance Investments, Inc., 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxx
Xxxxx, Xxxxxxx 00000, or at such other place as shall be designated by the
Representative for the respective accounts of the several Underwriters. Such
delivery and payment shall be made at 10:00 a.m. Florida time on ______________,
2002 or at such other time and date as shall be designated by the
Representative, but not more than three (3) business days after the Effective
Date of the Registration Statement (such time and date of payment and delivery
being hereafter called "Closing Date"). In addition, in the event that any or
all of the Overallotment Securities are purchased by the Underwriters, payment
of the purchase price for, and delivery of certificates for such Overallotment
Securities shall be made at the above-mentioned office or at such other place
and at such time (such time and date of payment and delivery being hereinafter
called "Overallotment Closing Date") as shall be agreed upon by the Underwriters
and the Company on each Overallotment Closing Date as specified in the notice
from the Underwriters to the Company. Delivery of the certificates for the Firm
Securities and the Overallotment Securities, if any, shall be made to the
Underwriters against payment by the Underwriters of the purchase price for the
Firm Securities and the Overallotment Securities, if any, to the order of the
Company as the case may be by certified check in New York Clearing House funds,
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two (2) business days prior to
Closing Date or the relevant Overallotment Closing Date, as the case may be. The
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be made available to the Underwriters at the above-mentioned office or
such other place as the Underwriter may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the relevant Overallotment Closing Date, as the case may be.
The purchase price of the Securities to be paid by the Underwriters to
the Company for the Securities purchased under clauses (a) and (b) above will be
[______] per Unit (which price is net of the Underwriters, discount and
commissions). The Company shall not be obligated to sell any Securities
hereunder unless all Firm Securities to be sold by the Company are purchased
hereunder. The Company agrees to issue and sell the Securities to the
Underwriter in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to
the Underwriters, the Underwriters' Purchase Option at a purchase price of
$[200.00] which Underwriters' Purchase option shall entitle the holders thereof
to purchase an aggregate of 200,000 Units. The Underwriters' Purchase Option
will expire five years after such date at an initial exercise price equal to one
hundred and fifty percent (150%) of the initial public offering price of the
Units. The Underwriters' Purchase Option Agreement and form of Units Purchase
Option Certificate shall be substantially in the form filed as an Exhibit to the
Registration Statement. The Securities to be received by the Underwriters upon
exercise of the Underwriters' Units Purchase Option shall be substantially the
same as delivered to the public in the Offering. Payment for the Underwriters'
Units Purchase Option shall be made on the Closing Date. The Company has
reserved and shall continue to reserve a sufficient number of Units, Shares and
Warrants for issuance upon exercise of the Underwriters, Purchase option.
3. Public offering of the Securities.
As soon after the Registration Statement becomes effective and as the
Underwriters deems advisable, but in no event more than three (3) business days
after such Effective Date, the Underwriters shall make a public offering of the
Securities (other than to residents of or in any jurisdiction in which
qualification of the Securities is required and has not become effective) at the
price and upon the other terms set forth in the Prospectus and otherwise in
compliance with the Rules and Regulations. The Underwriters may allow such
concessions and discounts upon sales to other dealers as set forth in the
Prospectus. The Underwriters may from time to time increase or decrease the
public offering price after distribution of the Securities has been completed to
such extent as the Underwriters, in their sole discretion, deem advisable. 4.
Covenants of the Company.
The Company covenants and agrees with the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act: (i) before termination of the offering of the Securities
by the Underwriters which the Underwriters shall not previously have been
advised and furnished with a copy; or (ii) to which the Underwriters shall have
objected; or (iii) which is not in compliance with the Act, the Exchange Act or
the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriters and confirm by notice in
writing: (i) when the Registration Statement, as amended, 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 and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution or proceeding for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose; (iv) of the receipt of
any comments from the Commission; and M of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Underwriters
pursuant to Rule 424(b)(4)) 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.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the Offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), will furnish the Underwriters with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the Underwriters
or Xxxxxx & Xxxx, P.A. ("Underwriters' Counsel"), shall reasonably object.
(e) The Company shall cooperate in good faith with the
Underwriters, and Underwriters' Counsel, at or prior to the time the
Registration Statement becomes effective, in endeavoring to qualify the
Securities for offering and sale under the securities laws of such jurisdictions
as the Underwriters may reasonably designate, and shall cooperate with the
Underwriters and Underwriters' Counsel in the making of such applications, and
filing such documents and shall furnish such information as may be required for
such purpose; provided, however, the Company shall not be required to qualify as
a foreign corporation or file a general consent to service of process in any
such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Underwriters agree that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriters' Counsel, and the Company will furnish
to the Underwriters a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period commencing on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(h) During a period of five (5) years after the date hereof
and provided that the Company is required to file reports with the Commission
under Section 12 of the Exchange Act, the Company will furnish to its
stockholders, as soon as practicable, annual reports (including financial
statements audited by independent public accountants), and will deliver to the
Representative:
(i) as soon as they are available copies of all
reports (financial or other) mailed to stockholders;
(ii) as soon as they are available copies of all
reports and financial statements furnished to or filed with
the Commission, the Nasdaq Stock Market or any securities
exchange;
(iii) every press release and every material news
item or article of interest to the financial community in
respect of the Company and any future subsidiaries or their
affairs which was released or prepared by the Company;
(iv) any additional information of a public nature
concerning the Company and any future subsidiaries or their
respective businesses which the Underwriters may reasonably
request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or
13E-4 received or filed by the Company from time to time.
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.
(i) For as long as the Company is required to file reports
with the Commission under Section 12 of the Exchange Act, the Company will
maintain a Transfer Agent and Warrant Agent, which may be the same entity, and,
if necessary under the same jurisdiction of incorporation as the Company, as
well as a Registrar (which may be the same entity as the Transfer and Warrant
Agent) for its Common Stock.
(j) The Company will furnish to the Underwriters or pursuant
to the Underwriters, direction, without charge, at such place as the
Underwriters may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (one of which copies will be manually executed 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 reasonably request.
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) 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 securities of the Company.
(l) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the provisions, set forth under the
caption "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used directly or indirectly to acquire any securities previously issued by
the Company.
(m) 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.
(n) The Company shall furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each
Overallotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as stated
in their letters to be furnished pursuant to Section 6(k) hereof.
(o) For a period of three (3) years from the Closing Date, the
Company shall furnish to the Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Representative's request; (ii) a list of holders of Securities upon the
Representatives' request. For a period of four (4) years from the Closing Date,
the Company shall furnish to the Representative at the Company's sole expense,
if requested, on up to four (4) occasions per year a list of, if any, the
securities positions of participants in the Depository Trust Company.
(p) Until a date which is three (3) years from the Closing
Date, the Representative shall be entitled to appoint an individual who shall be
permitted to attend all meetings of the Board and to receive all notices and
other correspondence and communications sent by the Company to members of the
Board, and copies of all minutes thereof. The Company shall reimburse the
Underwriters' designee for his or her out-of-pocket expenses reasonably incurred
and authorized in advance by the Company in connection with his or her
attendance of the Board meetings and the designee shall receive other
compensation equal to the entitlement of other non-officer directors. The
Company, during the three (3) year period, shall schedule no less than four (4)
formal and "in person" Board meetings of its Board of Directors in each year, at
which meetings such advisor shall be permitted to attend as set forth herein.
Such meetings shall be held quarterly and advance notice of such meetings,
identical to the notice given to the directors, shall be given to the
Underwriter's designee. Further, during such period, the Company and its
principal stockholders shall give advance notice to the Underwriter's designee
with respect to any proposed acquisitions, mergers, reorganizations or other
similar transactions.
(q) In lieu of the Representative's right to designate a
designee, the Representative shall have the right during the three (3) year
period, at the mutual agreement of the Company and the Representative, to
designate one (1) person for election as a director of the Company and the
Company will utilize its best efforts to obtain the election of such person who
shall be entitled to receive the same, expense reimbursements and other benefits
set forth in Section 4(p). The Company agrees to indemnify and hold the
Underwriter's designee or director harmless against any and all claims, actions,
damages, costs and expenses and judgments arising solely out of the designee's
participation on the Board of Directors.
(r) For a period equal to the lesser of (i) five (5) years
from the date hereof, or (ii) the sale to the public of the Underwriters' Option
Units, the Company will not take any action or actions that may prevent or
disqualify the Company's use of Form S-1 or, if applicable, Form S-3 (or other
appropriate form) for the registration under the Act of the Underwriters' Option
Units and underlying warrants and shares of Common Stock.
(s) For a period of five (5) years from the date hereof, use
its best efforts at its cost and expense to maintain the listing of the
Securities on the Nasdaq SmallCap Stock Market.
(t) Following the Effective Date of the Registration Statement
and for a period of [two (2)] years thereafter, the Company shall, at its sole
cost and expense, and on the Underwriters' request, furnish the Underwriters
with an opinion of counsel and blue sky memorandum setting forth the states in
which the securities may be traded in non-issuer transactions under the Blue Sky
Laws of the United States with respect to the secondary sale of the Securities
under the blue sky laws of the various states prepared by securities counsel to
the Company.
(u) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of six (6) years from
the Closing Date.
(v) For a period of 24 months commencing on the Closing Date,
except with the written consent of the Representative, the Company will not
issue or sell, directly or indirectly more than 100,000 shares of its capital
stock, or sell or grant options, or warrants or rights to purchase any shares of
its capital stock, except pursuant to (i) this Agreement, (ii) the Underwriters'
Purchase Option, (iii) the exercise of warrants and options of the Company
heretofore issued and described in the Prospectus, [and (iv) the grant of
options and the issuance of shares issued upon exercise of options issued or to
be issued under the Company's stock option plan as described in the Prospectus
("Stock Option Plan").]
(w) Subsequent to the dates as of which information is given
in the Registration Statement and Prospectus and prior to the Closing Dates,
except as disclosed in or contemplated by the Registration Statement and
Prospectus, (i) the Company will not have incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions
other than in the ordinary course of business; (ii) there shall not have been
any change in the capital stock, funded debt (other than regular repayments of
principal and interest on existing indebtedness) or other securities of the
Company, any material adverse change in the condition (financial or other),
business, operations, income, net worth or properties, including any material
loss or damage to the properties of the Company (whether or not such loss is
insured against), which could materially adversely affect the condition
(financial or other), business, operations, income, net worth or properties of
the Company; and (iii) the Company shall not pay or declare any dividend or
other distribution on its Common Stock or its other securities or redeem or
repurchase any of its Common Stock or other securities.
(x) At the Closing Date, the Company shall enter into a
management and consulting agreement with the Representative for a 12 month
period at a rate of $5,000 per month, [this fee shall be prepaid at Closing].
(y) Company shall grant the Representative the right of first
refusal for a period of three (3) years from the Closing Date for any public or
private offering of its securities or those of its affiliates or present or
future subsidiaries. Upon notification from the Company of its intent to
undertake an offering of securities, the Underwriter will have a period of seven
(7) business days to respond in writing of their intent to participate in such
proposed offering.
(z) In connection with the redemption of the Warrants, the
Representative shall be entitled to a fee of a fee of 5% of the exercise price
for each Warrant exercised; provided, however, that the Representative will not
be entitled to receive such compensation in warrant exercise transactions in
which (i) the market price of Common Stock at the time of exercise is lower than
the exercise price of the warrants; (ii) the warrants are held in any
discretionary account; (iii) disclosure of compensation arrangements is not
made, in addition to the disclosure provided in this Prospectus, in documents
provided to holders of warrants at the time of exercise; (iv) the holder of the
warrants has not confirmed in writing that the Representative solicited such
exercise; or (v) the solicitation of exercise of the warrants was in violation
of Regulation M promulgated under the Securities Act. The Company hereby
covenants and agrees that it not employee, retain or hire any other person or
broker deale in connection with the redemption of the Warrants, without the
prior written consent of the Representative. The covenants and agreements
contained in this clause shall survive termination of this Agreement.
(bb) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date
and the Overallotment Closing Date (to the extent not paid at the Closing Date)
all its expenses and fees (other than fees of Underwriters, counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation:
(i) the fees and expenses of accountants and counsel
for the Company; (ii) all costs and expenses incurred in
connection with the preparation, duplication, mailing,
printing and filing of the Registration Statement and the
Prospectus and any amendments and supplements thereto and the
printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements, Agreement Between Underwriters, and related
documents, including the cost of all copies thereof and of the
Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the
Underwriters in quantities as hereinabove stated; (iii) the
printing, engraving, issuance and delivery of the Securities
and Underwriters' Option Units including any transfer or other
taxes payable thereon; (iv) disbursements and fees of
Underwriters' Counsel in connection with the qualification of
the Securities under state or foreign securities or "Blue Sky"
laws and determination of the status of such securities under
legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the
"Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, which Underwriters, Counsel fees (exclusive
of filing fees and disbursements) shall equal $15,000 and of
which $______ has previously been paid; (v) advertising costs
and expenses, including but not limited to costs and expenses
in connection with information meeting, one tombstone
advertisement, at least four bound volumes of the offering
documents for the Underwriters and its counsel and prospectus
memorabilia; (vi) fees and expenses of the transfer agent;
(vii) the fees
payable to the NASD; (viii) investigative search fees in an
amount not to exceed $2,5000; and (ix) the fees and expenses
incurred in connection with the listing of the Securities on
the Nasdaq Stock Market and Boston Stock Exchange. All fees
and expenses payable to the Underwriters hereunder shall be
payable at the Closing Date or Overallotment Closing Date, as
applicable; provided, however, the Company shall pay such fees
and costs in advance of the Closing Date if requested by the
Underwriter. The Underwriters shall be responsible for all of
its own costs of counsel.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 11, the
Company shall reimburse and indemnify the Underwriters for up to its
out-of-pocket actual expenses reasonably incurred in connection with the
transactions contemplated hereby including the fees and disbursements of counsel
for the Underwriters.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriters a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Firm
Securities, $15,000 of which has been paid to date to the Underwriters. The
Company will pay the remainder of the non-accountable expense allowance on the
Closing Date by certified or bank cashier's check or, at the election of the
Underwriter, by deduction from the proceeds of the offering contemplated herein.
In the event the Underwriters elect to exercise the over-allotment option
described in Section 2(b) hereof, the Company further agrees to pay to the
Underwriters on the Overallotment Closing Date (by certified or bank cashier's
check or, at the Underwriters, election, by deduction from the proceeds of the
offering) a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds received by the Company from the sale of the Overallotment
Securities.
6. Conditions of the Underwriters, Obligations.
The obligations of the Underwriters hereunder shall be subject to the
continuing accuracy in all material respects of the representations and
warranties of the Company herein as of the Closing Date and each Overallotment
Closing Date, if any, as if they had been made on and as of the Closing Date or
each Overallotment Closing Date, as the case may be; the accuracy on and as of
the Closing Date or Overallotment Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Overallotment
Closing Date, if any, of each of its material covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have be declared
effective by the Commission not later than 5:30 P.M., Florida time, on the date
of this Agreement or such later date and time as shall be consented to in
writing by the Underwriters, and, at Closing Date and each Overallotment Closing
Date, if any, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending or contemplated to the knowledge of the
Company by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriters of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Underwriters shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, and the opinion of its
counsel is material or omits to state a fact which, in the Representative's
opinion, is material and is required to be stated therein or is necessary to
make the statements therein not misleading, or that the Prospectus, or any
supplement thereto, contains an untrue statement of fact which, in the
Representative's reasonable opinion, or the opinion of its counsel is material,
or omits to state a fact which, in the Representative's reasonable opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) The Company's registration statement pursuant to the
Exchange Act on Form 8-A has been declared effective by the Commission.
(d) At the Closing Date and the Overallotment Closing Date,
the Representative shall have received the favorable opinion of Sachs, Sax &
Xxxxx, LLP, counsel to the Company, dated the Closing Date, or Overallotment
Closing Date, as the case may be, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company: (A) has been dul (i) The Company:
(A) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of
Florida with full corporate power and authority to own and
operate its properties and to carry on its business as set
forth in the Registration Statement and Prospectus; (B) the
Company is duly licensed or qualified as a foreign corporation
in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real
property in such jurisdiction it is required to be so licensed
or qualified except where failure to be so qualified or
licensed would have no material adverse effect upon the
Company; and (C) to the best of counsel's knowledge, the
Company has not received any notice of proceedings relating to
the revocation or modification of any such license or
qualification which revocation or modification would have a
material adverse effect upon the Company.
(ii) The Registration Statement, (ii) The
Registration Statement, each Preliminary Prospectus that has
been circulated and the Prospectus and any post-effective
amendments or supplements thereto (other than the exhibits,
financial statements, schedules and other financial and
statistical data included therein, as to which no opinion need
be rendered) comply as to form in all material respects with
the requirements of the Act and Regulations and the conditions
for use of a registration statement on Form S-1 have been
satisfied by the Company.
(iii) To the best of such counsel's (iii) To the best
of such counsel's knowledge, except as described in the
Prospectus, the Company does not own an interest of a
character required to be disclosed in the Registration
Statement in any corporation, partnership, joint venture,
trust or other business entity;
(iv) The Company has a duly (iv) To the best of such
counsel's authorized, issued and outstanding capitalization as
set forth in the Prospectus as of the date indicated therein,
under the caption "Capitalization". The Securities,
Underwriters' Purchase Option and the Underwriters' Option
Units conform or upon issuance will conform in all material
respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly
authorized and validly issued and, to the best knowledge of
counsel, all shares of capital stock are fully paid and
non-assessable; the holders thereof are not, except by reason
of their own conduct or acts, subject to personal liability by
reason of being such holders, and none of such
securities were issued in violation of the preemptive rights
of any holder of any security of the Company. The Securities
to be sold by the Company hereunder, the Underwriters'
Purchase Option to be sold by the Company under the
Underwriters' Purchase Option Agreement and Underwriters,
Option Units 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 conform or
upon issuance will conform to the description thereof
contained in the Prospectus; are not subject to any preemptive
or other similar rights of any stockholder of the Company;
that, to such counsel's knowledge, the holders of the
Securities and Underwriters' Option Units shall not be
personally liable for the payment of the Company's debts
solely by reason of being such holders except as they may be
liable by reason of their own conduct or acts; and that the
certificates representing the Units, Underwriters' Purchase
Option and Underwriters' Option Units are in due and proper
legal form. Upon delivery of the Units to the Underwriters
against payment therefor as provided for in this Agreement,
the Underwriters (assuming they are bona fide purchasers
within the meaning of th Uniform Commercial Code) will acquire
good title to the Units, free and clear of all liens,
encumbrances, equities, security interests and claims.
(v) Each of the Registration Statement and the Form
8-A has been declared effective under the Act, and, if
applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and, to the best
of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and to the best of such counsel's knowledge, no proceedings
for that purpose have been instituted or are pending or
threatened or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A)
there are no material contracts or other documents required 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 (B) the
descriptions in the Registration Statement and the Prospectus
and any supplement or amendment thereto regarding such
material contracts or other documents to which the Company is
a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be
shown by Form S-1 and the Rules and Regulations;
(vii) This Agreement, the Underwriters, Purchase
Option Agreement, the Warrant Agreement between the Company,
the Warrant Agent and Representative and the Financial
Consulting Agreement have each been duly and validly
authorized, executed and delivered by the Company, and
assuming that each is a valid and binding agreement of the
Underwriter, as the case may be, constitutes a legally valid
and binding agreement of the Company, enforceable as against
the Company in accordance with their respective terms (except
as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting
enforcement of creditors rights and the application of
equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited
by applicable law or pursuant to public policy).
(viii) Neither the execution or delivery by the
Company of this Agreement, the Underwriters' Purchase Option
Agreement, the Warrant Agreement or the Financial Consulting
Agreement, nor its performance hereunder or thereunder, nor
its consummation of the transactions contemplated herein or
therein, nor the issuance of the Securities pursuant to this
Agreement, 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 imposition
of any material lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of
any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company except to the extent such event
will not have a material adverse effect upon the Company
pursuant to the terms of, (A) the Certificate of Incorporation
or By-Laws of the Company, (B) to the best knowledge of such
counsel, any indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument that is
material to the Company to which the Company is a party or by
which it is bound or to which its properties or assets
(tangible or intangible) are subject, or any indebtedness, or
(C) to the best knowledge of such counsel, and except to the
extent it would not have a material adverse effect on the
Company, any statute, judgment, decree, order, rule or
regulation applicable to the Company or any arbitrator, court,
regulatory body or administrative agency or other governmental
agency or body, having jurisdiction over the Company or any of
its respective activities or properties.
(ix) No consent, approval, authorization or order,
and no filing with, any court, regulatory body, government
agency or other body (other than such as may be required under
state securities laws, as to which no opinion need be
rendered) is required in connection with the issuance by the
Company of the Securities pursuant to the Prospectus and the
Registration Statement, the performance of this Agreement, the
Underwriters' Option Agreement for Units and the Financial
Consulting Agreement by the Company, and the taking of any
action by the Company contemplated hereby or thereby, which
has not been obtained;
(x) Except as described in the Prospectus, to the
best knowledge of such counsel, the Company is not in breach
of, or in default under, any material term or provision of any
indenture, mortgage, installment sale agreement, deed of
trust, lease, voting trust agreement, stockholders, agreement,
note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which any of the
property or assets (tangible or intangible) of the Company is
subject or affected; and, to the best knowledge of counsel,
the Company is not in violation of any material term or
provision of its Certificate of Incorporation or By-Laws or in
violation of any material franchise, license, permit,
judgment, decree, order, statute, rule or regulation material
to the Company business;
(xi) The statements in the Prospectus under the
captions "DESCRIPTION OF BUSINESS" "MANAGEMENT," "PRINCIPAL
STOCKHOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION OF CAPITAL
STOCK," and "SHARES ELIGIBLE FOR FUTURE SALE" and "RISK
FACTORS" have been reviewed by such counsel, and only insofar
as they refer to statements of law, descriptions of statutes,
rules or regulations or legal conclusions, are correct in all
material respects;
(xii) To the best of such counsel's knowledge, except
as described in the Prospectus, no person, corporation, trust,
partnership, association or other entity holding securities of
the Company has the contractual right to include and/or
register any securities of the Company in the Registration
Statement, require the Company to file any registration
statement or, if filed, to include any security in such
registration statement;
(xiii) the Securities are eligible for listing on the
Nasdaq SmallCap Stock Market and Boston Stock Exchange.
In addition, such counsel shall state that such counsel has
participated in meetings and teleconferences with officers and other
Underwriters of the Company, Underwriters of the independent public accountants
for the Company and Underwriters of the Underwriters at which the contents of
the Registration Statement, the Prospectus and related matters were discussed
and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus and made no independent
check or verification thereof, on the basis of the foregoing, no facts have come
to the attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto at the time such Registration
Statement or amendment became effective or the Prospectus as of the date of such
opinion contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not misleading
(it being understood that such counsel need express no opinion with respect to
the financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus or with respect to
statements or omissions made therein in reliance upon information furnished in
writing to the Company on behalf of any Underwriters expressly for use in the
Registration Statement or the Prospectus).
In rendering such opinion, such counsel may rely, as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written statements
of officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company; provided,
that copies of any such statements or certificates shall be delivered to
Underwriters' Counsel if requested.
(e) At each Overallotment Closing Date, if any, the
Underwriters shall have received the favorable opinion of counsel to the
Company, each dated the Overallotment Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming as of the Overallotment Closing Date the statements made by such
firm, in their opinion, delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the
Overallotment Closing Date, Underwriters' Counsel shall have been furnished such
documents, certificates and other legal opinions (including, without limitation,
legal opinions related to patent, trademark or Food and Drug matters) as they
may reasonably require and request for the purpose of enabling them to review or
pass upon the matters referred to in subsection (d) of this Section 6, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to the Closing Date and each Overallotment Closing
Date, if any: (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company shall not be in material
default under any provision of any instrument relating to any outstanding
indebtedness for money borrowed, except as described in the Prospectus; (iv) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or
to its knowledge threatened against the Company, or affecting any of its
properties or businesses before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vi) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(h) At the Closing Date and each Overallotment Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Overallotment
Closing Date, as the case may be, to the effect that:
(i) The representations and warranties of the Company
in this Agreement are, in all material respects, true and
correct, as if made on and as of the Closing Date or the
Overallotment Closing Date, as the case may be, and the
Company has complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its
part to be performed or satisfied at or prior to such Closing
Date or Overallotment Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings
for that purpose have been instituted or are pending or, to
the best of each of such person's knowledge, are contemplated
or threatened under the Act;
(iii) The Registration Statement an the Prospectus
and, if any, each amendment and each supplement thereto,
contain all statements and information required to be included
therein, and none of the Registration Statement, the
Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto included any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading except to the
extent any such material fact may be corrected in the Final
Prospectus; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus and except as otherwise contemplated therein: (A)
the Company has not incurred up to and including the Closing
Date or the Overallotment Closing Date, as the case may be,
other than in the ordinary course of its business, any
material liabilities or obligations, direct or contingent; (B)
the Company has not paid or declared any dividends or other
distributions on its capital stock; (C) the Company has not
entered into any material transactions not in the ordinary
course of
business; (D) there has not been any change in the capital
stock or any increase in long-term debt or any increase in the
short-term borrowings (other than any increase in the
short-term borrowings in the ordinary course of business) of
the Company; (E) the Company has not sustained any material
loss or damage to its property or assets, whether or not
insured; (F) there is no litigation which is pending or, to
the Company's knowledge, threatened against the Company which
is required to be set forth in an amended or supplemented
Prospectus which has not been set forth;
(v) Neither the Company nor any o its officers or
affiliates shall have taken, and the Company, its officers and
affiliates will not take, directly or indirectly, any action
designed to, or which might reasonably be expected to, cause
or result in the stabilization or manipulation of the price of
the Company's securities to facilitate the sale or resale of
the Units.
References to the Registration Statement and the Prospectus in this
subsection (h) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriters shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters, from Daszhal Xxxxxx, XX.
(i) confirming that they are independent public
accountants with respect to the Company within the meaning of
the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the
combined financial statements and supporting schedules of the
Company included in the Registration Statement comply as to
form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations
thereunder and that the Underwriters may rely upon the opinion
of Daszhal Xxxxxx, XX, with respect to the financial
statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited
interim combined financial statements of the Company (with an
indication of the date of the latest available unaudited
interim combined financial statements), a reading of the
latest available minutes of the stockholders and board of
directors and the various committees of the boards of
directors of the Company, consultations with officers and
other employees of the Company responsible for financial and
accounting matters and other specified procedures and
inquiries, nothing has come to their attention that would lead
them to believe that (A) the unaudited combined financial
statements and supporting schedules of the Company included in
the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited combined financial statements of the
Company included in the Registration Statement, or (B) at a
specified date not more than five (5) days prior to the
Effective Date of the Registration Statement, there has been
any change in the capital stock or long-term debt of the
Company, or any decrease in the stockholders' equity or net
current assets or net assets of the Company as compared with
amounts shown in the financial statements included in the
Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was
any change or decrease, setting forth the amount of such
change or decrease, and (C) during the period from
_________________, to a specified date not more than five (5)
days prior to the Effective Date of the Registration
Statement, there was any decrease in net revenues, net
earnings or increase in net earnings per common share of the
Company, in each case as compared with the corresponding
period beginning _______________ other than as set forth in or
contemplated by the Registration Statement, or, if there was
any such decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5)
days prior to the Effective Date of the Registration
Statement, the amount of liabilities of the Company (including
a breakdown of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of Securities, percentages of revenues and
earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus in each
case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general
accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(vi) stating that they have not during the
immediately preceding five (5) year period brought to the
attention of the Company's management any "weakness", as
defined in Statement of Auditing Standard No. 60
"Communication of Internal Control Structure Related Matters
Noted in an Audit," in the Company's internal controls;
(vii) stating that they have in addition carried out
certain specified procedures, not constituting an audit, with
respect to certain pro forma financial information which is
included in the Registration Statement and the Prospectus and
that nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro
forma financial information does not comply in form in all
material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of that information; and
(viii) statements as to such other matters incident
to the transaction contemplated hereby as the Underwriters may
reasonably request.
(k) At the Closing Date and each Overallotment Closing Date,
the Underwriters shall have received from Daszhal Xxxxxx, XX, a letter, dated as
of the Closing Date, or Overallotment Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section, except that the specified date referred to
shall be a date not more than five days prior to Closing Date and, if the
Company has elected to rely on Rule 430A of the Rules and Regulations, to the
further effect that they have carried out procedures as specified in clause
(iii) of subsection (i) of this Section with respect to certain amounts,
percentages and financial information as specified by the Underwriters and
deemed to be a part of the Registration Statement pursuant to Rule 430A(b) and
have found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (iii).
(1) On each of Closing Date and Overallotment Closing Date, if
any, there shall have been duly tendered to the Underwriters for their accounts
the appropriate number of Securities against payment therefore.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the
Overallotment Closing Date, if any, and no proceedings for that purpose shall
have been instituted or to its knowledge or that of the Company shall be
contemplated.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Overallotment
Closing Date, as the case may be, is not so fulfilled, the Underwriters may
terminate this Agreement or, if the Underwriters so elects, it may waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters, including specifically each person who controls the
Underwriters ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, against any and all losses, claims,
damages, reasonable expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriters or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in any Preliminary Prospectus (except that the indemnification contained in
this paragraph with respect to any preliminary prospectus shall not inure to the
benefit of the Underwriters or to the benefit of any person controlling the
Underwriters on account of any loss, claim, damage, liability or expense arising
from the sale of the Firm Securities by the Underwriters to any person if a copy
of the Prospectus, as amended or supplemented, shall not have been delivered or
sent to such person within the time required by the Act, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended and supplemented, and such correction would have
eliminated the loss, claim, damage, liability or expense), the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included Securities of the Company issued
or issuable upon exercise of the Underwriters' Unit Purchase Option; or (iii) in
any application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, Nasdaq Stock Market, Inc. or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless in any case above such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriters by or on behalf of such
Underwriter, through its Counsel, directly or through the Representative,
expressly for use in an Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) The Underwriters, severally but not jointly, hereby
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, its agents and each other
person, if any, who controls the Company within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company to the Underwriters but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto in any post-effective amendment, new registration statement
or prospectus, or in any application made in reliance upon, and in conformity
with, written information furnished to the Company with respect to the
Underwriters by such Underwriters expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any post-effective amendment, new registration
statement or prospectus, or in any such application, directly related to the
transactions effected by the Underwriters in connection with this offering;
provided that such written information or omissions only pertain to disclosures
in the Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto, in any post-effective amendment, new
registration statement or prospectus or in any such application, provided,
further, that the liability of each Underwriters to the Company shall be limited
to the product of the Underwriters' discount or commission for the Units
multiplied by the number of Units sold by the Underwriters hereunder. The
Company acknowledges that the statements with respect to the public offering of
the Firm Securities set forth under the heading "Underwriting" and the
stabilization legend and the last paragraph of the cover page in the Prospectus
have been furnished by the Underwriters expressly for use therein and any
information furnished by or on behalf of the Underwriters filed in any
jurisdiction in order to qualify the Securities under State Securities laws or
filed with the Commission, the NASD or any securities exchange constitute the
only information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus and the Underwriters hereby confirm that such
statements and information are true and correct in all material respects on the
date hereof and do not omit a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall be so on each
Closing Date and Overallotment Closing Date.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, the indemnifying party may assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnifying party or
parties shall have reasonably concluded that there may be defenses available to
it or them that are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided however, that
such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, 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 this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided, by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriters are the indemnified party the
relative benefits received by the Company on the one hand, and the Underwriter,
on the other, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses) bear to
the total underwriting discounts and commissions received by the Underwriters
hereunder, in each case as set forth in the table on the Cover Page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriters shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriters has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto, shall be deemed to be representations, warranties and
agreements at the Closing Date and the Overallotment Closing Date, as the case
may be, and such representations, warranties and agreements of the Company and
the indemnity agreements contained in Section 7 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Underwriters, the Company, or any controlling person, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
9. Effective Date
This Agreement shall become effective ____________, 2002, at _____
a.m., Florida time, on the next full business day following the date hereof, or
at such earlier time which shall be concurrent with the Registration Statement
becoming effective as the Underwriters, in their discretion, shall release the
Securities for the sale to the public, provided, however that the provisions of
Sections 5, 7 and 10 of this Agreement shall at all times be effective. For
purposes of this Section 9, the Securities to be purchased hereunder shall be
deemed to have been so released upon the earlier of dispatch by the
Representative of telegrams to securities dealers releasing such Securities for
offering or the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the
Securities.
10. Termination
(a) The Representative shall have the right to terminate this
Agreement: (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a
Florida State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or if the Company shall have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; or (vii) if there shall have been such material adverse change in the
conditions or prospects of the Company, involving a change not contemplated by
the Registration Statement, or (viii) if there shall have been such material
adverse general market conditions as in the Underwriters' reasonable judgment
would make it inadvisable to proceed with the Offering, sale or delivery of the
Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5(b) shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
(c) Substitution of Underwriters. If any Underwriter or
Underwriters shall default in its or their obligations to purchase Units
hereunder and the aggregate numbers of Units which such defaulting Underwriter
or Underwriters agreed but failed to purchase does not exceed ten percent (10%)
of the total number of shares underwritten, the other Underwriter shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the Units which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters shall so default and the
aggregate number of Units with respect to which such default or defaults occur
is more than ten percent (10%) of the total number of Units underwritten and
arrangements satisfactory to the Underwriters and the Company for the purchase
of such Units by other persons are not made within forty-eight (48) hours after
such default, this Agreement shall terminate.
If the remaining Underwriter or substituted Underwriters are
required hereby or agree to take up all or part of the Units of a defaulting
Underwriter or Underwriters as provided in this Section 10, (i) the Company
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
number of Units to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken as the basis of their underwriting obligation for
all purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Underwriters of its liability to the Company or the other
Underwriters for damages occasioned by its default hereunder. Any termination of
this Agreement pursuant to this Section 10 shall be without liability on the
part of any non-defaulting Underwriters or the Company, except for expenses to
be paid or reimbursed pursuant to Section 5 and except for the provisions of
Section 7.
11. Default by the Company.
If the Company shall fail at the Closing Date or any Overallotment
Closing Date, as applicable, to sell and deliver the number of Securities which
it is obligated to sell hereunder on such date, then this Agreement shall
terminate (or, if such default shall occur with respect to any Overallotment
Securities to be purchased on an Overallotment Closing Date, the Underwriters
may at the Underwriters, option, by notice from the Underwriters to the Company,
terminate the Underwriters, obligations to purchase Securities from the Company
on such date) without any liability on the part of any non-defaulting party
other than pursuant to Section 5 and Section 7 hereof. No action taken pursuant
to this Section shall relieve the Company from liability, if any, in respect of
such default.
12. Notices.
All notices and communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given if mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed to the Representative at vFinance
Investments, Inc., 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxx Xxxxx, Xxxxxxx
33431,Attention: _______________, with a copy to Xxxxxx & Xxxx, P.A., 000 Xxxx
Xxx Xxxx Xxxxxxxxx, Xxxxx 0000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxxxx
X. Xxxxxxxxx, Esq. Notices to the Company shall be directed to the Company at
0000 Xxxxx Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, Attention: Xxxxxxx
Xxxxxxxxx, with a copy to Sachs, Sax & Xxxxx, 000 Xxxxxx Xxxx, Xxxx Xxxxx,
Xxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxx, Esq.
13. Parties.
This Agreement shall inure solely to the benefit of and shall be
binding upon, the several Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and their respective heirs and
legal representatives and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of or by virtue of
this Agreement or any provisions herein contained. No purchaser of Securities
from any Underwriters shall be deemed to be a successor by reason merely of such
purchase.
14. Governing Law/Construction/jurisdiction
(a) This Agreement shall be construed in accordance with the
laws of the State of Florida, without giving effect to conflict of laws.
(b) The Company (a) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in a Florida State Court, County of Broward, or in the United States
District Court for the Southern District of Florida, (b) waives any objection
which the Company may have now or hereafter to the venue of any such suit,
action or proceeding, and (c) irrevocably consents to the jurisdiction of the
Florida State Court, County of Broward and the United States District Court for
the Southern District of Florida in any such suit, action or procedure. Each of
the Company and the Underwriters further agree to accept and acknowledge service
of any and all process which may be served in any such suit, action or
proceeding in the Florida State Court, and agrees that service of process upon
the Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the company in any such suit,
action or proceeding. In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
15. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which taken together shall
be deemed to be one and the same instrument.
16. Waiver.
The waiver by either party of the breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach.
17. Assignment.
Except as otherwise provided within this Agreement, neither party
hereto may transfer or assign this Agreement without prior written consent of
the other party.
18. Titles and Captions.
All article, section and paragraph titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor affect the interpretation of this Agreement.
19. Pronouns and Plurals.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the Person or
Persons may require.
20. Entire Agreement.
This Agreement contains the entire understanding between and among the
parties and supersedes any prior understandings and agreements among them
respecting the subject matter of this Agreement.
If the foregoing correctly sets forth our understanding, please so
indicate in the space provided below for that purpose, whereupon this letter and
your acceptance shall constitute a binding agreement among us.
Very truly yours,
99 CENT STUFF, INC.
By: ______________________________
Name: ________________________
Title: _______________________
Confirmed and accepted as of the date first above written
vFINANCE INVESTMENTS, INC.,
as Representative
By: ______________________________
Name: ________________________
Title: _______________________
SCHEDULE I
Underwriters
SCHEDULE II
Warrant Agent
