EXHIBIT 1.1
▇▇▇▇▇ AND ▇▇▇▇▇ & COMPANY, INC.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
with
VOICENET, INC.
Up to 1,875,000 Shares
UNDERWRITING AGREEMENT
Voicenet, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Voicenet, Inc., a Delaware corporation (the "Company"), with principal
offices located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, has an
authorized capitalization of 10,000,000 shares of Common Stock, $.01 par value
per share ("Common Stock") and 1,000,000 shares of Preferrred Stock, $.01 par
Value ("Preferred Stock"), of which 2,500,000 shares of Common Stock and no
shares of Preferred Stock are presently issued and outstanding. In addition,
the Company has adopted a "Non-Qualified Stock Option Plan" which enables the
Company to issue stock options to purchase a total of 500,000 shares of Common
Stock (the "Stock Option Plan") and in which no options are presently
outstanding. The Company proposes to offer and sell to the public at least
750,000 and no more than 1,875,000 Shares of Common Stock at $8.00 per Share.
The Shares are to be sold as more fully set forth in the "Registration
Statement" and "Prospectus" hereinafter mentioned.
1. CERTAIN DEFINITIONS
The following shall constitute the definitions of certain additional terms
used in this Agreement.
(a) "Act" shall refer to the Securities Act of 1933, as amended.
(b) "Closing Date" shall be the time and date set for payment and delivery
of the offered Shares.
(c) "Commission" shall refer to the Securities and Exchange Commission.
(d) "Common Stock" shall refer to the Common Stock, $.01 par value, of the
Company.
(e) "Company" shall refer to Voicenet, Inc.
(f) "Effective Date" shall be the date upon which the Registration
Statement becomes effective pursuant to notice from the Commission and/or
the passage of time in accordance with the Act.
(g) "Preliminary Prospectus" refers to and means any Prospectus included
in the Registration Statement before the Registration Statement becomes
effective.
(h) "Prospectus" shall refer to the Prospectus filed as part of the
Registration Statement as finally amended and revised prior to the
Effective Date.
(i) "Registration Statement" shall refer to the Registration Statement
filed by the Company, including exhibits and financial statements as
finally amended and revised prior to the Effective Date
(j) "Regulations" shall refer to the rules and regulations of the
Commission.
(k) "Securities Being Offered" shall mean the Shares which the Company
proposes to offer and sell to the public pursuant to this Agreement.
(l) "Shares" shall refer to the 1,875,000 shares of Common Stock, $.01
par value of the Company which the Company proposes to offer and sell
pursuant to this Agreement.
(m) "Termination Date" shall refer to the date upon which this Agreement
shall terminate for whatever reason.
(n) "Underwriter" shall refer to ▇▇▇▇▇ and Hatch & Company, Inc.
(o) "Underwriter's Warrants" shall mean the Warrants referred in Section
2(d) hereof.
2. UNDERWRITER'S COMPENSATION
(a) The Company hereby appoints the Underwriter as its exclusive agent for
a period of ninety (90) days from the Effective Date (unless extended by mutual
written consent for an additional ninety (90) days) to sell and to obtain
purchasers for at least 750,000 Shares and no more than 1,875,000 Shares at a
price of $8.00 per Share (the "Public Offering Price") on a "best efforts,
750,000 Shares or none" basis. Unless 750,000 Shares are sold and paid for
within 90 days from the Effective Date (unless further extended as specified in
Paragraph 4 hereof) no Shares will be sold and in that event the Underwriter
will not receive any of the commissions or expense allowances hereinafter
mentioned unless otherwise hereinafter provided. Moreover, it is understood
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that if the required funds relating to the 750,000 Shares or such greater amount
sold are received and deposited within the Escrow Account referred in Paragraph
4 hereof, but not cleared within the time set forth above, then up to an
additional ten (10) business days shall be allowed for the sole purpose of
clearance of such funds and the Closing of the offering. Such exclusive agency
shall be good and irrevocable unless and until terminated as herein and
hereinafter set forth.
(b) Subject to the filing and the becoming effective of a Registration
Statement in compliance with the provisions of the Act and the availability for
sale to the public of the Shares, pursuant to law, and subject to the
fulfillment
of all of the obligations of the Company and compliance with all of the terms
and conditions hereof by the Company and in reliance upon the warranties,
representations and covenants made by the Company herein, the Underwriter
accepts the foregoing exclusive agency and agrees to use its best efforts during
the term of the within Agreement to sell the Shares when and as issuable at the
public offering price set forth above; and to make a public offering of the
Shares as soon as reasonably practicable after the Registration Statement has
become effective and the Shares have become available for public offering.
(c) As compensation for the services of the Underwriter herein, the
Company shall allow the Underwriter subject to the sale and receipt of funds for
at least 750,000 Shares to be offered herein, a sales commission or discount of
nine (9%) percent of the Public Offering Price on all offered Shares to be sold
hereunder. The Underwriter may organize a selling group (the "Selected
Dealers", each of whom shall be a member of the National Association of
Securities Dealers, Inc.), which group may include the Underwriter; in such
event, the Underwriter may allow to such Selected Dealers such part of the
aforementioned commission or discount as it may, in its sole discretion,
determine. The Selected Dealers, other than the Underwriter itself, are not to
be deemed agents of the Company and shall not offer or sell the offered Shares
except at the price of $8.00 per Share. Moreover, the Underwriter acknowledges
and agrees that FAI Insurances Limited of Sidney, Australia ("FAI") and ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ("SLS") shall act as the
International
Advisors to the proposed offering and shall be allowed 750,000 Shares; and,
shall
receive a seven and one-fifth (7.2%) percent selling commission on each of such
allocated Share sold by them. Furthermore and after 750,000 Shares have been
sold by FAI and SLS, FAI and SLS shall also be entitled to receive an additional
one and four-fifths (1.8%) percent on each Share sold by them above 750,000
Shares (nine (9%) percent in the aggregate).
The Underwriter shall also be paid a non-accountable expense allowance of
$.20 for each Share sold, subject to the conditions set forth in Section 6(m)
hereof. Such commission and expense allowance shall be deductible by the
Underwriter at closing prior to remittance by it to the Company on account of
the Shares sold. Furthermore, the Underwriter will re-allow an amount equal to
one and four-fifths (1.8%) percent non-accountable expense allowance to the
International Advisors as their non-accountable expense allowances on the amount
sold by them over 750,000 Shares sold by them.
(d) At the closing of this offering the Company shall, subject to the sale
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and receipt of funds for at least 750,000 Shares to be offered herein, sell and
deliver to the Underwriter for each 10 offered Shares sold herein, 1
Underwriter's Warrant at a purchase price of $.00001 per Underwriter's Warrant,
up to a maximum of 187,500 Underwriter's Warrants.
The said Underwriter's Warrants shall represent the right to purchase one
(1) Share of Common Stock for each Underwriter's Warrant owned and shall be
exercisable only during a term of 4 years commencing 12 months after the
Effective Date, at an exercise price of $8.80 per Share. The sale and delivery
to the Underwriter of the Underwriter's Warrants will take place at the Closing
Date. The Underwriter's Warrants shall contain customary anti-dilution clauses
as more fully set forth within the form of Underwriter's Warrant attached as an
exhibit to the Registration Statement, The Underwriter represents that for a
period of not less than 12 months commencing from the Effective Date of the
offering the Underwriter will not sell, transfer, assign or hypothecate any of
the said Underwriter's Warrants or the securities underlying said Underwriter's
Warrants except to officers or partners of the Underwriter, Selected Dealers or
officers or partners of the Selected Dealers as well as the International
Advisors and that upon the purchase by the Underwriter of the said Underwriter's
Warrants, the Underwriter will not thereafter resell any of the said
Underwriter's Warrants or the underlying securities thereof, except in
conformity with the applicable provisions of the Act and all applicable "Blue
Sky" laws. In regard to the transfer to the International Advisors the amount
so transferred shall be an amount equal to seven (7%) percent of the total
number of shares sold by them.
(e) The Company agrees that upon written request of the holders (including
the Underwriter or its specific authorized designee) of at least forty (40%)
percent of the Underwriter's Warrants and/or the underlying securities, together
with the Underwriter's or its specific authorized designee's consent, made at
any time after 12 months following the Effective Date (and during the
Underwriter's exercise period) but, in any event for a period not to exceed five
(5) years following the Effective Date, the Company will file no more than one
Registration Statement under the Act or Notification under Regulation A (or any
successor thereto) registering or qualifying the Underwriter's Warrants and/or
the securities underlying the Underwriter's Warrants, and the Company agrees to
use its best efforts to cause the above filing to become effective. The
expenses of such registration or qualification, including but not limited to
printing charges (including sufficient number of Prospectuses to permit the sale
of the securities), all legal fees and disbursements of the Company's counsel
and all accounting fees, and all filing and miscellaneous expenses, will be
borne by the Company. The Company agrees that if at any time during the period
when the Underwriter or its specific authorized designee and/or the holders have
the right to exercise their Warrants but in any event for a period not to
exceed seven (7) years following the Effective Date it should file a
Registration Statement or Notification with the Commission pursuant to the
Act regardless of whether the Underwriter or its specific authorized designee
and/or the holders shall have theretofore availed themselves of the right
hereinabove provided, the Company, at its own expense, will offer to the
Underwriter and/or the holders the opportunity to register or qualify the
Underwriter's Warrants and/or securities underlying the Underwriter's Warrants,
limited, in the case of a Regulation A offering, to the amount of any available
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exemption, but unless such registration or qualification includes all of the
Underwriter's Warrants and/or underlying securities it will not relieve the
Company of such foregoing obligation to register or qualify the same. In
addition to the rights hereinabove provided, the Company will cooperate with the
Underwriter or its specific authorized designee and/or the holders in preparing
any additional Registration Statement or Notification required to sell or
transfer the underlying securities and will supply information required
therefore, but such additional Registration Statement or Notification shall be
at the expense of the holders of the Warrants and/or securities issuable
thereunder, and not at the expense of the Company.
(f) If at any time any condition of the material obligations of the
Company hereunder shall not have been met or shall cease to be met after five
(5) days written notice of such deficiency by the Underwriter and
the Underwriter shall have given the Company further notice of the desire of the
Underwriter to terminate this Agreement on account of the non-fulfillment of any
such condition or obligation, then upon such notice, the within Agreement shall
terminate, saving all such rights as the respective parties may then by law
possess. Any such notice must be in writing. If the within Agreement shall not
be sooner terminated as provided in the within paragraph, then, and in all
events, the Agreement herein shall terminate at such time as all of the offered
Shares shall have been subscribed for pursuant to the terms of the public
offering herein.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Underwriter to enter into this Agreement,
the Company hereby represents and warrants to, and agrees with the Underwriter,
which representations, warranties and agreements shall survive the closing, as
follows:
(a) A Registration Statement with respect to the Shares, copies of which
have heretofore been delivered by the Company to the Underwriter, has been
carefully prepared by the Company in conformity with the requirements of the
Act, and such Registration Statement has been filed with the Commission, and one
or more amendments to said Registration Statement , has or have been filed; and
the
Company may file on or prior to the Effective Date an additional amendment to
said Registration Statement.
(b) The Commission has not issued any order preventing or suspending the
use of any Prospectus with respect to the Shares and each Prospectus has
conformed in all material respects with the requirements of the Act and the
Regulations and has not included any fact required to be stated therein or
necessary to make the statements therein not misleading. When the Registration
Statement becomes effective and on the Closing Date hereinafter mentioned, it
will conform in all material respects with the requirements of the Act and the
applicable Regulations and the Registration Statement and any further amendments
or supplements thereto will contain all statements which are required to be
stated therein or necessary to make the statements therein not misleading;
provided, however the Company does not make any representations or warranties as
5
to information contained in or omitted from the Registration Statement or
Prospectus in reliance upon written information furnished on behalf of the
Underwriter or by the Underwriter, specifically for use therein or in any
amendments or supplements thereto.
(c) The financial statements of the Company together with the related
schedules and notes as set forth in the Registration Statement and Prospectus,
as reported upon by an independent certified public accountant, fairly present
the financial position of the Company at the respective dates or for the
respective periods to which they apply; such financial statements have been
prepared in accordance with generally accepted principles of accounting
consistently applied throughout the periods concerned except as otherwise stated
therein.
(d) Except as may be reflected in or contemplated by the Registration
Statement or the Prospectus, subsequent to the dates as of which information is
given in the Registration Statement and the Prospectus, and prior to the Closing
Date (i) there shall not be any material adverse change in the condition,
financial or otherwise, or in the results of operations or the general affairs
of the Company or in its business taken as a whole; (ii) there shall not have
been any material transaction entered into by the Company other than
transactions in the ordinary course of business; (iii) the Company shall not
have incurred any material obligations, contingent or otherwise, which are not
disclosed in the Prospectus; and (iv) there shall not have been, nor will there
be any change in the common stock or long term debt (except current payments) of
the Company.
(e) Except as may be set forth in the Registration Statement or
Prospectus, the Company is not in violation of any term or provision of its
Certificate of Incorporation or By-Laws, or of any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
the Company.
(f) The execution and delivery of this Agreement by the Company has been
duly authorized by all necessary corporate action, and this Agreement is the
valid, binding and legally enforceable obligation of the Company; the execution
and delivery of, and compliance with, this Agreement, and the issuance and
delivery of the securities being offered do not conflict with or constitute a
breach of or default under the Certificate of Incorporation or By-Laws of the
Company, any indenture, agreement, or other instrument by which the Company is,
or on the Closing Date will be bound, or any order, rule or regulation
applicable to the Company of any court or any law, administrative regulation or
court decree.
(g) The Company is, and at the Closing Date will be, duly incorporated and
validly existing in good standing as a corporation under the laws of its
jurisdiction of incorporation, with an authorized and outstanding common stock
as set forth in the Registration Statement and the Prospectus, and with full
power and authority (corporate and other) to own its property and conduct its
business, present and proposed, as described in the Registration Statement and
Prospectus; the Company has full power and authority to enter into this
Agreement; the Company has no subsidiaries; and the Company is duly qualified
6
and in good standing as a foreign corporation in each jurisdiction, other than
its jurisdiction of incorporation, in which such qualification is required by
the laws of such jurisdiction.
(h) The Company has an authorized and outstanding capitalization as set
forth in the Registration Statement and Prospectus; all of the outstanding
securities of the Company have been validly authorized and issued and are fully
paid and nonassessable; no sales of securities have been made by the Company in
violation of the Act; the securities being offered hereunder have been validly
authorized and, upon delivery and payment therefor pursuant to this Agreement,
will have been validly issued and will be fully paid and non-assessable; the
Underwriter's Warrants will represent the binding obligations of
the Company; the holders of the Underwriter's Warrants and or underlying
securities thereof and any of the Shares to be sold by the Company are not and
will not be subject to any liability as shareholders; and except as set forth in
the Prospectus there are no preemptive or other rights to subscribe for or
purchase any of the securities being offered, or any options, warrants,
agreements or similar rights calling for the issuance by the Company of any of
its securities outstanding as of the Closing Date.
(i) The securities being offered conform to the description thereof
contained in the Prospectus.
(j) No consent, approval, authorization or other order of any governmental
authority is required in connection with the execution and delivery by the
Company of this Agreement or the issuance and sale by the Company of the Shares,
except such as may be required under the Act or state securities laws.
(k) Except as set forth in the Registration Statement and Prospectus there
is, and at the Closing Date there will be, no action, suit or proceeding before
any court or governmental agency, authority or body pending or, to the knowledge
of the Company, threatened, which might result in judgments against the Company
not adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise), business or
prospects of the Company or would materially affect its properties or assets.
(l) Upon delivery of any payment for the Underwriter's Warrants to be sold
by the Company as set forth in Paragraph 2(d) of this Agreement, the Underwriter
will receive good and marketable title thereto free and clear of any and all
liens, encumbrances, charges and claims whatsoever; and the Company will have,
on the Effective Date and at the time of delivery of such Underwriter's
Warrants, full legal right and power and all authorization and approval required
by law to sell, transfer and deliver such Underwriter's Warrants in the manner
provided hereunder.
(m) The Company knows of no outstanding claims for services in the nature
of a finder's fee or origination fee with respect to the sale of the Shares
hereunder resulting from its acts for which the Underwriter may be responsible.
(n) Each contract to which the Company is a party and to which reference
is made in the Registration Statement and Prospectus has been duly and validly
executed, is in full force and effect in all material respects in accordance
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with its respective terms, and none of such contracts have been assigned by
the Company and the Company knows of no present situation or condition or fact
which would prevent compliance with the terms of such contracts, as amended to
date. The Company has no intention of exercising any right which it may have to
cancel any of its rights or obligations under any of such contracts and has no
knowledge that any other party to any of such contracts has any intention not to
render full performance under such contracts.
(o) The Company has filed all federal and state tax returns which are
required to be filed, and will pay all taxes shown due on such returns and all
assessments received by it to the extent such taxes have become due. All taxes
with respect to which the Company is obligated have been paid or adequate
accruals have been set up to cover any such unpaid taxes.
(p) Except as otherwise set forth in the Prospectus, (i) the Company has
good and marketable title, free and clear of all liens, encumbrances and
defects, except liens for current taxes not due and payable, to all property and
assets which are described in the Registration Statement and the Prospectus as
being owned by the Company, subject only to such exceptions as are not material
and do not adversely affect the present or prospective business of the Company;
and, (ii) the properties, including any equipment, referred to in the
Registration Statement and the Prospectus as being held under lease by the
Company are held under valid, subsisting and enforceable leases with only such
exceptions which collectively are not material and do not adversely affect the
present or prospective business of the Company.
4. ESCROW ACCOUNT
(a) Notwithstanding anything contained herein to the contrary, unless the
Underwriter shall sell at least 750,000 Shares, none of the Units will be sold
to the public and this Agreement shall automatically be terminated. The
Underwriter agrees to open an appropriate escrow account to be maintained at
the Company's expense, if any, for all monies to be received from the sale of
the securities being offered. Such monies shall be deposited in full without
any deductions for commissions and/or expenses. In the event that less than
750,000 Shares are sold and paid for within ninety (90) days from the Effective
Date (unless extended by mutual written consent for an additional Ninety (90)
days) the proposed offering herein will be withdrawn and all monies received on
subscriptions will be promptly refunded in full to each such purchaser, without
interest thereon or deduction therefrom. However, it is understood that if the
required funds relating to the 750,000 Shares or such greater amount sold are
received and deposited within the Escrow Account referred in Paragraph 4 hereof,
but not cleared within the time set forth above, then up to an additional ten
(10) business days shall be allowed for the sole purpose of clearance of such
funds and the Closing of the offering.
(b) Appropriate arrangements will be made by the Underwriter to provide
for the receipt of funds from the subscribers of the securities being offered
and to provide for the disposition thereof, in accordance with the provisions of
this section.
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(c) Unless the Underwriter shall have sold at least 750,000 Shares and the
proceeds thereof shall have been received by the Company, it shall not be
entitled to receive any expense allowance or commissions, or be entitled to
purchase any Underwriter's Warrants from the Company (except as otherwise stated
hereinafter).
(d) The "Closing Date" shall take place at the Office of Eptein ▇▇▇▇▇▇ &
Green, P.C. on such date and at such time as will be fixed by notice in writing
to be given by the Underwriter to the Company, such date to be not less than
five (5) full business days after the date on which such notice shall have been
given and not less than five (5) and not more than ten (10) full business days
after the date on which any of the conditions allowing the release of the
proceeds from the escrow account to the Company, and Underwriter as provided in
the Escrow Agreement shall have occurred. The Closing Date and place may be
changed by agreement of the Underwriter and the Company.
(e) The Underwriter shall comply in all respects with the requirements of
Rule 15c2-4 of the rules and regulations made by the Commission under the
Securities Exchange Act of 1934, as amended. The Underwriter shall deposit by
12 noon of the next business day subsequent to the receipt of funds all funds
received from the sale of the offered Shares, which funds shall be made payable
to the escrow agent, in an escrow account, to be maintained at a bank as escrow
agent for the benefit of the Subscribers, and the same shall be held in such
bank account until the Closing Date, and upon such Closing Date the said funds,
shall be promptly transmitted to the Company, who shall at said time provide
such documents, certificates, receipts and any and all other papers or
instruments as counsel may reasonably deem necessary or appropriate under the
circumstances.
5. Selected Dealers
(a) In selling the securities being offered the Underwriter shall offer
them solely as agent for the Company and such offer shall be made upon the terms
and subject to the conditions set forth in the Registration Statement and
Prospectus. The Underwriter shall commence making such offer as agent for the
Company as soon after the Effective Date as it may deem advisable.
(b) The Underwriter may offer and sell the securities being offered for
the Company's account to Selected Dealers pursuant to a form of Selling
Agreement pursuant to which the Underwriter may allow such concession (out of
its underwriting commission) as it may determine, within the limits set forth in
the Registration Statement and Prospectus. All purchases by selected dealers,
shall be as agents for the accounts of their customers, and the Underwriter
shall have no authority to employ any such dealers as agents for the Company.
(c) On each sale by the Underwriter of any of the securities being offered
to selected dealers, the Underwriter shall require any selected dealer
purchasing any such securities being offered to agree to re-offer the same on
the terms and conditions of offering set forth in the Prospectus and to comply
with all Commission requirements that the Underwriter is required to comply
with.
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(d) The Selected Dealer shall comply in all respects with the requirements
of Rule 15c2-4 of the rules and regulations made by the Commission under the
Securities Exchange Act of 1934, as amended. The Selected Dealer shall deposit
by 12 noon of the next business day subsequent to the receipt of funds all funds
received from the sale of the offered Shares, which funds shall be made payable
to the escrow agent, in an escrow account, to be maintained at a bank as escrow
agent for the benefit of the Subscribers, and the same shall be held in such
bank account until the Closing Date, and upon such Closing Date the said funds,
shall be promptly transmitted to the Company, who shall at said time provide
such documents, certificates, receipts and any and all other papers or
instruments as counsel may reasonably deem necessary or appropriate under the
circumstances.
6. COVENANTS OF THE COMPANY
The Company covenants and agrees with the Underwriter as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and will advise the Underwriter immediately and,
if requested by the Underwriter, will confirm such advice in writing (i) when
the Registration Statement has become effective and when any post-effective
amendment thereto becomes effective, or when any supplement to the Prospectus or
any amended Prospectus has been filed; (ii) of any request by the Commission for
any amendments or supplements to the Registration Statement or the Prospectus or
for additional information; (iii) of the issuance by the Commission of any order
suspending the effectiveness of the Registration Statement for the sale of the
Shares hereunder or of any order preventing or suspending the use of any
Prospectus or the institution of any proceedings for any such purposes; (iv) of
the happening of any event which in the judgment of the Company makes any
statement in the Registration Statement or Prospectus untrue or which requires
the making of any changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading; and (v) of the refusal to
qualify or the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, or of the institution of any proceedings for any of
such purposes. The Company will use its best efforts to prevent the issuance of
any such order or of any order preventing or suspending such use, to prevent any
such refusal to qualify or any such suspension, and to obtain as soon as
possible a lifting of any such order, the reversal of any such refusal and the
termination of any such suspension.
(b) The Company will not at any time, whether before, after or on the
Effective Date, file any amendment to the Registration Statement or supplement
to the Prospectus of which the Underwriter shall not previously have been
advised and furnished with copies or to which the Underwriter shall have
objected in writing or which is not in compliance with the Act and the
Regulations.
(c) To deliver to the Underwriter, without charge, three (3) signed copies
of the Registration Statement, including all financial statements and exhibits
filed therewith and any amendments or supplements thereto, and to deliver
without charge to the Underwriter three (3) conformed copies of the Registration
10
Statement and any amendment or supplement thereto, including such financial
statements and exhibits.
(d) Prior to the Effective Date of the Registration Statement the Company
will have delivered to the Underwriter, without charge, in such quantities as
the Underwriter may reasonably request, copies of each form of Preliminary
Prospectus. The Company consents to the use of each form of Prospectus by the
Underwriter and by dealers prior to the Effective Date of the Registration
Statement, if permitted under the Act.
(e) To deliver to the Underwriter, without charge, as soon as practicable
after the Effective Date of the Registration Statement and thereafter from time
to time as many copies as it may reasonably request of the Prospectus and of any
amended or supplemented Prospectus as the Underwriter may reasonably request.
(f) If, during such period of time as in the opinion of the Underwriter or
its counsel a Prospectus relating to this financing is required to be delivered,
any event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact, or omit to
state any material fact 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 after the Effective Date of the Registration Statement to
amend or supplement the Prospectus to comply with the Act, the Company will
forthwith notify the Underwriter thereof and prepare and file with the
Commission and furnish and deliver to the Underwriter and to others whose names
and addresses are designated by the Underwriter, all at the cost of the Company,
a reasonable number of the amended or supplemented Prospectus which as so
amended or supplemented will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the Prospectus not
misleading in the light of the circumstances when it is delivered to a purchaser
or prospective purchaser, and which will comply in all respects with the Act;
and, in the event the Underwriter is required to deliver a Prospectus 90 days or
more after the Effective Date upon request to prepare promptly such Prospectus
as may be necessary to permit compliance with the requirements of the Act.
(g) For a period of five years after the Closing Date, the Company will,
as soon as practicable and in any event within 120 days after the close of each
fiscal year, deliver (i) to its security holders and to the Underwriter a copy
of the annual report of the Company containing a balance sheet setting forth the
financial condition of the Company as of the end of such fiscal year, together
with statements of income and surplus of the Company for such fiscal year, all
reasonably detailed. Such balance sheet and statements of income and surplus
shall be accompanied by a copy of the accountant's report with respect thereto
of independent public accountants, who may be the regular accountants for the
Company; and (ii) to the Underwriter, (a) a copy of all reports which the
Company shall file with the Commission or with any national securities exchange
promptly after the same have been forwarded to the Commission or exchange and a
copy of all financial statements and other reports which the Company shall send
to its security holders, and (b) from time to time such other information as the
Underwriter may reasonably request. In the event the Company shall have any
subsidiaries the account of which are customarily consolidated with those of the
Company, the financial statements to be furnished in this paragraph shall be the
11
consolidated financial statements of the Company and such subsidiaries. In
addition, and for a period of five (5) years after the Closing Date, the Company
shall furnish unaudited quarterly financial statements to the Underwriter on a
timely basis.
(h) The Company will enter into employment contracts no later then the
Effective Date but to begin on the Closing Date with its key personnel, which
agreements shall remain in effect for at least three (3) years and provide that
their compensation shall be subject to the approval of the Underwriter.
(i) The Company will provide the Underwriter, on a monthly basis, at the
Company's expense, with copies of its daily transfer sheets and lists of
shareholders for a period of five (5) years from the Closing Date.
(j) The Company will deliver to the Underwriter true and correct copies of
its Articles of Incorporation and all amendments thereto, such copies to be
certified by the Secretary of the Company; true and correct copies of the
By-Laws of the Company and of the minutes of all meetings of the directors and
stockholders of the Company held prior to the Closing Date; and true and correct
copies of all contracts to which the Company is a party.
(k) Prior to the Effective Date the Company will cooperate with the
Underwriter and its counsel in connection with the registration or qualification
of the securities being offered for offering and sale by the Underwriter and
dealers under the Securities or Blue Sky laws of such states as the Underwriter
may reasonably designate and will file such consents to service of process or
other documents as may be necessary in order to effect such registration or
qualification. The Company shall bear the expenses incurred in qualifying the
securities being offered under the Securities or Blue Sky laws of such states
including the fees and charges of the various states, the cost of a printed
memorandum with respect thereto, and reasonable legal fees and expenses. The
Company shall not be required, however, to sign a general consent to service of
process in any jurisdiction where it is not now subject to such service.
(l) The Company will pay and bear, whether or not the transactions
contemplated hereunder are consummated or this Agreement is prevented from
becoming effective, or is terminated, all costs and expenses incident to the
performance of its obligations under this Agreement, including all expenses
incident to the authorization of the securities being offered and their issue
and delivery to the Subscribers, and any original issue taxes in connection
therewith, the fees and expenses of the Company's counsel and accountants; the
costs and expenses incident to the issuance, sale and delivery of the
Underwriter's Warrants to the Underwriter; the costs and expenses incident to
the preparation, printing and filing under the Act, of the Registration
Statement (including financial statements), any Preliminary Prospectus and the
Prospectus and any amendments or supplements thereto, the reproduction and
distribution of this Agreement, the Agreement Among Underwriters, if any, the
Selected Dealers Agreement, the Underwriter's Questionnaire, the Blue Sky
survey, and the Certificates for the Shares; the filing fees of the Commission
and the National
12
Association of Securities Dealers, Inc., and any state regulatory agencies, the
cost of preparing and filing all exhibits to the Registration Statement; the
cost of furnishing the Underwriter copies of the Registration Statement and
Prospectus as herein provided; the cost and fees of qualifying the securities
being offered under the Securities or Blue Sky laws as herein provided, legal
fees of $10,000.00 to the Underwriter's counsel for filing in up to ten (10)
states ($500.00 for each additional state) and disbursements incurred by said
counsel, in connection with the Blue Sky filing of this offering; and, the costs
and fees of any escrow agent referred to in Paragraph 4(a).
In addition, the Company shall also bear the cost of investigative reports
(such as ▇▇▇▇▇▇'▇ Reports) of the Company's principal executive officers,
directors and substantial shareholders which cost shall not exceed a sum of
$5,000.00.
(m) Provided that at least 750,000 Shares are sold during the offering, the
Company will pay to the Underwriter a non-accountable expense allowance of
$.20 for each Share sold, i.e., $150,000 if the minimum Shares are sold and
adjusted proportionately upwards to $375,000 if the maximum Shares are sold
($10,000 of which has been advanced to the Underwriter and shall be credited as
a part payment of this allowance) if all of the securities being offered are
sold for the fees and disbursements of counsel to the Underwriter, the fees due
to the International Advisors and for the actual costs of advertising,
traveling, postage, due diligence expenses, telephone and telegraph expenses and
other miscellaneous expenses incurred by or on behalf of the Underwriter in
preparation for, or in connection with, the offering and sale and distribution
of the securities being offered, and the Underwriter shall not be obligated to
account to the Company for such disbursements and expenses.
(n) If the Underwriter is unable to attempt or complete the proposed
offering and sale of the securities being offered mentioned hereinabove because
of (i) any reason solely within the control of the Company or its stockholders,
(ii) the Company unilaterally withdraws the proposed public offering from the
Underwriter, (iii) the Company does not permit the registration statement to
become effective for any reason whatsoever, (iv) any material discrepancy in any
representation by the Company and/or its officers, directors, shareholders,
agents, advisers or representatives, made in writing, including but not limited
to the Registration Statement, to the Underwriter, then the Company will
reimburse the Underwriter for any actual costs and expenses, on an accountable
basis, incurred by the Underwriter relative to the offering contemplated hereby
(including counsel fees of the Underwriter) up to but not exceeding $30,000
inclusive of the credit of $10,000 referred to in 6(m) hereof.
(o) Prior to the Closing Date, the Company will cooperate with the
Underwriter in such investigation as the Underwriter may make or cause to be
made of the properties, business and operations of the Company in connection
with the purchase and public offering of the securities being offered and will
make available to the Underwriter in connection therewith such information in
its possession as the Underwriter may request, provided the Underwriter agrees
to treat any such information as confidential information.
13
(p) The Company has appointed or shall promptly hereafter appoint
Continental Stock Transfer & Trust Company as Transfer and Warrant Agent, which
entity shall agree to provisions of Paragraph 9(b) of the Underwriter's Warrant,
for the securities being offered. Subject to the closing, for a period of five
(5) years following the Closing Date the Company will not change or terminate
any
such appointments without the written consent of the Underwriter, which consent
shall not be unreasonably withheld.
(q) The Company will use all reasonable efforts to comply or cause to be
complied with, the conditions precedent to the several obligations of the
Underwriter specified in this Agreement.
(r) The Company will deliver to the Underwriter and its counsel bound
volumes of copies of all documents and appropriate correspondence filed or
received from the Commission and the NASD and all closing documents.
(s) The Company will use its best efforts promptly to do and perform all
things to be done and performed by it hereunder prior to the Closing Date and to
satisfy all conditions which it is required to satisfy prior to the delivery by
it of the securities being offered.
(t) The Company will use the net proceeds to be received by it from the
sale of the securities being offered in the manner and for the purposes set
forth in the Prospectus and will comply with all reporting and other
requirements of the Act respecting the use of the proceeds.
(u) The Company will comply with the Act and Regulations and the
Securities Exchange Act of 1934 and the rules and regulations of the Commission
thereunder so as to permit the continuance of sales of and dealings in the
securities being offered under the Act and the Securities Exchange Act of 1934,
as and if required under said Act.
(v) Prior to the Closing time the Company will not issue directly or
indirectly without the Underwriter's prior written consent any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering of the securities.
(w) If at least 750,000 Shares are sold and for a period of five (5) years
commencing from the Closing Date, the Company shall continue to employ the
services of a firm of independent certified public accountants acceptable to the
Underwriter in connection with the preparation of the financial statements to be
included in any Registration Statement to be filed by the Company hereunder, or
any amendment or supplement thereto. For the purposes of the foregoing, ▇▇▇▇▇▇
& Kliegman, LLP and any "Regional" accounting firm shall be deemed to be
acceptable to the Underwriter.
(x) At the Closing Time, the Company shall retain the services of a
financial relations firm reasonably satisfactory to the Underwriter and in that
regard ▇▇▇▇▇▇▇ ▇▇▇▇, New York, New York is satisfactory to the Underwriter.
(y) If at least 750,000 Shares are sold and for a period of five (5) years
after the Closing Time, the Company will cause its Board of Directors to meet at
14
least quarterly, upon proper notice, and will cause an agenda and minutes of
each prior meeting to be mailed to each Director prior to each meeting and a
copy of such agendas and minutes to be sent to the Underwriter.
(z) The Company will, within thirty (30) days after the Closing Time,
apply for listing in Standard and Poor's Corporation Reports and ▇▇▇▇▇'▇
Over-the-Counter Guide, and will use its best efforts to have itself listed in
such reports.
(aa) Prior to the Effective Date, the Company will designate, an audit
committee consisting of a majority of outside directors, which will supervise
the financial affairs of the Company including but not limited to the monitoring
of the application of the funds provided by the contemplated offering.
(bb) Within ten (10) days after the end of the first three (3) month
period following the Effective Date of the Registration Statement, the Company
shall prepare and file with the Commission a report on Form SR as prescribed by
Rule 463 of Regulation C under the Act. Within thirty (30) days after the
Closing Date, the Company shall prepare and file with the Commission a
Registration Statement on Form 8-A with respect to the Securities being offered
pursuant to and as contemplated by Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "34 Act"), regardless of whether the Company would be
required otherwise by the terms of such Section to file such a Registration
Statement, and shall file a request for acceleration of the effective date under
Section 12(g) in connection therewith. The Company shall thereafter comply with
all periodic reporting and proxy solicitation requirements imposed by the
Commission pursuant to the 34 Act, and shall promptly furnish the Underwriter
with copies of all materials filed with the Commission pursuant to the 34 Act or
otherwise furnished to shareholders of the Company.
(cc) For a period of five (5) years following the Effective Date or until
such time as the securities of the Company are listed on the New York Stock
Exchange or the American Stock Exchange, the Company shall cause its legal
counsel to provide the Underwriter with a list, to be updated at least annually,
of those states in which the securities of the Company may be traded in
non-issuer transactions under the Blue Sky laws of the states and the basis for
such authority with the first list to be given at the time of Closing.
(dd) For a period of five (5) years following the Closing Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit) the Company's financial statements
for each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q quarterly
report and the mailing of quarterly financial information to security holders.
(ee) For a period of five (5) years following the Closing Date, if the
Company shall enter into any agreement or understanding introduced by the
Underwriter involving (i) the sale of all or substantially all of the assets and
properties of the Company, (ii) the merger or consolidation of the Company
(other than a merger or consolidation effected for the purpose of changing the
Company's domicile) or (iii) the acquisition by the Company of the assets or
stock of another business entity, which agreement or understanding is thereafter
15
consummated, whether or not during such five (5) year period, the Company, upon
such consummation, shall pay to the Underwriter an amount equal to the following
percentages of the consideration paid by the Company in connection with such
transaction:
5% of the first $1,000,000, or portion thereof, of such consideration;
4% of the second $1,000,000, or portion thereof, of such
consideration;
1% of such consideration in excess of the first $2,000,000 of such
consideration.
The fee payable to the Underwriter will be in the same form of
consideration as that paid by or to the Company, as the case may be, in such
transaction.
7. CONDITIONS OF UNDERWRITER'S OBLIGATIONS
The Underwriter's obligation to act as Agent of the Company hereunder and
to find purchasers for the securities being offered and to make payment to the
Company on the Closing Date is subject to the accuracy of and compliance with
the representations and warranties on the part of the Company herein as of the
date hereof and as of the Closing Date, to the performance by the Company of its
obligations and covenants hereunder, to the accuracy of certificates of the
Company and officers of the Company to be delivered pursuant to this Agreement,
all as to the Closing Date, and to the following further conditions:
(a) The Registration Statement shall become effective on or at such
reasonable date as the Underwriter may agree to. No stop order or order
suspending the effectiveness of the Registration Statement for the sale of the
securities being offered shall have been issued at or before the Closing Date
and no proceedings for that purpose shall have been instituted or shall be
pending or, to the knowledge of the Company, contemplated by the Commission, and
any request for additional information on the part of the Commission to be
included in the Registration Statement or the Prospectus or otherwise shall have
been complied with, and no amendments to the Registration Statement or
Prospectus shall have been filed to which the Underwriter and its counsel have
not given their consent in writing.
(b) All corporate action taken and all legal opinions and proceedings
relating to the securities being offered and the Underwriter's Warrants, the
Registration Statement and Prospectus and all other matters incident thereto and
to the transaction to which this Agreement relates shall be satisfactory in all
respects to ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Underwriter and they shall have
been furnished with such certificates, documents and information as they may
request in this connection.
(c) On the Closing Date, (i) the Registration Statement and Prospectus and
any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and shall in all
material respects conform to the requirements of the Act and neither the
16
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) since the respective dates as of which
information is given in the Registration Statement and Prospectus there shall
have been no material adverse change in the business, properties or financial
condition of the Company from that set forth in the Registration Statement and
Prospectus and there shall not have been any material transaction, contract or
agreement entered into by the Company which is not referred to in the
Registration Statement, (iii) no action, suit or proceeding at law or in equity
shall be pending or, to the knowledge of the Company, threatened against the
Company which would be required to be set forth in the Registration Statement
other than as set forth therein, and no proceedings shall be pending or, to the
knowledge of the Company, threatened against the Company before or by any
federal, state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would have a material adverse effect
upon the business, property, financial condition or income of the Company, and
(iv) the Company shall not have declared dividends or made any payments or made
any acquisitions of capital stock or made any other distribution on outstanding
shares of capital stock other than as set forth in the Registration Statement.
(d) Prior to the Closing Date the Company shall not have sustained a loss
on account of fire, flood, accident or other calamity which, in the judgment of
the Underwriter materially and adversely affects the Company, regardless of
whether or not such loss shall have been insured.
(e) The Underwriter shall receive on and as of the Closing Date an opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C., counsel for the Company, to the effect that
(i) the Company is a corporation in good standing, duly organized and validly
existing under the laws of the state of incorporation, and is authorized by its
Certificate of Incorporation to own its properties and to conduct its business,
present and proposed, as set forth in the Prospectus; (ii) the Company is duly
qualified to transact the business in which it is engaged and is in good
standing in each jurisdiction in which its ownership of property or its conduct
of business requires such qualification or registration (naming such
jurisdiction); the Company does not own or control any subsidiaries; (iii) the
Company has an authorized and outstanding capitalization as set forth in the
Prospectus; all of the outstanding securities of the Company have been validly
authorized and issued, and are fully paid and non-assessable; the securities
being offered to be sold by the Company have been validly authorized and when
issued will be fully paid and non-assessable; the securities issuable upon
exercise of the Underwriter's Warrants has been validly authorized and reserved
for issuance and when issued, will be validly issued and will be fully paid and
nonassessable; there are no preemptive or other rights to subscribe for or
purchase the securities being offered; there are no options, warrants,
agreements or similar rights calling for the issuance by the Company of any of
its securities except as described in the Registration Statement; (iv) the
securities being offered by the Company conform as to their legality with the
description thereof contained in the Registration Statement; (v) this Agreement
has been duly authorized, executed and delivered by the Company and is a valid
and binding agreement of the Company in accordance with its terms; the Company
has the legal power to sell and deliver the securities being offered pursuant to
17
the provisions of this Agreement and will deliver to the purchasers valid
marketable title thereto, free and clear of any claims, liens and encumbrances;
(1) the execution, performance and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
breach or violation (a) of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust, note agreement
or other agreement or instrument known to counsel to which the Company is a
party or by which it is bound or of which any of its property is the subject,
and (b) the Company's Articles of Incorporation, as amended, or By-Laws, or any
order, rule or regulation known to counsel of any court or governmental agency
or body having jurisdiction over the Company or any of their activities or
properties, and, (2) no consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transaction contemplated hereby except such as have been obtained under the Act
or Regulations or under state securities laws; (vi) the sale of the Company's
securities (other than the securities being offered) prior to the Closing Date
was made pursuant to exemptions from the registration requirements of the Act;
(vii) the Registration Statement has become effective under the Act and the
public offering and sale of the securities being offered is made pursuant to
such effective Registration Statement and, to the best knowledge of such
counsel, no order suspending the effectiveness of such Registration Statement
for the sale of securities being offered has been issued and no proceedings for
such purposes have been instituted or are pending or contemplated by the
Commission and to such counsel's knowledge and belief no grounds exist for the
suspension of such Registration Statement; the Registration Statement and
Prospectus and any supplement or amendment thereto (except as to the financial
statements and schedules included therein as to which counsel need not express
opinion) comply as to form in all material respects with the Act and such
counsel has received no information which would indicate that the Registration
Statement or Prospectus or any supplement or amendment thereto contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; (viii) such counsel does not know of any legal or government
proceedings required to be described in the Registration Statement or Prospectus
or of any contract or document of a character required to be described in the
Registration Statement or Prospectus or required to be filed as an exhibit to
the Registration Statement which is not described or filed as required; (ix) the
Company has good marketable title in fee simple, except as stated in the
Registration Statement or Prospectus to all of the real property described
therein as being owned by it, free and clear of all liens and encumbrances,
except liens and encumbrances, if any, which in the opinion of such counsel, are
not material and do not interfere with the use made and proposed to be made of
such property, and holds such valid leases, property rights and easements as are
set forth in the Registration Statement or the Prospectus are necessary to the
operations and proposed operations of the Company (such counsel being entitled
to rely with respect to the opinions called for by this subdivision (ix) on
certificates of the Company as to the use or proposed use of properties and as
to the materiality and non-interference of liens and encumbrances and on
opinions of local counsel or on abstracts of title and certificates; reports or
title policies of title insurance companies); (x) no holders of securities of
the Company have rights to the registration of such securities under the
Registration Statement, except for any such rights which have been effectively
waived; and (xi) the Underwriter's Warrants to be sold by
18
the Company have been duly authorized and constitute valid and binding
obligations of the Company; the Company had at the date of this Agreement and
has at the Closing Date full legal right and authority to sell and deliver in
the manner provided in this Agreement, the Underwriter's Warrants sold by it
hereunder; and the delivery by the Company as described in the Registration
Statement of certificates for the Underwriter's Warrants sold hereunder, will
pass good and marketable title to such Underwriter's Warrants, free and clear of
all liens, encumbrances, charges and claims whatsoever, except as may be
provided by federal and state securities laws. The opinion referred to in this
subsection shall also cover such other legal matters relating to this Agreement
and the transactions contemplated hereby as the Underwriter or their counsel may
reasonably request.
In expressing their opinion on the matters set forth in this Paragraph
7(e), said counsel shall be entitled to rely, as to any questions of fact upon
which such opinion is predicated, on the representations of the officers of the
Company or opinions of other counsel.
(f) The Underwriter shall have received on the Closing Date certificates,
dated as of the Closing Date, signed by the President, Treasurer and Secretary
of the Company certifying that:
(i) No Order suspending the effectiveness of the Registration Statement or
stop order regarding the sale of the securities being offered is in effect and
no proceedings for such purpose are pending or are, to their knowledge,
threatened by the Commission;
(ii) They do not know of any litigation instituted or threatened against
the Company of a character required to be disclosed in the Registration
Statement which is not disclosed therein; they do not know of any contracts
which are required to be summarized in the Prospectus which are not so
summarized; and they do not know of any material contracts required to be filed
as exhibits to the Registration Statement which are not so filed;
(iii) They have each carefully examined the Registration Statement and the
Prospectus and, to the best of their knowledge, neither the Registration
Statement nor the Prospectus nor any amendment or supplement to either of the
foregoing contains an untrue statement of any material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and since the Effective Date, to the best of
their knowledge, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
(iv) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus there has not been any material
adverse change in the condition of the Company, financial or otherwise, or in
the results of its operations, except as reflected in or contemplated by the
Registration Statement and the Prospectus, and except as so reflected or
contemplated since such date there has not been any material transaction entered
into by the Company;
(v) The representations and warranties set forth in this Agreement are
19
true and correct and the Company has complied with all of its agreements
herein contained;
(vi) The Company is not delinquent in the filing of any federal, state and
municipal tax return or the payment of any federal, state or municipal taxes;
they know of no proposed redetermination or re-assessment of taxes, adverse to
the Company, and the Company has paid or provided by adequate reserves for all
known tax liabilities;
(vii) They know of no material obligation or liability of the Company,
contingent or otherwise, not disclosed in the Registration Statement and
Prospectus;
(viii) This Agreement, the consummation of the transactions herein
contemplated, and the fulfillment of the terms hereof, will not result in a
breach by the Company of any terms of, or constitute a default under, its
Certificate of Incorporation or By-Laws, any indenture, mortgage, lease, deed of
trust, bank loan or credit agreement or any other agreement or undertaking of
the Company including, by way of specification but not by way of limitation, any
agreement or instrument to which the Company is now a party or pursuant to which
the Company has acquired any right and/or obligations by succession or
otherwise;
(ix) The financial statements and schedules filed with and as part of the
Registration Statement present fairly the financial position of the Company as
of the dates thereof all in conformity with generally accepted principles of
accounting applied on a consistent basis throughout the periods involved. Since
the respective dates of such financial statements there has been no material
adverse change in the condition or general affairs of the Company, financial or
otherwise, other than as referred to in the Prospectus; and,
(x) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, except as may otherwise be indicated
therein, the Company has not prior to the Closing Date, either (i) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money, or (ii) entered into any material transaction other than in the
ordinary course of business. The Company has not declared, paid or made any
dividend or distribution of any kind on its capital stock.
(g) The Company shall have performed all agreements herein contained to be
performed on its part at or before the Closing Date and all other covenants and
conditions set forth in Paragraph 6 shall have been performed.
(h) At the time that this Agreement is executed by the Company and at the
Closing Date, the Underwriter shall have received a letter from ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, dated as of the date this Agreement is executed by the Company and as
of the Closing Date confirming that it is an independent public accountant
within the meaning of the Act and the published Rules and Regulations and
that the answer to Item 22 of the Registration Statement is correct insofar as
it related to it and stating in effect (a) that in its opinion the financial
statements and schedules examined by it and included or incorporated by
reference in the Registration Statement and Prospectus comply as to form in all
20
material respects with the applicable accounting requirements of the Act and the
published Rules and Regulations, and (b) that on the basis of a
reading of the unaudited financial statements and the schedules included in the
Registration Statement and of the latest available unaudited interim financial
statement prepared by the Company, consultations with and inquiries of officials
of the Company, responsible for financial and accounting matters, a reading of
the Minute Book of the Company, and such other procedures and inquiries (if any)
as may be specified in such letter, nothing has come to its attention which gave
it reason to believe that (i) the unaudited financial statements and schedules
included in the Registration Statement and Prospectus do not comply as to form
in all material respects with the applicable accounting requirements of the
Act and the published Rules and Regulations or were not prepared in
accordance with generally accepted accounting principles and practices applied
on a basis consistent with those followed in the preparation of such audited
financial statements or that (ii) during the period from a specified date not
more than five days prior to the date of such letter there was any change in the
capital stock or long term debt of the Company as compared with corresponding
amounts shown in the Balance Sheet included in the Registration Statement or
(iii) during the period from the date of the Company's most recent financial
statement there was any decreases in net current assets or net assets as
compared with corresponding amounts shown in the Balance Sheet included in the
Registration Statement or any decreases in net sales or in the total or per
share amounts of income before extraordinary items or of net income of the
Company compared with the corresponding period of the preceding year, except as
set forth in or contemplated by the Registration Statement or Prospectus.
(i) All of the securities being offered by the Company shall be tendered
for delivery in accordance with the terms and provisions of this Agreement.
(j) The securities being offered shall be qualified in such states as the
Underwriter may reasonably request and each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Effective
Date, and Closing Date.
(k) The Company shall have furnished to the Underwriter such other and
further certificates, documents, and opinions as the Underwriter may reasonably
request or its counsel may request (including certificates of officers) as to
the accuracy, at and as of the Closing Date, of the representations and
warranties of the Company herein, as to the performance by the Company of its
obligations hereunder, and as to other conditions concurrent and precedent to
its obligations hereunder.
All the opinions, affidavits, letters, evidence and certificates specified
in this Paragraph 7 or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form reasonably
satisfactory to the Underwriter and its counsel.
Any certification signed by an officer of the Company and delivered to the
Underwriter or to its counsel will be deemed a representation and warranty by
the Company to the Underwriter as to the statements made therein.
In the event that any of the conditions specified in this Paragraph 7 shall
21
not have been fulfilled, the Underwriter shall have the right, upon written
notice to the Company, and upon the Company's failure to cure the condition
within ten (10) days from the date of such notice, to terminate the obligations
of the Underwriter under this Agreement.
8. INDEMNIFICATION
(a) The Company will indemnify and hold harmless the Underwriter and each
person who controls the Underwriter within the meaning of Section 15 of the Act
from and against any and all losses, claims, damages, expenses or liabilities,
joint or several to which they or any of them may become subject under the
Act or under any other statute or at common law or otherwise and will reimburse
the Underwriter and each such person specified as above for any legal or other
expenses (including the cost of any investigation and preparation) reasonably
incurred by them or any one them in connection with investigating or defending
any litigation or claim whether or not resulting in any liability, only insofar
as such losses, claims, damages, expenses, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any post-effective amendment
thereto or in any Blue Sky application or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein necessary to make the statements therein not misleading, all as
of the date when the Registration Statement or such post-effective amendment,
the filing of any such Blue Sky application as the case may be, becomes
effective or any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Prospectus or Prospectus (as amended or as
supplemented thereto), or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, not misleading; provided,
however, that the indemnity agreement contained in this subsection (a) shall not
apply to amounts paid in settlement of any such litigation if such settlement is
effected without the consent of the Company, nor shall it extend to any
Underwriter or any person controlling any Underwriter in respect of any such
losses, claims, damages, expenses, liabilities, or actions arising out of, or
based upon any such untrue statement or alleged untrue statement, or any such
omission, if such statement or omission was made in reliance upon and in
conformity with, written information furnished to the Company by the Underwriter
on behalf of such Underwriter specifically for use in connection with the
preparation of the Registration Statement, the Prospectus, or any such amendment
thereof or supplement thereto or Blue Sky Application.
The Underwriter and each controlling person of the Underwriter agree after
their receipt of written notice of the commencement of any action against such
Underwriter or against any such person controlling the Underwriter as aforesaid,
in respect of which indemnity may be sought from the Company on account of the
indemnity agreement contained in this subsection (a), to notify the Company
within ten (10) days in writing of the commencement thereof and to supply a copy
of any legal documents served upon such Underwriter or such controlling person
in connection with such action. The omission of such Underwriter or such
controlling person of such Underwriter to so notify the Company of any such
action shall relieve the Company from any liability which it may have to such
22
Underwriter or such controlling persons as to any such action on account of the
indemnity agreement contained in this subsection (a), but shall not relieve the
Company from any other liability which it may have to such Underwriter, to such
controlling person or to any other underwriter or controlling person. In case
any such action shall be brought against any Underwriter or any controlling
person, such Underwriter or controlling person of such Underwriter shall
promptly notify the Company of the commencement thereof and the Company shall be
entitled to participate in (and, to the extent it shall wish, to direct) the
defense thereof at its own expense but such defense shall be conducted by
counsel of recognized standing and reasonably satisfactory to such Underwriter
and to such controlling person or persons who are defendant or defendants in
such litigation. The Underwriter or any such controlling person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof subject to the Company's reasonable right to approve such
counsel which will not be unreasonably withheld, but the fees and expenses of
such counsel shall not be at the expense of the Company unless (i) the
employment of such counsel has been specifically authorized by the Company, or
(ii) the Company shall not have employed counsel to have charge of the defense
of such action, or (iii) there is a conflict of interest which would prevent
counsel for the Company from representing both the Company and the Underwriter
or such controlling person, in any of which cases the Company shall not have
the right to direct the defense of such action on behalf of the Underwriter or
such controlling person. It is understood that, regardless of whether such
counsel is representing all of the parties entitled to indemnification under
this subsection (a), the Company shall not be liable, under clause (iii) above,
for the fees and expenses of more than one separate counsel (other than local
counsel) who shall be approved by the Underwriter. The Company agrees to notify
the Underwriter promptly of the commencement of any litigation or proceeding
against it or against any of the officers or directors of the Company of which
it may be advised, in connection with the issue and sale of any of its
securities, and to furnish the Underwriter, at the Underwriter's request, with
copies of all pleadings therein and to permit the Underwriter to be an observer
therein and to apprise it of all of the developments therein, all at the
Company's expense.
The provisions of this paragraph 8(a) shall also apply to the subsequent
registration of the Underwriter's Warrants and/or the securities underlying the
Underwriter's Warrants.
(b) The Underwriter will indemnify and hold harmless the Company, the
directors of the Company, the officers of the Company who shall have signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several, to which they or any
of them may become subject under the Act or under any other statute or at common
law or otherwise and, except as hereinafter provided, will reimburse the Company
and such officers or controlling persons indemnified for as above for any legal
or other expenses (including the cost of any investigation and preparation)
reasonably incurred by them or any of them in connection with investigating or
defending any litigation or claims whether or not resulting in any liability,
23
only insofar as such losses, claims, damages, expenses, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any post-effective
amendment thereto or in any Blue Sky application or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
all as of the date when the Registration Statement or such post-effective
amendment, or the date the filing of any such Blue Sky application as the case
may be, becomes effective, or any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendments thereof or supplements thereto), or the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but only if insofar as such statement or omission was made
in reliance upon information furnished in writing to the Company by the
Underwriter specifically for use in connection with the preparation of the
Registration Statement, the Preliminary Prospectus or the Prospectus, or any
such amendment thereof or supplement thereto or Blue Sky application. This
indemnity agreement is in addition to any other liability which the Underwriter
may have to the Company. The Underwriter shall not be liable for amounts paid
in settlement of any such litigation, if such settlement was effected without
its consent. In case of the commencement of any action, in respect of which
indemnity may be sought from such Underwriter on account of its indemnity
agreement contained in this subsection (b), the Company and each person agreed
to be indemnified by such Underwriter shall have the same obligation to notify
such Underwriter and such Underwriter shall have the same right to participate
in (and, to the extent that it shall wish, to direct), as set forth in
subsection (a) above, the defense of such action at its own expense but such
defense shall be conducted by counsel of recognized standing and reasonably
satisfactory to the Company or such other person agreed to be indemnified by
such Underwriter. The Underwriter agrees to notify the Company promptly of the
commencement of any litigation or proceeding against it or against any such
controlling person of which it may be advised in connection with the issue or
sale of any of the securities of the Company. The provisions of this
subparagraph shall also apply to the subsequent registration of the
Underwriter's Warrants and/or securities underlying the Underwriter's Warrants.
(c) The respective indemnity agreements of the Company, and the
Underwriter contained in subsections (a) and (b) above, and the representations
and warranties of the Company set forth in this Agreement, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the Underwriter or the Company or any such officer or
controlling person of the Underwriter or the Company, and shall survive the
delivery of the Shares, and any successor of the Underwriter, or of any
controlling person of the Underwriter or of any controlling person of the
Company, as the case may be, shall be entitled to the benefit of these
respective indemnity agreements.
24
9. CONTRIBUTION.
In order to provide for just and equitable contribution under the Act in
any case in which (i) the Underwriter makes claims for indemnification pursuant
to Section 8 hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 8 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of the Underwriter,
then the Company and each person who controls the Company, in the aggregate, and
the Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) in either such case (after
contribution from others) in such proportions that the Underwriter is
responsible in the aggregate for that portion of such losses, claims, damages or
liabilities represented by the percentage that the underwriting commission per
Share appearing on the cover page of the Prospectus bears to the public offering
price appearing thereon, and the Company shall be responsible for the remaining
portion, provided, however, that (a) if such allocation is not permitted by
applicable law, then the relative fault of the Company and the Underwriter and
controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be determined
by reference to, among other things, whether in the case of an untrue statement
of a material fact or the omission to state a material fact, such statement or
omission relates to information supplied by the Company or the Underwriter, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriter to contribute pursuant to this
Section 9 were to be determined by pro rata or per capita allocation of the
aggregate damages or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this Section 9; and, (b) the contribution of the Underwriter shall not be in
excess of its proportionate share of the portion of such losses, claims, damages
or liabilities for which the Underwriter is responsible. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. As used in this paragraph, the word "Company"
includes any officer, director, or person who controls the Company within the
meaning of Section 15 of the Act. If the full amount of the contribution
specified in this paragraph is not permitted by law, then the Underwriter and
each person who controls the Underwriter shall be entitled to contribution from
the Company to the full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and the
Underwriter. No contribution shall be requested with regard to the settlement
of any matter from any party who did not consent to the settlement; provided,
however, that such consent not be unreasonably withheld in light of all factors
of importance to such party.
25
10. TERMINATION
This Agreement shall be terminated (a) in the event that minimum number of
750,000 Shares are not sold as provided in sections 2 and 4 above; (b) at any
time prior to the Closing Date by the Underwriter by written notice to the
Company if in the sole and absolute judgment of the Underwriter it is
impracticable to offer the Securities Being Offered for sale, by reason of (i)
an outbreak of major hostilities or other national or international calamity
having occurred; (ii) any loss of whatsoever nature, whether or not insured,
which, in the sole and absolute opinion of the Underwriter, substantially
affects the value of the property of the Company or materially interferes with
the operation of the business of the Company; (iii) any material adverse change
in the business, property or financial condition of the Company; (iv) any
action, suit or proceeding at law or in equity against the Company, or by any
Federal, State or other commission, board or agency wherein any unfavorable
decision would materially adversely effect the business, property, financial
condition or income of the Company; (v) adverse market conditions including but
not limited to the suspension and\or limitations of trading in securities on the
New York Stock Exchange, Inc., or the American Stock Exchange, Inc. and\or
minimum prices having been established on either such Exchange; (vi) any action
having been taken by any government in respect of its monetary affairs which, in
the sole and absolute opinion of the Underwriter, has a material adverse effect
on the United States securities markets, or (vii) based upon conditions arising
subsequent to the execution hereof, the Underwriter believes no favorable public
market exists for the sale of the Securities Being Offered.
If this Agreement shall be terminated pursuant to section 7 or this section
10, or if the transaction provided for herein is not consummated because of any
refusal, inability or failure on the part of the Company to comply with any of
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform all of its obligations under this
Agreement, the Company shall not be liable to the Underwriter for liability of
any character on account of loss of anticipated profits arising out of the
transactions covered by this Agreement, but the Company shall remain liable to
the extent provided in Paragraphs 6(l), 6(m), 6(n) and 8(a) hereof, and except
where termination occurs pursuant to clauses (i), (v), (vi) or (vii) of
this Section 10, the Company shall pay in addition thereto all out-of-pocket
expenses incurred by the Underwriter, on an accountable basis, in contemplation
of the performance by it of its obligations hereunder, including fees and
disbursements of counsel and printing and traveling expenses and postage, due
diligence expenses, and other charges of the Underwriter which charges shall not
exceed the sum of $30,000; and, if termination should occur pursuant to clauses
(i), (v), (vi) or (vii) of this section 10, the Company shall reimburse the
Underwriter for the aforesaid expenses incurred by it, on an accountable basis,
in the sum of not more than $30,000
Any notice under this section 10 may be given by telephone or telegraph,
but shall be subsequently confirmed by letter within three (3) days of such
notification. Moreover, nothing in this section 10 shall be construed so to
permit the Underwriter to be reimbursed for expenses by it in excess of its
actual expenses as described above.
26
11. FINDERS
(a) The Company knows of no claims for services in the nature of a
finder's fee or origination fee with respect to this financing resulting from
the respective acts of its officers, directors or employees, for which the
Underwriter may be responsible, and the Company agrees to indemnify and hold the
Underwriter free and harmless from any claims for any services of such nature
arising from any act of the Company or its employees,
and will reimburse the Underwriter for any counsel fees, legal or other expenses
reasonably incurred by the Underwriter in investigating or defending against any
such claim.
(b) The Underwriter knows of no claims for services in the nature of a
finder's fee or origination fee with respect to this financing resulting from
the respective acts of its officers, directors, or employees, for which the
Company may be responsible, and the Underwriter agrees to indemnify and hold the
Company free and harmless from any claims for any services of such nature
arising from any act of such Underwriter or its employees or agents, and will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in investigating or defending against any such claim.
12. UNDERWRITER'S COVENANT
The Underwriter covenants and agrees with the Company as follows:
(a) By the Closing Date the Underwriter will supply the Company with all
information requested by the Company with regard to the names and addresses of
all subscribers to the securities being offered.
(b) The Underwriter and all Selected Dealers are registered as
broker-dealers with the Commission and are members in good standing with the
National Association of Securities Dealers, Inc. ("NASD") and the Underwriter
and all Selected Dealers will be registered as broker-dealers with the
Commission and members in good standing of the NASD and duly licensed and
authorized as broker-dealers in each state where securities are sold by them.
(c) There is not now pending or threatened or to the best knowledge of the
Underwriter or its counsel, contemplated against the Underwriter any action or
proceeding, either in any court of competent jurisdiction or before the
Commission or any state securities commission, or administrative body or
tribunal, except as fully disclosed or required to be disclosed in the
Prospectus.
(d) In the event any action or proceeding of the type referred to in
subparagraph (c) above shall be instituted or threatened against the Underwriter
at any time prior to the Effective Date, or in the event that the Underwriter
shall cease to be a member in good standing of the NASD, or in the event there
shall be filed by or against the Underwriter in any court pursuant to any
federal, state, local or municipal statute, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of its assets or if the
27
Underwriter makes an assignment for the benefit of creditors, the Underwriter
shall give written notice of the occurrence of such event or events to the
Company, and the Company shall have the right on three (3) days' written notice
to the Underwriter to terminate this Agreement without any liability to the
Underwriter of any kind.
(e) The Company agrees that, upon the closing and immediately upon the
request of the Underwriter it will give instructions to its Transfer Agent to
issue Share Certificates in the names and denominations submitted to
it by the Underwriter. The Underwriter agrees that when funds in sufficient
amount as required by this Agreement are in liquid form it will submit, within
three (3) days thereafter, to the Transfer Agent a list of the names and
addresses of the subscribers and the denominations of the certificates to be
issued to them. The Transfer Agent shall be required by the Company to issue
said certificates within seven (7) days after receipt of the aforesaid list from
the Underwriter and the delivery of the certificates shall be made to the
Underwriter within seven (7) days thereafter against receipt of payments as
provided in this Agreement.
(f) Whether or not the transactions contemplated hereunder are consummated
or this Agreement is prevented from becoming effective, the Underwriter will pay
and bear all costs and expenses incident to the performance of its obligations
of this Agreement except as otherwise specified herein.
13. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The respective indemnities, agreements, representations, warranties and
other statements of the Company or its officers as set forth in or made
pursuant to this Agreement and the respective indemnities, agreements,
representations, warranties, covenants and other statements of the
Underwriter or its officers as set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Company or the Underwriter or
any controlling person, and will survive termination of this Agreement and
the delivery of any payment for the securities being offered, on the Closing
Date.
14. BENEFIT
This Agreement has been made solely for the benefit of and shall be binding
upon the Underwriter, the Company and, to the extent expressed, any person
controlling the Company or the Underwriter and the officers and directors of the
Company, and their respective legal representatives, successors and assigns, all
as and to the extent provided herein, and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "legal
representatives, successors and assigns" shall not include any purchaser of any
of the securities being offered from the Underwriter merely because of such
purchase.
28
15. NEW YORK LAW
This Agreement shall be construed in accordance with the laws of the State
of New York and subject to the exclusive jurisdiction of the courts of said
state.
16. NOTICES
All communications hereunder shall be in writing and, if to the
Underwriter, shall be mailed by certified mail or delivered to the Underwriter
at its address appearing on Page 1 hereof, or if to the Company, shall be mailed
by certified mail or delivered to it at its address appearing on Page 1 hereof,
or sent to Counsel to such parties named in the Prospectus at the respective
addresses indicated therein.
If the foregoing correctly states and sets forth in full the Agreement
between us, please indicate by signing this letter in the space provided below
for that purpose. The within Agreement may be executed simultaneously in two
or
29
more counterparts, each of which shall be deemed the original, but all of which
together shall constitute one and the same instrument and shall be valid and
binding between us.
Very truly yours,
▇▇▇▇▇ AND HATCH & COMPANY, INC.
BY
---------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, PRESIDENT
DATED: NEW YORK, NEW YORK
MARCH 7, 1997
ACCEPTED AND AGREED:
VOICENET, INC.
BY
------------------------
▇▇▇▇▇ ▇▇▇▇, PRESIDENT
ACCEPTED AND AGREED AS IT PERTAINS TO THEM AND FUTHER
THEY AGREE TO ABIDE BY THE APPROPRIATE RULES OF THE NASD
AND WILL NOT EFFECT DIRECTLY OR INDIRECTLY ANY SALES TO
AMERICAN CITIZENS:
INTERNATIONAL ADVISORS
FAI INSURANCES, LTD
BY
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▇▇▇▇▇▇▇▇ ST. ▇▇▇▇▇▇▇▇ SECURITIES, LTD
BY
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30
