EXHIBIT 1.1
N-GEN XXXXXXXXX.XXX, INC.
1,600,000 SHARES OF COMMON STOCK AND
1,600,000 COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
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Boca Raton, Florida
_____________, 2000
Xxxxxx Xxxxx Securities, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Gentlemen:
n-Gen Xxxxxxxxx.Xxx, Inc. (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein,
hereby proposes to issue and sell to Xxxxxx Xxxxx Securities, Inc. (the
"Underwriter" or "you") for sale in a proposed public offering (the
"Offering") pursuant to the terms of this Underwriting Agreement (the
"Agreement"), on a "firm commitment" basis, 1,600,000 shares of Common
Stock (the "Shares") at $5.00 per Share and 1,600,000 Redeemable Common
Stock Purchase Warrants (the "Warrants") at $.125 per Warrant. The Shares
and the Warrants are collectively referred to as the "Securities". Each
Warrant is exercisable to purchase one (1) share of Common Stock (the
"Common Stock") at $5.50 per share at any time during the period between
the Effective Date and five (5) years from the Effective Date. The date
upon which the Securities and Exchange Commission ("Commission") shall
declare the Registration Statement of the Company effective shall be the
"Effective Date". The Warrants are subject to redemption under certain
circumstances. In addition, the Company proposes to grant to the
Underwriter the option referred to in Section 2(b) to purchase all or any
part of an aggregate of 240,000 additional Shares and/or 240,000 additional
Warrants (the "Option Securities").
You have advised the Company that you desire to purchase the
Securities, and that you are authorized to execute this Agreement. The
Company confirms the agreements made by it with respect to the purchase of
the Securities by the Underwriter, as follows:
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1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to, and agrees with the
Underwriter as of the Effective Date (as defined above), the Closing Date
(as hereinafter defined) and the Option Closing Date (as hereinafter
defined) that:
(a) A registration statement (File No. 333-_____) on Form SB-2
relating to the public offering of the Securities, including a preliminary
form of the prospectus, copies of which have heretofore been delivered to
you, has been prepared by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Commission thereunder, and
has been filed with the Commission under the Act. The Company has prepared
in the same manner and proposes to file, prior to the Effective Date of
such registration statement, an additional amendment or amendments to such
registration statement, including a final form of Prospectus, copies of
which shall be delivered to you. "Preliminary Prospectus" shall mean each
prospectus filed pursuant to the Rules and Regulations under the Act prior
to the Effective Date. The registration statement (including all financial
schedules and exhibits) as amended at the time it becomes effective and the
final prospectus included therein are respectively referred to as the
"Registration Statement" and the "Prospectus", except that (i) if the
prospectus first filed by the Company pursuant to Rule 424(b) of the Rules
and Regulations shall differ from said prospectus as then amended, the term
"Prospectus" shall mean the prospectus first filed pursuant to Rule 424(b),
and (ii) if such registration statement or prospectus is amended or such
prospectus is supplemented, after the effective date of such registration
statement and prior to the Option Closing Date (as hereinafter defined),
the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term
"Prospectus" shall include the prospectus as so supplemented, or both, as
the case may be.
(b) At the Effective Date and at all times subsequent thereto up to
the Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriter or Selected Dealers: (i) the Registration Statement and
Prospectus will in all respects conform to the requirements of the Act and
the Rules and Regulations; and (ii) neither the Registration Statement nor
the Prospectus will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make statements therein, in light of the circumstances under which they are
made, not misleading; provided, however, that the Company makes no
representations, warranty or agreements as to information contained in or
omitted from the Registration Statement or Prospectus in reliance upon, and
in conformity with, written information furnished to the Company by the
Underwriter specifically for use in the preparation thereof. It is
understood
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that the statements set forth in the Prospectus under the heading
"Underwriting" and regarding the identity of counsel to the Underwriter
under the heading "Legal Matters" constitute the only information furnished
in writing by the Underwriter for inclusion in the Registration Statement
and Prospectus.
(c) Each of the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with full power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus and is duly qualified to do
business as a foreign corporation and is in good standing in all other
jurisdictions in which the nature of its business or the character or
location of its properties requires such qualification, except where
failure to so qualify will not materially affect the Company's business,
properties or financial condition.
(d) The authorized, issued and outstanding securities of the Company
as of the date of the Prospectus is as set forth in the Prospectus under
"Capitalization"; all of the issued and outstanding securities of the
Company have been, or will be when issued as set forth in the Prospectus,
duly authorized, validly issued and fully paid and non-assessable; the
issuances and sales of all such securities complied in all material respect
with, or were exempt from, applicable Federal and state securities laws;
the holders thereof have no rights of rescission against the Company with
respect thereto, and are not subject to personal liability by reason of
being such holders; none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company; except as set forth in the
Prospectus, no options, warrants or other rights to purchase, agreements or
other obligations to issue, or agreements or other rights to convert any
obligation into, any securities of the Company have been granted or entered
into by the Company; and all of the securities of the Company, issued and
to be issued as set forth in the Registration Statement, conform to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and
paid for pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights of any
security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Securities as contemplated in
this Agreement gives rise to any rights, other than those which have been
waived or satisfied, for or relating to the registration of any securities
of the Company, except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized,
validly issued and delivered and will constitute
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valid and legally binding obligations of the Company entitling the holders
to the benefits provided by the warrant agreement pursuant to which such
Warrants are to be issued (the "Warrant Agreement"), which will be
substantially in the form filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the
Warrants have been reserved for issuance and when issued in accordance with
the terms of the Warrants and Warrant Agreement will be duly and validly
authorized, validly issued, fully paid and non-assessable, free of pre-
emptive rights, and no personal liability will attach to the ownership
thereof. The Warrant exercise period and the Warrant exercise price may
not be changed or revised by the Company without the prior written consent
of the Underwriter. The Warrant Agreement has been duly authorized and,
when executed and delivered pursuant to this Agreement, will have been duly
executed and delivered and will constitute the valid and legally binding
obligation of the Company enforceable in accordance with its terms.
The Common Stock Underwriter Warrants, the Warrant Underwriter
Warrants, the Underlying Warrants, the shares of Common Stock issuable upon
exercise of the Common Stock Underwriter Warrants, and the shares of Common
Stock issuable upon exercise of the Underlying Warrants (all as defined in
the Underwriter's Warrant Agreement described in Section 11 herein), have
been duly authorized and, when issued, delivered and paid for, will be
validly issued, fully paid, non-assessable, free of pre-emptive rights and
no personal liability will attach to the ownership thereof, and will
constitute valid and legally binding obligations of the Company enforceable
in accordance with their terms and entitled to the benefits provided by the
Underwriter's Warrant Agreement.
(f) This Agreement, the Warrant Agreement, the Financial Advisory
Agreement, the Merger and Acquisition Agreement (the "M/A Agreement") and
the Underwriter's Warrant Agreement have been duly and validly authorized,
executed and delivered by the Company, and assuming due execution of this
Agreement by the other party hereto, constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally. The
Company has full power and authority to authorize, issue and sell the
Securities to be sold by it hereunder on the terms and conditions set forth
herein, and no consent, approval, authorization or other order of any
governmental authority is required in connection with such authorization,
execution and delivery or with the authorization, issue and sale of the
Securities or the securities to be issued pursuant to the Underwriter's
Warrant Agreement, except such as may be required under the Act or state
securities laws, or as otherwise have been obtained.
(g) Except as described in the Prospectus, neither the
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Company nor any subsidiary is in material violation, breach of or default
under, and consummation of the transactions herein contemplated and the
fulfillment of the terms of this Agreement will not conflict with, or
result in a breach of, or constitute a material default under, or result in
the creation or imposition of any material lien, charge or encumbrance upon
any property or assets of the Company or any subsidiary or any of the terms
or provisions of any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any
subsidiary is a party or by which the Company or any subsidiary may be
bound or to which any of the property or assets of the Company or any
subsidiary is subject, nor will such action result in any material
violation of the provisions of the Articles of Incorporation or By-Laws of
the Company or any subsidiary, as amended, or any statute or any order,
rule or regulation applicable to the Company or subsidiary of any court or
of any regulatory authority or other governmental body having jurisdiction
over the Company or each subsidiary.
(h) Subject to the qualifications stated in the Prospectus, the
Company and each subsidiary have good and marketable title to all
properties and assets described in the Prospectus as owned by each of them,
free and clear of all liens, charges, encumbrances or restrictions, except
such as are not material to its business, financial condition or results of
operation; all of the material leases and subleases under which the Company
or each subsidiary is the lessor or sublessor of properties or assets or
under which the Company or each subsidiary holds properties or assets as
lessee or sublessee as described in the Prospectus are in full force and
effect, and, except as described in the Prospectus, neither the Company nor
each subsidiary is in default in any material respect with respect to any
of the terms or provisions of any of such leases or subleases, and no claim
has been asserted by anyone adverse to rights of the Company or any
subsidiary as lessor, sublessor, lessee, or sublessee under any of the
leases or subleases mentioned above, or affecting or questioning the right
of the Company or any subsidiary to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company and each
subsidiary owns or leases all such properties described in the Prospectus
as are necessary to its operations as now conducted and, except as
otherwise stated in the Prospectus, as proposed to be conducted as set
forth in the Prospectus.
(i) Xxxxxx, Xxxxxx & Banks LLC, who has given its report on certain
financial statements filed and to be filed with the Commission as part of
the Registration Statement, and which are included in the Prospectus, is
with respect to the Company, independent public accountants as required by
the Act and the Rules and Regulations.
(j) The financial statements and schedules, together with related
notes, set forth in the Prospectus and the Registration
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Statement present fairly the financial condition, results of operations and
cash flows of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which
they apply. Said financial statements and related notes and schedules have
been prepared in accordance with generally accepted accounting principles
applied on a basis which is consistent during the periods involved. The
Company's internal accounting controls and procedures are sufficient to
cause the Company and each subsidiary to prepare financial statements which
comply in all material respects with generally accepted accounting
principles applied on a basis which is consistent during the periods
involved. During the preceding five (5) year period, nothing has been
brought to the attention of the Company's management that would result in
any material reportable condition relating to the Company's internal
accounting procedures, weaknesses or controls.
(k) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus and to and including
the Option Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) neither the Company nor any
subsidiary has incurred and will not have incurred any material liabilities
or obligations, direct or contingent, and has not entered into and will not
have entered into any material transactions other than in the ordinary
course of business and/or as contemplated in the Registration Statement and
the Prospectus; (ii) neither the Company nor any subsidiary has and will
not have paid or declared any dividends or have made any other distribution
on its capital stock; (iii) there has not been any change in the capital
stock of, or any incurrence of long-term debt by, the Company or any
subsidiary; (iv) neither the Company nor any subsidiary has issued any
options, warrants or other rights to purchase the capital stock of the
Company or any subsidiary; and (v) there has not been and will not have
been any material adverse change in the business, financial condition or
results of operations of the Company or any subsidiary, or in the book
value of the assets of the Company or any subsidiary, arising for any
reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending or,
to the knowledge of the Company or any subsidiary, threatened, any material
action, suit, proceeding, inquiry, arbitration or investigation against the
Company or any subsidiary, or any of the officers or directors of the
Company or any subsidiary, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects,
net worth, or properties of the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the Company and
each subsidiary has filed all necessary federal, state and foreign income
and franchise tax returns and has paid all taxes
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shown as due thereon; and there is no tax deficiency which has been or to
the knowledge of the Company might be asserted against the Company or any
subsidiary that has not been provided for in the financial statements.
(n) Except as set forth in the Prospectus, each of the Company and
each subsidiary has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all
material respects in compliance therewith and owns or possesses adequate
right to use all material patents, patent applications, trademarks, service
marks, trade-names, trademark registrations, service xxxx registrations,
copyrights, and licenses necessary for the conduct of such business and has
not received any notice of conflict with the asserted rights of others in
respect thereof. To the best of the Company's knowledge, none of the
activities or business of the Company or any subsidiary are in violation
of, or cause the Company or any subsidiary to violate, any law, rule,
regulation or order of the United States, any state, county or locality, or
of any agency or body of the United States or of any state, county or
locality, the violation of which would have a material adverse impact upon
the condition (financial or otherwise), business, property, prospective
results of operations, or net worth of the Company and any subsidiary.
(o) Neither the Company nor any subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar
public of quasi-public duties, other than payments or contributions
required or allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other taxes
(including franchise, capital stock or other tax, other than income taxes,
imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the Underwriter
hereunder will have been fully paid or provided for by the Company and all
laws imposing such taxes will have been fully complied with.
(q) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been
so described and/or filed.
(r) Except as described in the Registration Statement and Prospectus,
no holders of Common Stock or of any other securities of the Company have
the right to include such Common Stock or other securities in the
Registration Statement and Prospectus.
(s) Except as set forth in or contemplated by the
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Registration Statement and the Prospectus, neither the Company nor any
subsidiary has any material contingent liabilities.
(t) The Company has no subsidiary corporations except as disclosed in
the Registration Statement and Prospectus, nor has it any equity interest
in any partnership, joint venture, association or other entity except as
disclosed in the Registration Statement or Prospectus. Except as described
in the Registration Statement and Prospectus, the Company owns all of the
outstanding securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or suspending
the use of any Preliminary Prospectus with respect to the offer and sale of
the Securities and each Preliminary Prospectus, as of its date, has
conformed fully in all material respects with the requirements of the Act
and the Rules and Regulations and did not include any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein not misleading.
(v) Neither the Company, nor, to the Company's knowledge, any of its
officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(w) Item 26 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three
year period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions
which were exempt from the registration provisions of the Act and not in
violation of Section 5 thereof.
(x) Other than as set forth in the Prospectus, the Company has not
entered into any agreement pursuant to which any person is entitled, either
directly or indirectly, to compensation from the Company for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriter against any losses, claims,
damages or liabilities, which shall include, but not be limited to, all
costs to defend against any such claim, so long as such claim arises out of
agreements made or allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or beneficial owner of five percent (5%) or more of the
securities of the Company or any subsidiary has any direct or indirect
affiliation or association with any member of the National Association of
Securities Dealers, Inc. ("NASD"), except as disclosed to the Underwriter
in writing, and no beneficial owner of the Company's unregistered
securities has any direct or indirect affiliation or association with any
NASD member
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except as disclosed to the Underwriter in writing. The Company will advise
the Underwriter and the NASD if any beneficial owner of the securities of
the Company or any subsidiary is or becomes an affiliate or associated
person of an NASD member participating in the distribution.
(z) The Company and each subsidiary is in compliance in all material
respects with all federal, state and local laws and regulations respecting
the employment of its employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. There are
no pending investigations involving the Company or any subsidiary by the
U.S. Department of Labor, or any other governmental agency responsible for
the enforcement of such federal, state or local laws and regulations.
There is no unfair labor practice charge or complaint against the Company
or any subsidiary pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or to the
knowledge of the Company, threatened against or involving the Company or
any subsidiary or any predecessor entity. No question concerning
representation exists respecting the employees of the Company or any
subsidiary and no collective bargaining agreement or modification thereof
is currently being negotiated by the Company or any subsidiary. No
grievance or arbitration proceeding is pending under any expired or
existing collective bargaining agreements of the Company or any subsidiary,
if any.
(aa) Except as disclosed in the Prospectus, neither the Company nor
any subsidiary maintains, sponsors nor contributes to, nor is it required
to contribute to, any program or arrangement that is an "employee pension
benefit plan", an "employee welfare benefit plan", or a "multi-employer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). Except as disclosed in the Prospectus,
neither the Company nor any subsidiary maintained or contributed to a
defined benefit plan, as defined in Section 3(35) of ERISA.
(ab) Based upon written representations received from the officers and
directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors
of the Company or any subsidiary have been:
(1) The subject of a petition under the federal bankruptcy
laws or any state insolvency law filed by or against them, or by
a receiver, fiscal agent or similar officer appointed by a court
for their business or property, or any partnership in which any
of them was a general partner at or within two years before the
time of such filing, or any corporation or business association
of which any of them was an executive officer at or within two
years before the time of such filing;
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(2) Convicted in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining any
of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant,
any other person regulated by the Commodity Futures Trading
Commission, or an associated person of any of the foregoing,
or as an investment adviser, underwriter, broker or dealer
in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or
continuing any conduct or practice in connection with any
such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in
connection with any violation of federal or state securities
law or federal commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or
state authority barring, suspending or otherwise limiting for
more than sixty (60) days their right to engage in any activity
described in paragraph (3)(i) above, or be associated with
persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the judgment in
such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or vacated.
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(ac) Based upon written representations received from the officers
and directors of the Company, each of the officers and directors of the
Company has reviewed the sections in the Prospectus relating to their
biographical data and equity ownership position in the Company, and all
information contained therein is true and accurate.
2. PURCHASE, DELIVERY AND SALE OF THE SECURITIES.
(a) Subject to the terms and conditions of this Agreement and based
upon the representations, warranties and agreements herein contained, the
Company hereby agrees to issue and sell to the Underwriter an aggregate of
1,600,000 Shares at $4.50 per Share and 1,600,000 Warrants at $.1125 per
Warrant, (the public offering price less ten percent (10%)), at the place
and time hereinafter specified. The price at which the Underwriter shall
sell the Securities to the public shall be $5.00 per Share and $.125 per
Warrant.
Delivery of the Securities against payment therefor shall take place
at the offices of Xxxxxx Xxxxx Securities, Inc., 0000 Xxxx Xxxxxx Xxxx,
Xxxx Xxxxx, Xxxxxxx 00000 (or at such other place as may be designated by
the Underwriter) at 10:00 a.m., Eastern Time, on such date after the
Registration Statement has become effective as the Underwriter shall
designate, but not later than ten (10) business days (holidays excepted)
following the first date that any of the Securities are released to you,
such time and date of payment and delivery for the Securities being herein
called the "Closing Date".
(b) In addition, subject to the terms and conditions of this
Agreement, and based upon the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter to
purchase all or any part of an aggregate of an additional 240,000 Shares
and 240,000 Warrants at the same price per Share and Warrant as the
Underwriter shall pay for the Securities being sold pursuant to the
provisions of subsection (a) of this Section 2 (such additional Securities
being referred to herein as the "Option Securities"). This option may be
exercised within forty-five (45) days after the Effective Date of the
Registration Statement upon notice by the Underwriter to the Company
advising as to the amount of Option Securities as to which the option is
being exercised, the names and denominations in which the certificates for
such Option Securities are to be registered and the time and date when such
certificates are to be delivered. Such time and date shall be determined
by the Underwriter but shall not be later than ten (10) full business days
after the exercise of said option, nor in any event prior to the Closing
Date, and such time and date is referred to herein as the "Option Closing
Date". Delivery of the Option Securities against payment therefor shall
take place at the offices of the Underwriter. The Option granted hereunder
may be exercised only to cover overallotments in the sale by the
Underwriter of the Securities referred to in subsection (a)
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above. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of
Common Stock or any other consideration, prior to the Option Closing Date,
such dividend or distribution shall also be paid on the Option Closing Date.
(c) The Company will make the certificates for the Securities to be
sold hereunder available to you or your representative for inspection at
least two (2) full business days prior to the Closing Date at the offices
of the Underwriter, and such certificates shall be registered in such names
and denominations as you may request. Time shall be of the essence and
delivery at the time and place specified in this Agreement is a further
condition to the obligations of the Company to the Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered by the Company to
you for the account of the Underwriter against payment of the purchase
prices by the Underwriter by wire transfer in New York Clearing House funds
to the account of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Securities
pursuant to the provisions of subsection (b) above, payment for such
Securities shall be made by wire transfer, at the time and date of delivery
of such Securities as required by the provisions of subsection (b) above,
against receipt of the certificates for such Securities by the Underwriter
for the account of the Underwriter registered in such names and in such
denominations as the Underwriter may request.
It is understood that the Underwriter proposes to offer the Securities
to be purchased hereunder to the public upon the terms and conditions set
forth in the Registration Statement, after the Registration Statement is
declared effective by the Commission.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriter that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will
not at any time, whether before or after the Effective Date, file any
amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously been advised and furnished with a copy or to
which you or your counsel shall have objected in writing, acting
reasonably, or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (i) the completion by the
Underwriter of the distribution of the Securities as contemplated hereby;
or (ii) 25 days after the date on which the Registration Statement shall
have become or been declared effective, the Company will prepare and file
with the Commission, promptly upon your request, any amendments or
supplements to the Registration Statement or
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Prospectus which may be necessary or advisable in connection with the
distribution of the Securities and as mutually agreed by the Company and
the Underwriter.
After the Effective Date and as soon as the Company is advised
thereof, the Company will advise you, and confirm the advice in writing, of
the receipt of any comments of the Commission, of the effectiveness of any
post-effective amendment to the Registration Statement, of the filing of
any supplement to the Prospectus or any amended Prospectus, of any request
made by the Commission for amendment of the Registration Statement or for
supplementing of the Prospectus or for additional information with respect
thereto, of the issuance by the Commission or any state or regulatory body
of any stop order or other order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
Preliminary Prospectus, or of the suspension of the qualification of the
Securities for offering in any jurisdiction, or of the institution of any
proceedings for any of such purposes, and will use its best efforts to
prevent the issuance of any such order, and, if issued, to obtain as soon
as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus and Definitive Prospectus, and the Company has
consented and hereby consents to the use of such copies for the purposes
permitted by the Act. The Company authorizes the Underwriter and Selected
Dealers to use the Prospectus in connection with the sale of the Securities
for such period as in the opinion of counsel to the Underwriter the use
thereof is required to comply with the applicable provisions of the Act and
the Rules and Regulations. In case of the happening, at any time within
such period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or Selected Dealers, of any event
of which the Company has knowledge and which in the opinion of counsel for
the Company or counsel for the Underwriter should be set forth in an
amendment to the Registration Statement or a supplement to the Prospectus,
in order to make the statements therein not then misleading, in light of
the circumstances existing at the time the Prospectus is required to be
delivered to a purchaser of the Securities, or in case it shall be
necessary to amend or supplement the Prospectus to comply with law or with
the Act and the Rules and Regulations, the Company will notify you promptly
and forthwith prepare and furnish to you copies of such amended Prospectus
or of such supplement to be attached to the Prospectus, in such quantities
as you may reasonably request, in order that the Prospectus, as so amended
or supplemented, will not contain any untrue statement of a material fact
or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which
they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus
or supplement to be attached to the Prospectus shall be without expense to
the Underwriter.
13
The Company will comply with the Act, the Rules and Regulations
thereunder, and the provisions of the Securities Exchange Act of 1934 (the
"1934 Act"), and the rules and regulations thereunder in connection with
the offering and issuance of the Securities.
(b) The Company will act in good faith and use its best efforts and
cooperate with you and your counsel to qualify to register the Securities
for sale under the securities or "blue sky" laws of such jurisdictions as
the Underwriter may designate and will make such applications and furnish
such information as may be required for that purpose and to comply with
such laws, provided the Company shall not be required to qualify as a
foreign corporation or a dealer in securities or to execute a general
consent to service of process in any jurisdiction in any action other than
one arising out of the offering or sale of the Securities. The Company
will, from time to time, prepare and file such statements and reports as
are or may be required to continue such qualification in effect for so long
a period as the Underwriter may reasonably request.
(c) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not
limited to, all such expenses itemized in Section 8(a) and 8(c) hereof, and
either (i) the out-of-pocket expenses of the Underwriter, not to exceed the
$50,000 previously paid if the Underwriter elects to terminate the offering
for any reason; or (ii) the out-of-pocket expenses of the Underwriter if
the Company elects to terminate the offering for any reason. For the
purposes of this sub-section, the Underwriter shall be deemed to have
assumed such expenses when they are billed or incurred, regardless of
whether such expenses have been paid. The Underwriter shall not be
responsible for any expenses of the Company or others, or for any charges
or claims relative to the proposed public offering if it is not
consummated. In the event the public offering is not consummated, the
Underwriter will return any unaccounted for portion of the $50,000 advanced
against non-accountable expenses to the Company.
(d) The Company will deliver to you at or before the Closing Date two
signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith, and of each amendment or
supplement thereto. The Company will deliver to or upon the order of the
Underwriter, from time to time until the Effective Date of the Registration
Statement, as many copies of any Preliminary Prospectus filed with the
Commission prior to the Effective Date of the Registration Statement as the
Underwriter may reasonably request. The Company will deliver to the
Underwriter on the Effective Date of the Registration Statement and
thereafter for so long as a Prospectus is required to be delivered under
the Act, from time to time, as many copies of the Definitive Prospectus, or
as thereafter amended or supplemented, as the Underwriter may from
14
time to time reasonably request.
(e) For so long as the Company is a reporting company under either
Section 12 or 15 of the 1934 Act, the Company, at its expense, will furnish
to the Underwriter during the period ending five (5) years from the
Effective Date, (i) as soon as practicable after the end of each fiscal
year, a balance sheet of the Company and any of its subsidiaries as at the
end of such fiscal year, together with statements of income, surplus and
cash flow of the Company and any subsidiaries for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report
thereon of independent accountants; (ii) as soon as they are available, a
copy of all reports (financial or other) mailed to security holders; (iii)
as soon as they are available, a copy of all non-confidential documents,
including annual reports, periodic reports and financial statements,
furnished to or filed with the Commission under the Act and the 1934 Act;
(iv) copies of each press release, news item and article with respect to
the Company's affairs released by the Company; and (v) such other
information as you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company
and its subsidiary or subsidiaries are consolidated in reports furnished to
its stockholders generally.
(g) The Company will make generally available to its stockholders and
to the registered holders of its Warrants and deliver to the Underwriter as
soon as it is practicable, but in no event later than the first day of the
sixteenth full calendar month following the Effective Date, an earnings
statement (which need not be audited) covering a period of at least twelve
consecutive months beginning with the Effective Date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the necessary
action to become a reporting company under Section 12 of the 1934 Act, and
the Company will make all filings required to and will have obtained
approval for the listing of the Shares and Warrants on The Nasdaq SmallCap
Market System, and will use its best efforts to maintain such listing for
at least seven (7) years from the date of this Agreement.
(i) For a period of seven (7) years following the Effective Date, the
Company will hold an annual meeting of stockholders for the election of
Directors within 180 days after the end of each of the Company's fiscal
years and, within nine (9) months after the end of each of the Company's
fiscal years will provide the Company's stockholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements shall be those required
by Rule 14a-3 under the 1934 Act and shall be included in an annual report
15
pursuant to the requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption
"Use of Proceeds" in the Prospectus, and will file such reports with the
Commission with respect to the sale of the Securities and the application
of the proceeds therefrom as may be required by the Act and the 1934 Act.
(k) The Company will, promptly upon your request, prepare and file
with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of counsel to the Underwriter and the
Company may be reasonably necessary or advisable in connection with the
distribution of the Securities and will use its best efforts to cause the
same to become effective as promptly as possible.
(l) On the Closing Date, the Company shall execute and deliver to you
the Underwriter's Warrant Agreement. The Underwriter's Warrant Agreement
and Warrant Certificates will be substantially in the form of the
Underwriter's Warrant Agreement filed as an exhibit to the Registration
Statement.
(m) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Underwriter's Warrants outstanding from time to time.
(n) All beneficial owners of the Company's securities (including
warrants, options and Preferred Stock of the Company) as of the Effective
Date shall agree in writing, in a form satisfactory to the Underwriter, not
to sell, transfer or otherwise dispose of any of such securities (or
underlying securities) of the Company for a period of eighteen (18) months
from the Effective Date, or any longer period required by the NASD, Nasdaq
or any State, without the written consent of the Underwriter.
(o) The Company will obtain, on or before the Closing Date, key
person life insurance on the life of Xxxxxx X. Xxxxxx in an amount of not
less than $2,000,000, and will use its best efforts to maintain such
insurance for a period of at least five (5) years from the Effective Date.
(p) Prior to the Closing Date, the Company shall, at its own expense,
undertake to list the Company's securities in the appropriate recognized
securities manual or manuals published by Standard & Poor's Corporation and
such other manuals as the Underwriter may designate, such listings to
contain the information required by such manuals and the Uniform Securities
Act. The Company hereby agrees to use its best efforts to maintain such
listing for a period of not less than five (5) years. The Company shall
take such action as may be reasonably requested by the
16
Underwriter to obtain a secondary market trading exemption in such states
as may be reasonably requested by the Underwriter.
(q) During the one (1) year period commencing on the Closing Date,
the Company will not, without the prior written consent of the Underwriter,
grant options or warrants to purchase the Company's Common Stock at a price
less than the initial per share public offering price.
(r) Prior to the Closing Date, neither the Company nor any subsidiary
will issue, directly or indirectly, without your prior 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 other than
routine customary advertising of the Company's products and services, and
except as required by any applicable law or the directives of any relevant
regulatory authority in any relevant jurisdiction.
(s) At the Closing Date, the Company will engage the Underwriter as
a non-exclusive financial advisor to the Company for a period of twelve
(12) months commencing on the first day of the month following the
Company's receipt of the proceeds of this offering, at an aggregate fee of
$108,000, all of which shall be payable to the Underwriter on the Closing
Date. The financial advisory agreement will provide that the Underwriter
shall, at the Company's request, provide advice and consulting services to
the Company concerning potential merger and acquisition proposals and the
obtaining of short or long-term financing for the Company, whether by
public financing or otherwise.
(t) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the
financial statements to be included in any registration statement or
similar disclosure document to be filed by the Company hereunder, or any
amendment or supplement thereto. For a period of five (5) years from the
Effective Date, the Company, at its expense, shall cause its regularly
engaged independent certified public accountants to review (but not audit)
the Company's financial statements for each of the first three (3) fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's quarterly report and the mailing of quarterly
financial information to stockholders.
(u) The Company shall retain American Securities Transfer & Trust,
Inc. as the transfer agent for the securities of the Company, or such other
transfer agent as you may agree to in writing. In addition, the Company
shall direct such transfer agent to furnish the Underwriter with daily
transfer sheets as to each of the Company's securities as prepared by the
Company's transfer agent and copies of lists of stockholders and
warrantholders as reasonably requested by the Underwriter, for a five (5)
year period commencing from the Closing Date.
17
(v) The Company shall cause the Depository Trust Company, and any
other depository of the Company's securities, to furnish security position
reports and special DTC Tracking Reports to the Underwriter at the expense
of the Company. The security position reports shall be furnished on a
weekly basis for a five (5) year period from the Effective Date, and the
DTC Tracking Reports shall be furnished for the initial two (2) month
period from the Effective Date, after which time the Company's obligation
to furnish such tracking reports will be reviewed by the Company and the
Underwriter.
(w) Following the Effective Date, the Company shall, at its sole cost
and expense, prepare and file such Blue Sky applications with such
jurisdictions as the Underwriter shall designate and the Company may
reasonably agree.
(x) On the Effective Date and for a period of three (3) years
thereafter, the Company's Board of Directors shall consist of a minimum of
five (5) persons, two (2) of whom shall be independent and not otherwise
affiliated with the Company or associated with any of the Company's
affiliates. The Underwriter shall have the opportunity to invite an
observer to attend Board of Directors meetings of the Company and the
Company shall pay the out-of-pocket expenses of such observer.
(y) On the Closing Date, the Company shall execute and deliver to you
a non-exclusive M/A Agreement with the Underwriter in a form satisfactory
to the Underwriter, providing:
(1) that the Underwriter will be paid a finder's fee, of from
five percent (5%) of the first $1,000,000 ranging in $1,000,000
increments down to one percent (1%) of the excess, if any, over
$4,000,000 of the consideration involved in any transaction introduced
by the Underwriter (including mergers, acquisitions, joint ventures,
and any other business for the Company introduced by the Underwriter)
consummated by the Company, as an "Introduced, Consummated
Transaction", by which the Underwriter introduced the other party to
the Company during a period ending five (5) years from the date of the
M/A Agreement; and
(2) that any such finder's fee due to the Underwriter will be
paid in cash or stock as mutually agreed at the closing of the
particular Introduced, Consummated Transaction for which the finder's
fee is due.
(z) After the Closing Date, the Company shall prepare and publish
"tombstone" advertisements of at least 5 x 5 inches in publications to be
designated by the Underwriter at a total cost not to exceed $15,000.
(aa) For such period as any Warrants are outstanding, the Company
shall use its best efforts to cause post-effective
18
amendments to the Registration Statement or a new Registration Statement to
become effective in compliance with the Act and without any lapse of time
between the effectiveness of any such post-effective amendments and cause
a copy of each Prospectus, as then amended, to be delivered to each holder
of record of a Warrant and to furnish the Underwriter and each dealer as
many copies of each such Prospectus as the Underwriter or such dealer may
reasonably request. Such post-effective amendments or new Registration
Statement shall also include the Underwriter's Warrants and all the
securities underlying the Underwriter's Warrants. The Company shall not
call for redemption any of the Warrants unless a Registration Statement
covering the securities underlying the Warrants has been declared effective
by the Commission and remains current at least until the date fixed for
redemption. In addition, the Warrants shall not be redeemable during the
first year after the Effective Date without the written consent of the
Underwriter.
(ab) Until such time as the securities of the Company are listed or
quoted on either the New York Stock Exchange or the American Stock
Exchange, the Company shall deliver to the Underwriter a written opinion
detailing those states in which the Shares and Warrants of the Company may
be traded in non-issuer transactions under the Blue Sky laws of the fifty
states ("Secondary Market Trading Opinion"). The initial Secondary Market
Trading Opinion shall be delivered to the Underwriter on the Effective
Date, and the Company shall continue to update such opinion and deliver
same to the Underwriter on a timely basis, but in any event at the
beginning of each fiscal quarter, for a five (5) year period, if required.
(ac) As promptly as practicable after the Closing Date, the Company
will prepare, at its own expense, hard cover "bound volumes" relating to
the offering, and will distribute such volumes to the individuals
designated by the Underwriter or counsel to the Underwriter.
4. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligation of the
Underwriter to purchase and pay for the Securities which the Underwriter
has agreed to purchase hereunder from the Company is subject, as of the
date hereof and as of the Closing Date and the Option Closing Date, to the
execution of this Agreement by the Underwriter, to the continuing accuracy
of, and compliance with, the representations and warranties of the Company
herein, to the accuracy of statements of officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the following additional conditions:
(a) (i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or at
such later time or on such later date as you may agree to in writing; (ii)
at or prior to the Closing Date, no stop order suspending the effectiveness
of the Registration
19
Statement shall have been issued by the Commission and no proceeding for
that purpose shall have been initiated or pending, or shall be threatened,
or to the knowledge of the Company, contemplated by the Commission; (iii)
no stop order suspending the effectiveness of the qualification or
registration of the Securities under the securities or "blue sky" laws of
any jurisdiction (whether or not a jurisdiction which you shall have
specified) shall be threatened or to the knowledge of the Company
contemplated by the authorities of any such jurisdiction or shall have been
issued and in effect; (iv) any request for additional information on the
part of the Commission or any such authorities shall have been complied
with to the satisfaction of the Commission and any such authorities, and to
the satisfaction of counsel to the Underwriter; and (v) after the date
hereof no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted
to the Underwriter and the Underwriter did not object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus,
(i) there shall not have been any material change in the capital stock or
other securities of the Company or any subsidiary or any material adverse
change in the long-term debt of the Company or any material subsidiary
except as set forth in or contemplated by the Registration Statement, (ii)
there shall not have been any material adverse change in the general
affairs, business, properties, condition (financial or otherwise),
management, or results of operations of the Company or any subsidiary,
whether or not arising from transactions in the ordinary course of
business, in each case other than as set forth in or contemplated by the
Registration Statement or Prospectus; (iii) neither the Company nor any
subsidiary shall have sustained any material interference with its business
or properties from fire, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not set forth in
the Registration Statement and Prospectus; and (iv) the Registration
Statement and the Prospectus and any amendments or supplements thereto
shall contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and shall in all
material respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstance under which they are
made, not misleading.
(c) Except as set forth in the Prospectus, there shall not be pending
or, to the knowledge of the Company or any subsidiary, threatened, any
material action, suit, proceeding, inquiry, arbitration or investigation
against the Company or any subsidiary, or any of the officers or directors
of the Company or any
20
subsidiary, or any material action, suit, proceeding, inquiry, arbitration,
or investigation, which is likely to result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company or any subsidiary.
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct as of this date and at the
Closing Date as if made at the Closing Date, and all covenants and
agreements herein contained to be performed on the part of the Company and
all conditions herein contained to be fulfilled or complied with by the
Company at or prior to the Closing Date shall have been duly performed,
fulfilled or complied with.
(e) At the Closing Date, the Underwriter shall have received the
opinion, dated as of the Closing Date, from Berenbaum, Weinshienk & Xxxxx,
P.C., counsel for the Company, in form and substance satisfactory to
counsel for the Underwriter, which in the aggregate shall state:
(i) the Company and each subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with full corporate power
and authority to own its properties and conduct its business as
described in the Registration Statement and Prospectus and is duly
qualified or licensed to do business as a foreign corporation and is
in good standing in each other jurisdiction in which the ownership or
leasing of its properties or conduct of its business requires such
qualification except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company and
each subsidiary as a whole;
(ii) the authorized capital of the Company is as set forth under
"Capitalization" in the Prospectus; all shares of the Company's
outstanding stock and other securities requiring authorization for
issuance by the Company's Board of Directors have been duly
authorized, validly issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock of the Company and other securities
have not been issued in violation of the preemptive rights of any
shareholder and the shareholders of the Company do not have any
preemptive rights or, to such counsel's knowledge, other rights to
subscribe for or to purchase securities of the Company, nor, to such
counsel's knowledge, are there any restrictions upon the voting or
transfer of any of the securities of the Company, except as disclosed
in the Prospectus; the Common Stock, the Shares, the Warrants, and the
securities contained in the Underwriter's Warrant Agreement conform to
the respective descriptions thereof contained in the Prospectus; the
Common Stock, the Shares, the Warrants, the shares of Common Stock to
be issued upon exercise of the Warrants and
21
the securities contained in the Underwriter's Warrant Agreement, have
been duly authorized and, when issued, delivered and paid for, will be
duly authorized, validly issued, fully paid, non-assessable, free of
pre-emptive rights and no personal liability will attach to the
ownership thereof; all prior sales by the Company of the Company's
securities complied in all material respects with, or were exempt
from, applicable federal and state securities laws; no shareholders of
the Company have any rescission rights against the Company with
respect to the Company's securities; a sufficient number of shares of
Common Stock has been reserved for issuance upon exercise of the
Warrants and the Underwriter Warrants, and to the best of such
counsel's knowledge, neither the filing of the Registration Statement
nor the offering or sale of the Securities as contemplated by this
Agreement gives rise to any registration rights or other rights, other
than those which have been waived or satisfied or described in the
Registration Statement;
(iii) this Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement, and the M/A
Agreement have been duly and validly authorized, executed and
delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by the Underwriter, are the
valid and legally binding obligations of the Company, enforceable in
accordance with their terms, except (a) as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which
effect creditors' rights generally; and (b) no opinion is expressed as
to the enforceability of the indemnity provisions or the contribution
provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding securities of
the Company, the Shares, the Common Stock and the Warrants are in
valid and proper legal form;
(v) to the best of such counsel's knowledge, except as set forth
in the Prospectus, there is not pending or threatened any material
action, suit, proceeding, inquiry, arbitration or investigation
against the Company or any subsidiary or any of the officers of
directors of the Company or any subsidiary, nor any material action,
suit, proceeding, inquiry, arbitration, or investigation, which might
materially and adversely affect the condition (financial or
otherwise), business prospects, net worth, or properties of the
Company or any subsidiary;
(vi) the execution and delivery of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement, the Financial
Advisory Agreement, and the M/A Agreement, and the incurrence of the
obligations herein and therein set forth and
22
the consummation of the transactions herein or therein contemplated,
will not result in a violation of, or constitute a default under (a)
the Articles of Incorporation or By-Laws of the Company and each
subsidiary; (b) to the best of such counsel's knowledge, any material
obligations, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness or in any contract,
indenture, mortgage, loan agreement, lease, joint venture or other
agreement or instrument to which the Company or any subsidiary is a
party or by which it or any of its material properties is bound; or
(c) to the best of such counsel's knowledge, any material order, rule,
regulation, writ, injunction, or decree of any government,
governmental instrumentality or court, domestic or foreign;
(vii) the Registration Statement has become effective under the
Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or
are pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations; and
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or
delivery of the Securities by the Company in connection with the
execution, delivery and performance of this Agreement by the Company
or in connection with the taking of any action contemplated herein, or
the issuance of the Underwriter's Warrants or the Securities
underlying the Underwriter's Warrants, other than registrations or
qualifications of the Securities under applicable state or foreign
securities or Blue Sky laws and registration under the Act.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such
counsel may rely upon certificates of any officer of the Company or public
officials as to matters of fact; and may rely as to all matters of law,
upon opinions of counsel satisfactory to you and counsel to the
Underwriter. The opinion of such counsel to the Company shall state that
the opinion of any such other counsel is in form satisfactory to such
counsel and that the Underwriter and they are justified in relying thereon.
Such counsel shall also include a statement to the effect that
23
such counsel has participated in the preparation of the Registration
Statement and the Prospectus and nothing has come to the attention of such
counsel to lead such counsel to believe that the Registration Statement or
any amendment thereto at the time it became effective contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they are made, not misleading or that the
Prospectus or any supplement 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 statements therein, in light of the
circumstances under which they are made, not misleading (except, in the
case of both the Registration Statement and any amendment thereto and the
Prospectus and any supplement thereto, for the financial statements, notes
thereto and other financial information and statistical data contained
therein, as to which such counsel need express no opinion).
(f) You shall have received on the Closing Date, a certificate dated
as of the Closing Date, signed by the Chief Executive Officer and the Chief
Financial Officer of the Company and such other officers of the Company as
the Underwriter may reasonably request, certifying that:
(i) No Order suspending the effectiveness of the Registration
Statement or stop order regarding the sale of the Securities 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, to their
knowledge, threatened against the Company or any subsidiary or any
officer or director of the Company or any subsidiary 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 statement
therein, in light of the circumstances under which they are made, 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;
24
(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 or any
subsidiary, financial or otherwise, or in the results of its
operations, except as reflected in or contemplated by the Registration
Statement and the Prospectus;
(v) The representations and warranties set forth in this
Agreement are true and correct in all material respects, and the
Company has complied with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is delinquent in the
filing of any federal, state and other tax return or the payment of
any federal, state or other taxes; they know of no proposed
redetermination or re-assessment of taxes, adverse to the Company or
any subsidiary, and the Company and each subsidiary 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 Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement, and the M/A
Agreement, the consummation of the transactions therein contemplated,
and the fulfillment of the terms thereof, will not result in a breach
by the Company of any terms of, or constitute a default under, the
Company's Articles of Incorporation or By-Laws, any indenture,
mortgage, lease, deed of trust, bank loan or credit agreement or any
other material agreement or undertaking of the Company or any
subsidiary including, by way of specification but not by way of
limitation, any agreement or instrument to which the Company or any
subsidiary is now a party or pursuant to which the Company or any
subsidiary has acquired any material 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 accounting principles applied on a consistent basis
throughout the periods involved. Since the respective dates of such
financial statements, there have 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;
(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 or
25
contemplated thereby, neither the Company nor any subsidiary has,
prior to the Closing Date, either (i) issued any securities or
incurred any material 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;
(xi) They have reviewed the sections in the Prospectus relating
to their biographical data and equity ownership position in the
Company, and all information contained therein is true and accurate;
and
(xii) Except as disclosed in the Prospectus, during the past
five years, they have not been:
(1) The subject of a petition under the federal bankruptcy
laws or any state insolvency law filed by or against them, or by
a receiver, fiscal agent or similar officer appointed by a court
for their business or property, or any partnership in which any
of them was a general partner at or within two years before the
time of such filing, or any corporation or business association
of which any of them was an executive officer at or within two
years before the time of such filing;
(2) Convicted in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining any
of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant,
any other person regulated by the Commodity Futures Trading
Commission, or an associated person of any of the foregoing,
or as an investment adviser, underwriter, broker or dealer
in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or
continuing any conduct or practice in connection with any
such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection
26
with the purchase or sale of any security or commodity or in
connection with any violation of federal or state securities
law or federal commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or
state authority barring, suspending or otherwise limiting for
more than sixty (60) days their right to engage in any activity
described in paragraph (3)(i) above, or be associated with
persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the judgment in
such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(g) The Underwriter shall have received from Xxxxxx, Xxxxxx & Banks
LLC, independent auditors to the Company, certificates or letters, one
dated and delivered on the Effective Date and one dated and delivered on
the Closing Date, in form and substance satisfactory to the Underwriter,
stating that:
(i) they are independent certified public accountants with
respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) the financial statements and the schedules included in the
Registration Statement and the Prospectus were examined by them and,
in their opinion, comply as to form in all material respects with the
applicable accounting requirements of the Act, the Rules and
Regulations and instructions of the Commission with respect to
Registration Statements on Form SB-2;
(iii) on the basis of inquiries and procedures conducted by them
(not constituting an examination in accordance with generally accepted
auditing standards), including a reading of the latest available
unaudited interim financial statements or other financial information
of the Company (with an indication of the date of the latest available
unaudited interim financial statements), inquiries of officers of the
Company who have responsibility for financial and accounting matters,
27
review of minutes of all meetings of the shareholders and the Board of
Directors of the Company and other specified inquiries and procedures,
nothing has come to their attention as a result of the foregoing
inquiries and procedures that causes them to believe that:
(a) during the period from (and including) the date of the
financial statements in the Registration Statement and the
Prospectus to a specified date not more than five days prior to
the date of such letters, there has been any change in the Common
Stock, long-term debt or other securities of the Company (except
as specifically contemplated in the Registration Statement and
Prospectus) or any material decreases in net current assets, net
assets, shareholder's equity, working capital or in any other
item appearing in the Company's financial statements as to which
the Underwriter may request advice, in each case as compared with
amounts shown in the balance sheet as of the date of the most
recent financial statements in the Prospectus, except in each
case for changes, increases or decreases which the Prospectus
discloses have occurred or will occur;
(b) during the period from (and including) the date of the
financial statements in the Registration Statement and the
Prospectus to such specified date there was any material decrease
in revenues or in the total or per share amounts of income or
loss before extraordinary items or net income or loss, or any
other material change in such other items appearing in the
Company's financial statements as to which the Underwriter may
request advice, in each case as compared with the fiscal period
ended as of the date of the most recent financial statements in
the Prospectus, except in each case for increases, changes or
decreases which the Prospectus discloses have occurred or will
occur;
(c) the unaudited interim financial statements of the
Company appearing in the Registration Statement and the
Prospectus (if any) do not comply as to form in all material
respects with the applicable accounting requirements of the Act
and the Rules and Regulations or are not fairly presented in
conformity with generally accepted accounting principles and
practices on a basis substantially consistent with the audited
financial statements included in the Registration Statements or
the Prospectus.
(iv) they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may
28
be derived from the general accounting records, including work sheets,
of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letters and
found them to be in agreement; and
(v) they have not during the immediately preceding five (5) year
period brought to the attention of the Company's management any
reportable condition related to the Company's internal accounting
procedures, weaknesses and/or controls.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriter. Any changes, increases or
decreases in the items set forth in such letters which, in the judgment of
the Underwriter, are materially adverse with respect to the financial
position or results of operations of the Company shall be deemed to
constitute a failure of the Company to comply with the conditions of the
obligations to the Underwriter hereunder.
(h) Upon exercise of the option provided for in Section 2(b) hereof,
the obligation of the Underwriter to purchase and pay for the Option
Securities referred to therein will be subject (as of the date hereof and
as of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
satisfaction of counsel to the Underwriter.
(ii) At the Option Closing Date, there shall have been delivered
to you the signed opinion from Berenbaum, Weinshienk & Xxxxx, P.C.,
counsel for the Company, dated as of the Option Closing Date, in form
and substance satisfactory to counsel to the Underwriter, which
opinion shall be substantially the same in scope and substance as the
opinion furnished to you at the Closing Date pursuant to Section 4(e)
hereof, except that such opinion, where appropriate, shall cover the
Option Securities.
(iii) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company, dated the Option Closing Date,
in form and substance satisfactory to counsel to the Underwriter,
substantially the same in scope and substance
29
as the certificate furnished to you at the Closing Date pursuant to
Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been delivered
to you a letter in form and substance satisfactory to you from Xxxxxx,
Xxxxxx & Banks LLC, independent auditors to the Company, dated
the Option Closing Date and addressed to the Underwriter confirming
the information in their letter referred to in Section 4(g) hereof and
stating that nothing has come to their attention during the period
from the ending date of their review referred to in said letter to a
date not more than five business days prior to the Option Closing
Date, which would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date
in connection with the sale and issuance of the Option Securities
shall be satisfactory in form and substance to the Underwriter, and
the Underwriter and counsel to the Underwriter shall have been
furnished with all such documents, certificates, and opinions as you
may request in connection with this transaction in order to evidence
the accuracy and completeness of any of the representations,
warranties or statements of the Company or its compliance with any of
the covenants or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD,
the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal
or agent) in the Securities and no proceedings for the taking of such
action shall have been instituted or shall be pending, or, to the knowledge
of the Underwriter or the Company, shall be contemplated by the Commission
or the NASD. The Company represents that at the date hereof it has no
knowledge that any such action is in fact contemplated by the Commission or
the NASD. The Company shall advise the Underwriter of any NASD
affiliations of any of its officers, directors, or stockholders or their
affiliates in accordance with Section 1(y) of this Agreement.
(j) At the Effective Date, you shall have received from counsel to
the Company, dated as of the Effective Date, in form and substance
satisfactory to counsel for the Underwriter, a written Secondary Market
Trading Opinion detailing those states in which the Shares and Warrants may
be traded in non-issuer transactions under the Blue Sky laws of the fifty
(50) states after the Effective Date, in accordance with Section 3(ab) of
this Agreement.
(k) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to
counsel for the Underwriter, and such counsel shall
30
be furnished with such documents, certificates and opinions as they may
reasonably request to enable them to pass upon the matters referred to in
this sub-section.
(l) Prior to the Effective Date, the Underwriter shall have received
clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriter, as described in the Registration Statement.
(m) If any of the conditions provided for in this Section shall not
have been fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be canceled at, or
at any time prior to, the Closing Date and/or the Option Closing Date by
the Underwriter notifying the Company of such cancellation in writing or by
facsimile at or prior to the applicable Closing Date or Option Closing
Date. Any such cancellation shall be without liability of the Underwriter
to the Company.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligation of
the Company to sell and deliver the Securities is subject to the execution
of this Agreement by the Company, and to the following conditions:
(i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or
on such later time or date as the Company and the Underwriter may
agree in writing; and
(ii) At the Closing Date and the Option Closing Date, no stop
orders suspending the effectiveness of the Registration Statement
shall have been issued under the Act or any proceedings therefore
initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the Closing Date but are not fulfilled
after the Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Securities on exercise of
the option provided for in Section 2(b) hereof shall be affected.
6. INDEMNIFICATION. (a) The Company indemnifies and holds harmless
the Underwriter and each person, if any, who controls the Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this
Agreement, include but not be limited to, all reasonable costs of defense
and investigation and all attorneys' fees), to which the Underwriter or
such controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (i) the
Registration Statement, any Preliminary Prospectus, the Prospectus,
31
or any amendment or supplement thereto, (ii) any blue sky application or
other document executed by the Company specifically for that purpose or
based upon written information furnished by the Company and filed in any
state or other jurisdiction in order to qualify any or all of the
Securities under the securities laws thereof (any such application,
document or information being hereinafter called a "Blue Sky Application"),
or arise out of or are based upon the omission or alleged omission to state
in the Registration Statement, any Preliminary Prospectus, Prospectus, or
any amendment or supplement thereto, or in any Blue Sky Application, a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company will
not be liable in any such cases to the extent, but only to the extent, that
any such losses, claim, damages or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use in the
Registration Statement or any amendment or supplement thereof or any Blue
Sky Application or any Preliminary Prospectus or the Prospectus or any such
amendment or supplement thereto. Notwithstanding the foregoing, the
Company shall have no liability under this Section if such untrue statement
or omission made in a Preliminary Prospectus is cured in the Prospectus and
the Prospectus is not delivered to the person or persons alleging the
liability upon which indemnification is being sought. This indemnity will
be in addition to any liability which the Company may otherwise have.
(b) The Underwriter indemnifies and holds harmless the Company, each
of its directors, each nominee (if any) for director named in the
Prospectus, each of the persons who have signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of the
Act, against any losses, claims, damages or liabilities (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs
of defense and investigation and all attorneys' fees) to which the Company
or any such director, signer of the Registration Statement, officer or
controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statements or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by the Underwriter
specifically for use in such Registration Statement or Prospectus.
32
Notwithstanding the foregoing, the Underwriter shall have no liability
under this section if such untrue statement or omission made in a
Preliminary Prospectus is cured in the Prospectus and the Prospectus is not
delivered to the person or persons alleging the liability upon which
indemnification is being sought through no fault of the Underwriter. This
indemnity agreement will be in addition to any liability which the
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section, promptly notify in writing the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party other than indemnification under this Section. In case
any such action is brought against any indemnified party, and it promptly
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, subject to the provisions herein
stated, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the
indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act,
the fees and expenses of such counsel shall be at the expense of the
indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or (ii) the
named parties to any such action (including any impleaded parties) include
both the Underwriter or such controlling person and the indemnifying party
and in the reasonable judgment of the Underwriter, it is advisable for the
Underwriter or such Underwriter or controlling persons to be represented by
separate counsel (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the Underwriter or
such controlling person). No settlement of any action against an
indemnified party shall be made without the prior written consent of the
indemnifying party, which shall not be unreasonably withheld in light of
all factors of importance to such indemnifying and indemnified parties.
7. CONTRIBUTION.
33
(a) If the indemnification provided for in this Agreement is
unavailable to any indemnified party in respect to any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, will contribute to
the amount paid or payable by such indemnified party, as a result of such
losses, claims, damages, liabilities or expenses (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on
the one hand, and by the Underwriter on the other hand, from the Offering,
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above, but also the
relative fault of the Company on the one hand, and of the Underwriter on
the other hand, in connection with any statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses as well
as any other relevant equitable considerations; provided, that any
contribution hereunder by the Underwriter shall not exceed the amount of
consideration received by the Underwriter hereunder. The relative benefits
received by the Company on the one hand, and by the Underwriter on the
other hand, shall be deemed to be in the same proportion as the total
proceeds from the Offering (net of sales commissions, and the non-accountable
expense allowance, but before deducting expenses) received by
the Company, bear to the commissions and the non-accountable expense
allowance received by the Underwriter. The relative fault of the Company
on the one hand, and of the Underwriter on the other hand, will be
determined with reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company, and its
relative intent, knowledge, access or information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if contribution
pursuant to this Section were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to in this paragraph.
(b) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any
action, suit, or proceeding, such party will, if a claim for contribution
in respect thereof is to be made against another party ("Contributing
Party"), notify the Contributing Party of the commencement thereof, but the
omission to so notify the Contributing Party will not relieve it from any
liability which it may have to any other party other than for contribution
hereunder. In case any such action, suit or proceeding is brought against
any party, and such party notifies a Contributing Party or its
representative of the commencement thereof within the aforesaid fifteen
(15) days, the Contributing Party will be entitled to participate therein
with the notifying party and any other Contributing Party similarly
notified. Any such Contributing Party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
34
proceeding which was effected by such party seeking contribution on account
of any settlement of any claim, action or proceeding effected by such party
seeking contribution without the prior written consent of such Contributing
Party. The contribution provisions contained in this Section are intended
to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available.
8. COSTS AND EXPENSES. (a) Whether or not this Agreement becomes
effective or the sale of the Securities to the Underwriter is consummated,
the Company will pay all costs and expenses incident to the performance of
this Agreement by the Company including but not limited to the fees and
expenses of counsel to the Company and of the Company's accountants; the
costs and expenses incident to the preparation, printing, filing and
distribution under the Act of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto),
Preliminary Prospectus and the Prospectus, as amended or supplemented; the
fee of the National Association of Securities Dealers, Inc. ("NASD") in
connection with the filing required by the NASD relating to the offering of
the Securities contemplated hereby; all state filing fees, expenses and
disbursements and legal fees of counsel to the Underwriter in their
capacity as Blue Sky counsel to the Company in connection with the filing
of applications to register the Securities under the state securities or
blue sky laws (which legal fees shall be payable by the Company in the sum
of $25,000, of which $12,500 has been paid); the cost of printing and
furnishing to the Underwriter copies of the Registration Statement, each
Preliminary Prospectus, the Prospectus, this Agreement, the Selected
Dealers Agreement, and the Blue Sky Memorandum; the cost of printing the
certificates evidencing the securities comprising the Securities; the cost
of preparing and delivering to the Underwriter and its counsel bound
volumes containing copies of all documents and appropriate correspondence
filed with or received from the Commission and the NASD and all closing
documents; and the fees and disbursements of the transfer agent for the
Company's securities. The Company shall pay any and all taxes (including
any original issue, transfer, franchise, capital stock or other tax imposed
by any jurisdiction) on sales to the Underwriter hereunder. The Company
will also pay all costs and expenses incident to the furnishing of any
amended Prospectus or of any supplement to be attached to the Prospectus.
The Company shall also engage the Company's counsel to provide the
Underwriter with a written Secondary Market Trading Opinion in accordance
with Sections 3(ab) and 4(j) of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Underwriter a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received from the sale of
the Securities, of which an advance of $50,000 has been paid to date. In
the event the overallotment option is exercised, the Company shall pay to
the Underwriter at the Option Closing Date an additional amount equal to
three percent (3%) of the gross proceeds received upon exercise of the
35
overallotment option.
(c) Other than as disclosed in the Registration Statement, no person
is entitled either directly or indirectly to compensation from the Company,
from the Underwriter or from any other person for services as a finder in
connection with the proposed offering, and the Company agrees to indemnify
and hold harmless the Underwriter against any losses, claims, damages or
liabilities, which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all
attorneys' fees, to which the Underwriter may become subject insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an
employee of the party claiming indemnity) or entity that he or it is
entitled to a finder's fee in connection with the proposed offering by
reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. EFFECTIVE DATE. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness
until 11:00 a.m., Eastern time, on the first full business day following
the execution of this Agreement; or at such earlier time after the
Effective Date of the Registration Statement as you in your discretion
shall first commence the public offering of any of the Securities. The
time of the public offering shall mean the time after the effectiveness of
the Registration Statement when the Securities are first generally offered
by you to the Selected Dealers and/or the public. This Agreement may be
terminated by you at any time before it becomes effective as provided
above, except that Sections 3(c), 6, 7, 8, 12, 13, 14, 15, 16 and 17 shall
remain in effect notwithstanding such termination.
10. TERMINATION. (a) This Agreement, except for Sections 3(c), 6,
7, 8, 12, 13, 14, 15, 16, and 17 hereof, may be terminated at any time
prior to the Closing Date, and the option referred to in Section 2(b)
hereof, if exercised, may be cancelled at any time prior to the Option
Closing Date, by you if in your judgment it is impracticable to offer for
sale or to enforce contracts made by the Underwriter for the resale of the
Securities agreed to be purchased hereunder by reason of: (i) the Company
having sustained a material adverse loss, whether or not insured, by reason
of fire, earthquake, flood, accident or other calamity, or from any labor
dispute or court or government action, order or decree; (ii) trading in
securities on the New York Stock Exchange or the American Stock Exchange
having been suspended or limited; (iii) material governmental restrictions
having been imposed on trading in securities generally (not in force and
effect on the date hereof); (iv) a banking moratorium having been declared
by Federal or New York or Florida state authorities; (v) an outbreak of
major international hostilities or other national or international calamity
having occurred; (vi) the passage by the Congress of the United States or
by any state legislative body of similar impact, of any act or measure, or
the adoption of any orders, rules or regulations by any governmental body
or any authoritative
36
accounting institute or board, or any governmental executive, which is
reasonably likely to have a material adverse impact on the business,
financial condition or financial statements of the Company or the market
for the Securities offered hereby; (vii) any material adverse change in the
financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement; (viii) any material adverse
change having occurred, since the respective dates as of which information
is given in the Registration Statement and Prospectus, in the earnings,
business prospects or general condition of the Company, financial or
otherwise, whether or not arising in the ordinary course of business; (ix)
a pending or threatened legal or governmental proceeding or action relating
generally to the Company's business, or a notification having been received
by the Company of the threat of any such proceeding or action, which could
materially adversely affect the Company; (x) except as contemplated by the
Prospectus, the Company is merged or consolidated into or acquired by
another company or group or there exists a binding legal commitment for the
foregoing or any other material change of ownership or control occurs; or
(xi) the Company shall not have complied in all material respects with any
term, condition or provisions on its part to be performed, complied with or
fulfilled (including but not limited to those set forth in this Agreement)
within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section, the Company shall
be promptly notified by you, by telephone, telegram or facsimile, confirmed
by letter.
11. UNDERWRITER'S WARRANT AGREEMENT. At the Closing Date, the
Company will issue to the Underwriter and/or persons related to the
Underwriter, for an aggregate purchase price of $10, and upon the terms and
conditions set forth in the form of Underwriter's Warrant Agreement annexed
as an exhibit to the Registration Statement, Underwriter Warrants to
purchase up to an aggregate of 160,000 Shares and 160,000 Warrants, in such
denominations as the Underwriter shall designate. In the event of conflict
in the terms of this Agreement and the Underwriter's Warrant Agreement, the
language of the form of Underwriter's Warrant Agreement shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and
other statements of the Company and its principal officers, where
appropriate, and the Underwriter set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Underwriter, the Company or any
of its officers or directors or any controlling person and will survive
delivery of and payment for the Securities and the termination of this
Agreement.
13. NOTICE. All communications hereunder will be in writing and,
except as otherwise expressly provided herein, will be mailed,
37
delivered or telefaxed, and confirmed:
If to the Underwriter: Xxxxxx X. Xxxx, President
Xxxxxx Xxxxx Securities, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Copy to: Xxxxx X. Xxxxxx, P.A.
0000 Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
If to the Company: Xxxxxx X. Xxxxxx, Chairman
n-Gen Xxxxxxxxx.Xxx, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Copy to: Xxxx X. Xxxxx, Esq.
Berenbaum, Weinshienk & Xxxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
14. PARTIES IN INTEREST. This Agreement herein set forth is made
solely for the benefit of the Underwriter, the Company and, to the extent
expressed, the holders of the Underwriter Warrants, any person controlling
the Company or the Underwriter, and directors of the Company, nominees for
director (if any) named in the Prospectus, each person who has signed the
Registration Statement, and their respective executors, administrators,
successors, assigns and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns"
shall not include any purchaser of the Securities, as such purchaser, from
the Underwriter.
15. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed entirely within the State of Florida.
The parties agree that any action brought by any party against another
party in connection with any rights or obligations arising out of this
Agreement shall be instituted properly in a federal or state court of
competent jurisdiction with venue only in the Fifteenth Judicial Circuit
Court in and for Palm Beach County, Florida or the United States District
Court for the Southern District of Florida, West Palm Beach Division. A
party to this Agreement named as a Defendant in any action brought in
connection with this Agreement in any court outside of the above named
designated county or district shall have the right to have the venue of
said action changed to the above designated county or district or, if
necessary, have the case dismissed, requiring the other party to refile
such action in an appropriate court in the above designated county or
federal district.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all
38
purposes be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.
17. ENTIRE AGREEMENT. This Agreement and the agreements referred to
within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become
a binding Agreement between the Company and the Underwriter in accordance
with its terms.
Very truly yours,
n-Gen Xxxxxxxxx.Xxx, Inc.
BY:_______________________________________
Xxxxxx X. Xxxxxx, Chairman
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
XXXXXX XXXXX SECURITIES, INC.
BY:_______________________________________
Xxxxxx X. Xxxx, President
39
