UNDERWRITING AGREEMENT
Exhibit
1.1
___________________,
2007
U.S.
EURO
Securities, Inc.
00000
Xxxxxxx Xxx Xxxxx, Xxxxxxxxx Xxxxx
Xxxxxxx
Xxx, XX 00000
Attn:
Xxxxxxx Xxx Xxxxxx, Chairman
Gentlemen:
U.S.
Dry
Cleaning Corporation, a Delaware corporation (the “Company”), hereby confirms
its agreement with you (the “Underwriter”) as follows:
SECTION
1
THE
OFFERING
1.1 Description
of the Securities. The
Company proposes to issue and sell (the “Offering”) a minimum of 1,500,000 and a
maximum of up to 3,000,000 Units (the “Units”) of the Company’s securities, each
Unit comprising one share of its common stock (the “Shares”) and one redeemable
warrant to purchase one share of common stock (the “Warrants”),
pursuant
to the terms of a Registration Statement on Form SB-2 (the “Registration
Statement”) filed with the Securities and Exchange Commission (“SEC”) on
December 27, 2006 and any pre- and post-effective amendments and supplements
thereto. Except
as
otherwise provided herein,
the Company hereby appoints the Underwriter its exclusive (managing) agents
to
sell the Units, subject to the terms and provisions of this Agreement, on a
“best efforts, minimum/maximum” basis.
1.2 Direct
Investments.
As
allowed by any applicable laws, rules, or regulations, certain of the officers
and directors of the Company intend to directly offer and sell the Units to
certain individuals who are familiar with the Company and/or its officers and
directors (“Direct Investors”). The Underwriter agrees to allocate up to
1,500,000 Units of the Offering to Direct Investors.
SECTION
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
In
order
to induce the Underwriter to enter into this Agreement, the Company hereby
represents and warrants to and agrees with the Underwriter that:
2.1 Registration
Statement and Prospectus.
The
Registration Statement has been prepared by the Company in conformity with
the
requirements of the Act of 1933 (the “Act”) and the rules and regulations of the
Securities and Exchange Commission (the “SEC”) thereunder, and the Registration
Statement has been filed with the SEC. Copies of the Registration Statement
and
any amendments, and all forms of the related prospectuses contained therein,
have been delivered to the Underwriter. The Registration Statement, includes
the
prospectus, Part II, and financial schedules and exhibits thereto, as amended
at
the time when it shall become effective, and the prospectus included as part
of
the Registration Statement on file with the SEC when it shall become effective
or, if the procedure in Rule 430A of the Rules and Regulations (as defined
below) under the Act is followed, the prospectus that discloses all the
information that was omitted from the prospectus on the effective date pursuant
to such Rule, and in either case, together with any changes contained in any
prospectus filed with the SEC by the Company with your consent after the
effective date of the Registration Statement, is herein referred to as the
“Final Prospectus.” If the procedure in Rule 430A is followed, the prospectus
included as part of the Registration Statement on the date when the Registration
Statement became effective is referred to herein as the “Effective Prospectus.”
Any prospectus included in the Registration Statement and in any amendments
thereto prior to the effective date of the Registration Statement is referred
to
herein as a “Preliminary Prospectus.” For purposes of this Agreement, “Rules and
Regulations” mean the rules and regulations adopted by the SEC under the
Act.
Included
in the Registration Statement are the 3,000,000 Units proposed to be sold in
the
Offering, the Shares, the Warrants, the shares of common stock reserved against
exercise of the Warrants (the “Warrant Shares”)., the Underwriter’s Warrants (as
defined below), and the shares of common stock reserved against exercise of
the
Underwriter’s Warrants (the “Underwriter’s Warrant Shares”). As used in this
Agreement, the term “Effective Date” refers to the date the SEC declares the
Registration Statement effective pursuant to Section 8 of the Act.
2.2 Accuracy
of Registration Statement and Prospectus.
The SEC
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Units, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Act and the
applicable Rules and Regulations and to the Company’s knowledge has not included
at the time of filing any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; except that the foregoing shall not apply
to
statements in or omissions from any Preliminary Prospectus in reliance upon,
and
in conformity with, written information furnished to the Company by the
Underwriter, or from any Underwriter through the Underwriter, specifically
for
use in the preparation thereof.
When
the
Registration Statement becomes effective and on the final closing of the
sale
of the Units under
the
Offering (the “Closing Date”), the Registration Statement, the Effective
Prospectus (and on the Closing Date, the Final Prospectus) will contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations. No such document will contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein not misleading;
except that the foregoing does not apply to information contained in or omitted
from the Registration Statement or the Effective Prospectus or Final Prospectus
in reliance upon written information furnished by the Underwriter, specifically
for use in the preparation thereof. The Company will not at any time hereafter
file any amendments to the Registration Statement or in accordance with Rule
424(b) of the Rules and Regulations of which the Underwriter shall not have
been
previously advised in advance of filing or to which the Underwriter shall
reasonably object in writing.
2.3 Financial
Statements.
Squar,
Xxxxxx, Xxxxxxx & Xxxxxxxxxx, LLP, whose reports appear in the Effective
Prospectus and the Final Prospectus, are, and during,
the
periods covered by their reports were, independent accountants as required
by
the Act and the applicable Rules and Regulations. The financial statements
and
schedules (including the related notes) included in the Registration Statement,
any Preliminary Prospectus or the Effective Prospectus or the Final Prospectus,
present fairly the financial position, the results of operations, and changes
in
financial position of the entities purported to be shown thereby at the dates
and for the periods indicated; and such financial statements have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods indicated.
2.4 No
Material Adverse Change.
Except
as may be reflected in or contemplated by the Effective Prospectus or the Final
Prospectus, subsequent to the dates as of which information is given in the
Effective Prospectus or the Final Prospectus, and prior to the Closing Dates,
(a) there shall not have been any material adverse change in the condition,
financial or otherwise, of the Company or in its business taken as a whole;
(b)
there shall not have been any material transaction entered into by the Company
other than transactions in the ordinary course of business which
are
not disclosed in the Effective or the Final Prospectus;
(c) the
Company shall not have incurred any material liabilities, obligations or claims,
contingent or otherwise, which are not disclosed in the Effective Prospectus
or
the Final Prospectus; (d)
except in the ordinary course of business and with the consent of the
Underwriter, prior to the effective date of the Registration Statement there
shall not have been nor will there by any change in the capital stock or
long-term debt (except current payments) of the Company; and (e) the
Company has not and will not have paid or declared any dividends or other
distributions on its capital stock.
2.5 No
Defaults.
Other
than as disclosed in the Effective Prospectus or the Final Prospectus, the
Company is not in any default (which has not been waived) in the performance
of
any obligation, agreement or condition contained in any debenture, note or
other
evidence of indebtedness or any indenture or loan agreement. The execution
and
delivery of this Agreement and the consummation of the transactions herein
contemplated, and compliance with the terms of this Agreement will not conflict
with or result in a breach of any of the terms, conditions or provisions of,
or
constitute a default under, the certificate
of
incorporation, as amended, or by-laws of the Company; any note, indenture,
mortgage, deed of trust, or other material agreement or instrument to which
the
Company is a party or by which it or any of its property is bound, other than
for which the Company has received a consent or waiver of such conduct, breach
or default or except where such default would not have a material adverse effect
on the business of the Company; or any existing law, order, rule, regulation,
writ, injunction, or decree of any government, governmental instrumentality,
agency or body, arbitration tribunal or court, domestic or foreign, having
jurisdiction over the Company or its property. The consent, approval,
authorization, or order of any court or governmental instrumentality, agency
or
body is not required for the consummation of the transactions herein
contemplated except such as may be required under the Act or under the
securities laws of any state or jurisdiction.
2.6 Incorporation
and Standing.
The
Company is, and at the Closing Date will be, duly incorporated and validly
existing in good standing as a corporation under the laws of the jurisdiction
of
its organization, with full power and authority (corporate and other) to own
its
property and conduct its business, present and proposed, as described in the
Effective Prospectus and the Final Prospectus; the Company has full power and
authority to enter into this Agreement; is duly qualified and in good standing
as a foreign corporation in each jurisdiction in which the character or location
of its properties (owned or leased) or the nature of its business makes such
qualification necessary except where the failure to be so qualified would not
have a material adverse effect on the Company; and each of the Company and
its
Subsidiaries holds all material licenses, certificates, and permits from
governmental authorities necessary for the conduct of its business as described
in the Effective Prospectus and Final Prospectus.
2.7 Capitalization.
The
Company’s authorized and outstanding capitalization on the Effective Date and on
the Closing Date are and will be as set forth under the caption “Capitalization”
in the Effective Prospectus and the Final Prospectus. The Company’s securities
conform to the description thereof contained under the captions “Description of
Securities” in the Effective Prospectus and the Final Prospectus. The
outstanding shares of common stock have been, and the shares, the Warrant
Shares, and the Underwriter’s Warrant Shares, upon issuance and delivery against
payment therefor in the manner described herein or
in the
Final Prospectus,
will
be, duly authorized and validly issued, fully paid and nonassessable. To the
knowledge of the Company, no sales of securities have been made by the Company
in violation of the registration or anti-fraud provisions of the Act or in
violation of any other federal law or laws of any state or jurisdiction, except
as disclosed in the Registration Statement.
2.8 Legality
of Securities.
The
Units, the Shares, the Warrants, the Warrant Shares, the Underwriter’s Warrants
(as defined below), and the shares of common stock reserved against exercise
of
the Underwriter’s Warrants (the “Underwriter’s Warrant Shares”) have been duly
and validly authorized and, when issued and delivered against payment therefor
as provided in this Agreement and
in
the Final Prospectus,
will be
validly issued, fully paid and nonassessable. There are no preemptive rights
or
other rights to subscribe for or to purchase, or any restriction upon the voting
or transfer of, any shares of common stock pursuant to the Company’s articles of
incorporation, by-laws or other governing documents or any agreement or other
instrument to which the Company is a party or by which the
Company
may be
bound. Neither the filing of the Registration Statement nor the offering or
sale
of the Units as contemplated by this Agreement gives rise to any rights, other
than those which have been waived or satisfied, for or relating to the
registration of any shares of common stock. The Underwriter’s Warrants, when
sold and delivered, will constitute valid and binding obligations of the Company
enforceable in accordance with the terms thereof. A sufficient number of shares
of common stock of the Company have been reserved for issuance upon exercise
of
the Underwriter’s Warrants.
2.9 Prior
Sales.
No
unregistered securities of the Company, of an affiliate or of a predecessor
of
the Company have been sold within three years prior to the date hereof, except
as disclosed in the Registration Statement.
2.10 Litigation.
Except
as set forth in the Effective Prospectus and the Final Prospectus, there is,
and
at the Closing Date there will be, no action, suit or proceeding before any
court, arbitration tribunal or governmental agency pending, or to the knowledge
of the Company, threatened, which might result in judgments against the Company
not adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise), the business
or the prospects of the Company, or which would materially affect the properties
or assets of the Company.
2.11 Underwriter’s
Warrants.
Upon
issuance of the Underwriter’s Warrants pursuant to Section 3.4 of this
Agreement, the Underwriter and designees of the Underwriter will receive good
and marketable title thereto, free and clear of all liens, encumbrances, charges
and claims whatsoever; and the Company will have on the Effective Date and
at
the time of delivery of such Underwriter’s Warrants the requisite power and
authority to sell, transfer and deliver such Underwriter’s Warrants in the
manner provided hereunder.
2.12 Finder.
The
Company knows of no outstanding claims against it for compensation for services
in the nature of a finder’s fee, origination fee or financial consulting fee
with respect to the offer and sale of the Units hereunder except as previously
disclosed in writing to the Underwriter.
2.13 Exhibits;
Contracts; Agreements.
There
are no contracts or other documents which are required to be filed as exhibits
to the Registration Statement by the Act or by the Rules and Regulations which
have not been so filed and each contract to which the Company is a party and
to
which reference is made in the Effective Prospectus and the Final Prospectus
has
been duly and validly executed by the Company and, to the best of the Company’s
knowledge, is in full force and effect in all material respects in accordance
with its terms, and none of such contracts have been assigned by the Company;
and the Company knows of no present situation or condition or fact which would
prevent compliance with the terms of such contracts, as amended as of the date
of the Effective Prospectus and the Final Prospectus. Except for amendments
or
modifications of such contracts in the ordinary course of business, the Company
has no intention of exercising any right which it may have to cancel any of
its
obligations under any of such contracts, and has no knowledge that any other
party to any of such contracts has any intention not to render full performance
under such contracts. All material terms of each contract, agreement, plan,
arrangement or understanding to which the Company is a party, or to which it
may
reasonably be expected to become a party, have been fully disclosed in the
Effective Prospectus and Final Prospectus.
2.14 Tax
Returns.
The
Company has filed all federal and state tax returns that are required to be
filed by it and has paid all taxes shown on such returns and on all assessments
received by it to the extent such taxes have become due unless
such tax obligations have been discharged or disallowed by federal Bankruptcy
Court order.
All
taxes with respect to which the Company is obligated have been paid or adequate
accruals have been set up to cover any such unpaid taxes.
2.15 Property.
Except
as otherwise set forth in or contemplated by the Effective Prospectus and the
Final Prospectus, the Company has good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
it, in each case free and clear of all liens, encumbrances and defects, except
such as are described in the Effective Prospectus and the Final Prospectus
or
such as do
not
interfere with the use made or proposed to be made of such property by the
Company and any real property and buildings held under lease by the Company
are
held by it under valid, existing, and enforceable leases with such exceptions
as
are not material and do not interfere with the use made or proposed to be made
of such property and buildings by the Company.
2.16 Authority.
The
execution and delivery by the Company of this Agreement has been duly authorized
by all necessary corporate action and this Agreement is the valid, binding
and
legally enforceable obligation of the Company, except as rights to indemnity
hereunder may be limited by federal or state securities laws or public policy
and except as enforceability may be limited by bankruptcy, insolvency, or
similar laws affecting creditors rights generally and by general equitable
principles.
2.17 Lock-Up.
The
Company has obtained from its Chief Executive Officer
his
written agreement placing restrictions on such person from selling any of the
shares of the Company’s common stock, warrants, options, convertible securities
or rights which may be converted into or exercised to purchase shares of the
Company’s common stock, or promotional shares, which he
owns
or
possesses
during
the 12 month period following the Effective Date, subject to the terms and
conditions of such agreement (“Lock-Up”).
At the
Underwriter’s sole discretion, any holders of 5% or more of the Company’s
outstanding shares may also be subject to such Lock-Up.
2.18 Use
of Form SB-2.
The
Company is eligible to use Form SB-2 for the offer and sale of the
Units.
2.19 Governmental
Compliance.
The
Company is not in violation of any law, ordinance, governmental rule or
regulation or court decree to which it may be subject which violation might
reasonably be expected to have a material adverse effect on the condition
(financial or other), properties, prospective results of operations or net
worth
of the Company, except as disclosed in the Registration Statement.
2.20 Stabilization.
The
Company has not taken and may not take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the
price of the shares of common stock to facilitate the sale or resale of the
Units.
2.21 CUSIP
Number.
The
Company has obtained a CUSIP number for its common stock.
2.22 Subsidiaries.
The
Company has no subsidiaries and it has no present intention of acquiring or
forming any subsidiaries, except as disclosed in the Effective Prospectus and
the Final Prospectus.
2.23 Books
and Accounts.
The
books, records and accounts of the Company accurately and fairly reflect, in
reasonable detail, the transactions in and dispositions of the assets of the
Company. The systems of internal accounting controls maintained by the Company
are sufficient to provide reasonable assurances that (w) transactions are
executed in accordance with management’s general or specific authorization; (x)
transactions are recorded as necessary (A) to permit preparation of financial
statements in conformity with generally accepted accounting principles and
(B)
to maintain accountability for assets; and (z) the recorded accountability
for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
2.24 Employees.
No
labor disturbance by the employees of the Company exists or is imminent; and
the
Company is not aware of any existing or imminent labor disturbance by the
employees of any principal suppliers, contract manufacturing organizations,
manufacturers, authorized dealers or distributors that might be expected to
result in any material adverse change in the condition (financial or otherwise),
earnings, operations, business or prospects of the Company, considered as a
whole. No collective-bargaining agreement exists with any of the Company’s
employees and, to the best knowledge of the Company, no such agreement is
imminent.
2.25 Political
Contributions.
The
Company has not, directly or indirectly, at any time (x) made any
contributions to any candidate for political office, or failed to disclose
fully
any such contribution, in violation of law; (y) made any payment to any state,
federal or foreign governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
allowed by all applicable laws; or (z) violated nor is it in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
2.26 Environmental
Liabilities.
The
Company knows
of
no
liability, matured
or not matured, absolute or contingent, assessed or unassessed, imposed or
based
upon any provision of, and
has not
received
notice of any potential liability under, any foreign, federal, state or local
law, rule or regulation or the common law, or any tort, nuisance or absolute
liability theory, or under any code, order, decree, judgment or injunction
applicable to the Company relating to public health or safety, worker health
or
safety or pollution, damage to or protection of the environment, including,
without limitation, laws relating to damage to natural resources, emissions,
discharges, releases or threatened releases of hazardous materials into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), or otherwise relating to the
manufacture, processing, use,
treatment, storage, generation, disposal, transport or handling of hazardous
materials. As used herein, “hazardous material” includes chemical substances,
wastes, pollutants, contaminants, hazardous or toxic substances, constituents,
materials or wastes, whether solid, gaseous or liquid in
nature.
2.27 Investment
Company Act.
The
Company is familiar with the Investment Company Act of 1940, as amended (the
“1940 Act”), and the rules and regulations thereunder, and has in the past
conducted, and intends in the future to conduct, its affairs in such a manner
as
to ensure that it will not become an “investment company” within the meaning of
the 1940 Act and such rules and regulations.
2.28 Patents.
The
Company owns or possesses adequate rights to use all material patents, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names and copyrights described or referred to in the Final Prospectus as owned
by or used by any of them, or which are necessary for the conduct of its
business as described in the Final Prospectus; and the Company has not received
any notice of infringement of or conflict with asserted rights of others with
respect to any patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the business, properties, condition (financial
or otherwise), prospects or results of operations of the Company.
SECTION
3
SALE
OF THE SECURITIES
3.1 Sale
of Units.
Subject
to the terms and conditions and upon the basis of the representations and
warranties herein set forth, the Company hereby appoints the Underwriter as
its
exclusive agent commencing on the Effective Date for the purpose of offering
the
Units as provided in this agreement on a “best efforts” basis. The Underwriter
agrees to use its best efforts to sell the Units as the Company’s agent. It is
understood and agreed that there is no firm commitment on the Underwriter’s part
to purchase any of the Units. The Underwriter may, in its discretion, offer
a
part of the Units for sale by dealers who are members of the National
Association of Securities Dealers, Inc. (“NASD”), selected by the Underwriter,
and the Underwriter may form and manage a selling group of such selected
dealers. The Underwriter may allow such concessions upon sales by selected
dealers as may be determined from time to time by the Underwriter.
3.2 Public
Offering Price.
After
the SEC notifies the Company that the Registration Statement has become
effective, the Underwriter will offer the Units hereunder at a price of
[$_____]
per Unit. The Underwriter will be entitled to the following commission and
fees
all expressed as a percentage of the gross proceeds of the Offering (the
“Underwriter’s Compensation”):
·
|
An
underwriting fee of 1%;
|
·
|
A
selling commission of 6%;
|
·
|
A
non accountable expense allowance of 3%;
and
|
·
|
The
Underwriter’s Warrants (as defined in Section
3.4).
|
The
Underwriter shall receive the Underwriter’s Compensation on the entire gross
proceeds of the Offering, including on any investments by Direct
Investors.
Any
commissions and fees payable to the Underwriter under this paragraph shall
be
payable on the Closing Date or as otherwise provided herein.
The
Underwriter hereby acknowledges receipt of a $10,000 advance on expenses in
connection with the Offering. If this Offering is terminated, the advance
received will be returned to the Company to the extent not actually incurred
in
accordance with NASD Rule 2710(f)(2)(C).
3.3 Inspection
of Certificates.
For the
purpose of expediting the checking and packaging of the Units,
if
requested by the Underwriter, the Company agrees to make the
certificates for
the
Shares
and the Warrants
available for inspection by the Underwriter at the main office of the
Underwriter at least two full business days prior to the proposed delivery
date.
3.4 Issuance
of Underwriter’s Warrants.
On the
Closing Date of the Offering, at a price of $0.001 per warrant, the Company
will
issue to the Underwriter and its designees, warrants (the “Underwriter’s
Warrants”) substantially in the form filed as an Exhibit to the Registration
Statement with such changes therein, if any, as may be agreed upon by the
Company and the Underwriter, to purchase the number of shares of common stock
equal to 10% of the Units sold in the Offering for a term beginning on the
Effective Date and ending on the date which is five years from the Effective
Date at an exercise price per share equal to 125% of the offering price per
share of Units sold in the Offering.
The
Underwriter’s Warrant Shares shall be registered on the Registration Statement
for the Offering.
The
Underwriter’s Warrants shall also contain a net exercise provision and
anti-dilution provisions for stock splits, recombinations, and reorganizations
and shall otherwise be in form and substance satisfactory to the
Underwriter.
For
a
period of 180 days from the Effective Date, the Underwriter’s Warrants may not
be transferred other than to officers and employees of the Underwriter who
are
also shareholders of the Underwriter, or by will, pursuant to the laws of
descent and distribution, or by the operation of law.
3.5 Representations
of the Parties.
The
parties hereto respectively represent that as of the Effective Date and
continuing through the Closing Date, the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.
3.6 Post-Closing
Information.
The
Underwriter covenants that, reasonably promptly after the Closing Date, it
will
supply the Company with all information required from the Underwriter which
must
be supplied to the SEC, if any, and such additional information as the Company
may reasonably request to be supplied to the securities authorities for such
states in which the Units have been qualified for sale.
3.7 Re-Offers
by Selected Dealers.
The
Underwriter shall require any selected dealer selling the Units to agree to
sell
the Units on the terms and conditions of the Offering set forth in the
Prospectus.
SECTION
4
REGISTRATION
STATEMENT AND PROSPECTUS
4.1 Delivery
of Registration Statements.
The
Company shall deliver to the Underwriter without charge one manually signed
copy
of the Registration Statement, including all financial statements and exhibits
filed therewith and any amendments or supplements thereto. The signed copies
of
the Registration Statement so furnished to the Underwriter will include manually
signed copies of any and all consents and certificates of the independent public
accountant certifying to the financial statements included in the Registration
Statement and signed copies of any and all opinions, consents and certificates
of any other persons whose profession gives authority to statements made by
them
and who are named in the Registration Statement as having prepared, certified,
or reviewed any part thereof.
4.2 Delivery
of Pre-Effective Prospectus.
The
Company will cause to be delivered to the Underwriter and to other
broker-dealers, without charge, prior to the Effective Date, as many copies
of
each Preliminary Prospectus filed with the SEC bearing in red ink the statement
required by Item 501(c)(8) of Regulation S-K (Reg. 229.501(c)(8)) as may be
required by the Underwriter. The Company consents to the use of such documents
by the Underwriter and by selected dealers prior to the Effective Date of the
Registration Statement.
4.3 Delivery
of Prospectus.
The
Company will deliver, without charge, copies of the Effective Prospectus and
the
Final Prospectus at such addresses and in such quantities as may be required
by
the Underwriter for the purposes contemplated by this Agreement and shall
deliver said printed copies of the Effective Prospectus and the Final Prospectus
to the Underwriter and to selected dealers within three
business
days
after
the Effective Date.
4.4 Further
Amendments and Supplements.
If
during such period of time as in the opinion of the Underwriter or its counsel
the Final Prospectus is required to be delivered under the Act, any event occurs
or any event known to the Company relating to or affecting the Company shall
occur as a result of which the Final Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time after the Effective Date to amend or supplement the Final Prospectus
to comply with the Act, the Company will forthwith notify the Underwriter
thereof and prepare and file with the SEC such further amendment to the
Registration Statement or supplement the Final Prospectus (at the expense of
the
Company) so as to correct such statement or omission or effect such compliance.
The Company shall furnish and deliver to the Underwriter and to others whose
names and addresses are designated by the Underwriter, all at the cost of the
Company, a reasonable number of copies of the amended or supplemented Prospectus
which as so amended or supplemented will not contain any untrue statement of
a
material fact or omit to state any material fact necessary in order to make
the
Prospectus not misleading in the light of the circumstances as of the date
of
such Prospectus, amendment, or supplement, and which will comply in all respects
with the Act. In the event the Underwriter is required to deliver a Prospectus
beyond completion of their participation in the Offering, upon request the
Company will prepare promptly such Prospectus or Prospectuses as may be
necessary to permit continued compliance with the requirements of Section 10
of
the Act.
4.5 Use
of Prospectus.
The
Company authorizes the Underwriter and all selected dealers to whom any of
the
Units may be sold to use the Effective Prospectus and the Final Prospectus,
as
from time to time amended or supplemented, in connection with the offer and
sale
of the Units and in accordance with the applicable provisions of the Act, the
Rules and Regulations and state Blue Sky or securities laws.
SECTION
5
COVENANTS
OF THE COMPANY
The
Company covenants and agrees with the Underwriter that:
5.1 Objection
of Underwriter to Amendments or Supplements.
The
Company will not at any time, whether before or after the Effective Date, file
any amendment or supplement to the Registration Statement or Prospectus unless
and until a copy of such amendment or supplement has been furnished to the
Underwriter a reasonable period of time prior to the proposed filing thereof;
or
to which the Underwriter or legal counsel for the Underwriter has reasonably
objected, in writing, on the ground that such amendment or supplement is not
in
compliance with the Act or the Rules and Regulations.
5.2 Company’s
Best-Efforts to Cause Registration Statement to Become
Effective.
The
Company will use its best efforts to cause the Registration Statement to become
effective or, if the procedure in Rule 430A of the Rules and Regulations is
followed, comply with the provisions of and make all requisite filings with
the
SEC pursuant to such Rule and to notify the Underwriter promptly (in writing,
if
requested) of all such filings. The Company shall promptly advise the
Underwriter, and will confirm such advice in writing (a) when the Registration
Statement shall become effective and when any amendment thereto shall have
become effective and when any amendment of or supplement to the Effective
Prospectus or the Final Prospectus shall be filed with the SEC; (b) when the
SEC
makes a request or suggestion for any amendment to the Registration Statement
or
the Effective Prospectus or the Final Prospectus or for additional information
and the nature and substance thereof; and (c) of the happening of any event
which in the judgment of the Company makes any material statement in the
Registration Statement or Effective Prospectus or the Final Prospectus untrue
or
which requires the making of any changes in the Registration Statement or the
Effective Prospectus or Final Prospectus in order to make the statements therein
not misleading. The Company shall also promptly notify the Underwriter, and
confirm such notice in writing, when the Company has knowledge of the issuance
by the SEC of an order suspending the effectiveness of the Registration
Statement pursuant to Section 8 of the Act, suspending or preventing the use
of
any Preliminary Prospectus or the Effective Prospectus or Final Prospectus
or
suspending the qualification of the Units for offering or sale in any
jurisdiction, or of the institution of any proceedings for any such purpose.
The
Company will use every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or refusing or
suspending the qualification of the Units, and to obtain as soon as possible
a
lifting of any such suspension order, the reversal of any such refusal to
qualify, and the termination of any such suspension.
5.3. Preparation
and Filing of Amendments and Supplements.
The
Company agrees to prepare and file promptly with the SEC, upon request of the
Underwriter, such amendments or supplements to the Registration Statement or
Final Prospectus, in form satisfactory to counsel to the Company, as may be
reasonably necessary, in the opinion of counsel to the Underwriter and of
counsel to the Company; and it shall use its best efforts to cause the same
to
become effective as promptly as possible.
5.4 Blue
Sky Qualification.
The
Company will cooperate with the Underwriter in qualifying or registering the
Units and underlying securities for sale under the blue sky laws of such
jurisdictions as the Underwriter and
the
Company agree,
and
will continue such qualifications in effect so long as is reasonably required
for the distribution of the Units. The Company shall not be required to qualify
as a foreign corporation or to file a general consent to service of process
in
any such jurisdiction where it is not currently qualified or where it would
be
subject to taxation as a foreign corporation.
5.5 Financial
Statements.
The
Company at its own expense will prepare and give such financial statements
and
other information to the SEC, or the proper public bodies of the states in
which
the Units and underlying securities may be registered or qualified, as may
be
required by them.
5.6 Reports
and Financial Statements to the Underwriter.
During
the period ending three years from the Closing Date, the Company will deliver
to
the Underwriter copies of each annual report of the Company, and will deliver
to
the Underwriter, within 90 days after the close of each fiscal year of the
Company, a financial report of the Company. All such reports will include a
balance sheet as of the end of the preceding fiscal year, a statement of
operations, a statement of cash flows and an analysis of shareholders’ equity
covering such fiscal year, and all will be in reasonable detail and certified
by
independent public accountants for the Company. These requirements will be
satisfied if the Company electronically files its Forms 10-KSB,
Forms
10-QSB,
and
Forms 8-K (or other appropriate forms) when they are filed with the
SEC.
If
the
Company shall fail to furnish the Underwriter with financial statements as
herein provided, within the times specified herein, the Underwriter, after
giving reasonable notice of not less than 30 days (and if the financial
statements are not provided within such 30 day period), shall have the right
to
have such financial statements prepared by independent public accountants of
its
own choosing and the Company agrees to furnish such independent public
accountants such data and assistance and access to such records as they may
reasonably require to enable them to prepare such statements and to pay their
reasonable fees and expenses in preparing the same.
During
the period ending three years from the Closing Date, the Company shall also
provide to the Underwriter copies of all other statements, documents, or other
information which the Company shall mail or otherwise make available to any
class of its security holders, or which it shall file with the SEC; and, upon
request in writing from the Underwriter, the Company shall furnish to the
Underwriter such other information as may reasonably be requested and which
may
be properly disclosed to the Underwriter with reference to the property,
business and affairs of the Company provided such written request includes
an
agreement to keep confidential any information which should not be disclosed
to
the public.
5.7 Expenses
Paid by the Company.
The
Company will pay or cause to be paid, whether or not the transactions
contemplated hereunder are consummated or the Registration Statement is
prevented from becoming effective or this Agreement is terminated, (a) all
fees
and expenses (including, without limitation, fees and expenses of the Company’s
accountants and counsel, and fees and expenses of counsel for the Underwriter)
in connection with the preparation, printing, filing, delivery and shipping
of
the Registration Statement (including financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus, the Effective
Prospectus and the Final Prospectus as amended or supplemented, and the
printing, delivery and shipping of this Agreement and other underwriting
documents, including Blue Sky Memoranda and Selected Dealer Agreements; (b)
the
filing fee of the NASD; (c) any applicable listing fees; (d) the cost of
printing certificates or other documents representing the Units; (e) the cost
and charges of any transfer agent or registrar; (f) the fees and expenses of
qualifying the Units under the blue sky laws of various jurisdictions; (g)
all
expenses for due diligence, including meetings associated with this Offering,
which are reimbursable weekly or prior to being incurred, as may be requested
by
an Underwriter and as approved in advance in writing by the Company and subject
to NASD Rule 2710(f)(2)(C); (h) the costs of any luncheons, functions, special
expenses and all road show and travel expenses and the Company shall provide
arrangements for the payment of these expenses prior to being incurred, as
may
be requested by the Underwriter and approved in writing by the Company and
subject to NASD Rule 2710(f)(2)(C); and (i) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
provided for in this Section.
5.8 Reports
to Shareholders.
During
the period ending five years from the Closing Date, the Company will, as
promptly as possible, but not later than 180 days after the end of its annual
fiscal year, render and distribute reports to its shareholders which will
include audited statements of its operations and cash flows during such period
and its balance sheet as of the end of such period, as to which statements
the
Company’s independent certified public accountants shall have rendered an
opinion.
5.9 Section
11(a) Financials.
The
Company will make generally available to its security holders and will deliver
to the Underwriter, as soon as practicable, an earnings statement (as to which
no opinion need be rendered but which will satisfy the provisions of Section
11(a) of the Act) covering a period of at least 12 months beginning after the
Effective Date. Compliance by the Company with Rule 158 promulgated under the
Act shall satisfy the requirements of this Section 5.9.
5.10 Post-Effective
Availability of Prospectus.
The
Company will comply, at its own expense, with all requirements imposed upon
it
by the Act, as now or hereafter amended, by the Rules and Regulations, as from
time to time may be in force, and by any order of the SEC, so far as necessary
to permit the continuance of sales or dealings in the Units.
5.11 Application
of Proceeds.
The
Company will apply the net proceeds from the sale of the Units substantially
in
the manner specifically set forth in the Final Prospectus. Any deviation from
such application must be in accordance with the Final Prospectus and may occur
only after approval by the board of directors of the Company and then only
after
the board of directors has obtained the written opinion as to the propriety
of
any such deviation provided by recognized legal counsel well versed in the
federal and state securities laws.
5.12 Agreements
of Certain Shareholders.
The
Company will deliver to the Underwriter, prior to the execution of this
Agreement, the lock-up agreement referred to in Section 2.17.
5.13 Delivery
of Documents.
At or
prior to the Closing, the Company will deliver to the Underwriter true and
correct copies of the certificate
of
incorporation of the Company and all amendments thereto; true and correct copies
of the by-laws of the Company and of the minutes of all meetings of the
directors and shareholders of the Company held prior to the Closing Date which
in any way relate to the subject matter of this Agreement. All such copies
shall
be certified by the Secretary of the Company.
5.14 Cooperation
with Underwriter’s Due Diligence.
At all
times prior to the Closing Date, the Company will cooperate with the Underwriter
in such investigation as the Underwriter may make or cause to be made of all
the
properties, management, business and operations of the Company, and the Company
will make available to the Underwriter in connection therewith such information
in its possession as the Underwriter
may
reasonably request.
5.15 Appointment
of Transfer Agent.
The
Company has appointed Interwest Transfer Co., Inc. as its transfer agent for
the
Company’s securities. The Company will not change or terminate such appointment
for a period of three years from the Effective Date without first obtaining
the
written consent of the Underwriter, which consent shall not be unreasonably
withheld.
5.16 Compliance
with Conditions Precedent.
The
Company will use all reasonable efforts to comply or cause to be complied with
the conditions precedent to the several obligations of the Underwriter in
Section 8 hereof.
5.17 Filing
of Form SR.
If
required under the Act, the Company agrees to file with the SEC all required
reports on Form SR in accordance with the provisions of Rule 463 promulgated
under the Act and to provide a copy of such reports to the Underwriter and
their
counsel.
5.18 Bulletin
Board.
The
Company will use its best efforts to cooperate
with a market maker which is reasonably acceptable to the Company in applying
for quotation of the Shares on the Over-the-Counter Bulletin Board
(“OTCBB”).
The
Company hereby agrees that the Underwriter is reasonably acceptable market
makers for the purpose of applying for quotation of the Shares on the
OTCBB.
5.19 Right
of Inspection.
For a
period of three years after the Effective Date, the Underwriter, at its expense,
will have the right to have a person or persons selected by the Underwriter
review the books and records of the Company upon seven days’ written notice and
at reasonable times. Such person or persons will be required to execute a
confidentiality agreement which will, in part, prohibit disclosure of
information to any party except the Underwriter, which information shall be
held
in confidence unless otherwise specifically agreed to by the Company in
writing.
5.20 Outside
Directors, Committees, Executive Compensation.
The
Company shall use its best efforts to have at least two members elected to
its
board of directors who are not officers or employees of the Company (“outside
directors”) on the Effective Date of the Registration Statement, and to cause
two such outside directors to be nominated as directors for two additional
one-year terms. The Company will form independent audit and compensation
committees which shall be comprised of at least three of the Company’s
directors, at least a majority of whom shall be outside directors.
5.21 Financial
Statements and Share Issuances. The
Company has prepared and delivered to the Underwriter its most recent financial
statements constituting
its best estimate of revenues, earnings and cash flow and shall update such
estimates on a quarterly
basis
during the registration period. Except in connection with acquisitions or
pursuant to the exercise of warrants and options outstanding prior to the
completion of the Offering, and the Company’s right to adopt a stock option plan
(the “Plan”) reserving no more than 20%
of the
issued and outstanding shares of common stock of the Company as of the date
hereof and the grant of options to its officers and employees under such Plan
at
an exercise price equal to or
greater than
the
Offering price, the Company will not, without the Underwriter’s prior written
consent, sell any shares of capital stock of the Company or issue warrants
or
options to purchase any shares of capital stock of the Company during the twelve
month period following the Offering if $7,000,000 gross proceeds or more are
raised in the Offering, or during the six month period following the Closing
Date if $5,000,000 to $6,999,999 in gross proceeds are raised in the Offering.
This provision shall not apply if less than $5,000,000 gross proceeds are raised
in the Offering.
5.22 Observer
Rights. The
Underwriter shall have the right for a period of five years commencing on the
Closing Date to designate an observer to the Board of Directors of the Company,
which observer receives notice of all Board and Board committee meetings
concurrent with the Company’s directors and shall have the right to attend all
Board and Board committee meetings at the Company’s expense.
SECTION
6
INDEMNIFICATION
AND CONTRIBUTION
6.1 Indemnification
by Company.
The
Company shall indemnify and hold harmless each Underwriter and each
participating dealer against any and all loss, claim, damage or liability,
joint
or several, to which such Underwriter or participating dealer may become
subject, under the Act or otherwise, insofar as such loss, claim, damage, or
liability (or action with respect thereto) arises out of or is based upon (a)
any violation of any registration requirements; (b) any improper use of sales
literature by the Company; (c) any untrue statement or alleged untrue statement
made by the Company in Section 2 hereof; (d) any untrue statement or alleged
untrue statement of a material fact contained (i) in the Registration Statement,
any Preliminary Prospectus, the Effective Prospectus, or the Final Prospectus
or
any amendment or supplement thereto, or (ii) in any application or other
document,
executed
by the Company specifically for such application or based upon written
information furnished by the Company, filed in order to qualify the Units under
the securities laws of the states where filings were made (any such application,
document, or information being hereinafter called “Blue Sky Application”); or
(e) the omission or alleged omission to state in the Registration Statement,
any
Preliminary Prospectus, the Effective Prospectus, or the Final 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; and shall reimburse the Underwriter and each participating dealer
for any legal or other reasonable expenses incurred by the Underwriter and
participating dealer in connection with investigating or defending against
or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action, notwithstanding the possibility that payments
for
such expenses might later be held to be improper, in which case the person
receiving them shall promptly refund them; except that the Company shall not
be
liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage, 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 through the Underwriter or participating dealer by or on behalf of
the
Underwriter or participating dealer specifically for use in the preparation
of
the Registration Statement, any Preliminary Prospectus, the Effective Prospectus
and the Final Prospectus or any amendment or supplement thereto, or any Blue
Sky
Application.
6.2 Indemnification
by Underwriter.
The
Underwriter shall indemnify and hold harmless the Company against any and all
loss, claim, damage or liability, joint or several, to which the Company may
become subject under the Act or otherwise, insofar as such loss, claim, damage,
liability (or action in respect thereto) arises out of or is
based
upon (a) any untrue statement or alleged untrue statement of a material fact
contained (i) in the Registration Statement, any Preliminary Prospectus,
the Effective Prospectus or the Final Prospectus or any amendment or supplement
thereto or (ii) in any Blue Sky Application; or (b) the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospective,
the Effective Prospectus or the Final 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; except
that
such indemnification shall be available in each such case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement
or
omission or alleged omission was made in reliance upon information and in
conformity with written information furnished to the Company through the
Underwriter or on behalf of the Underwriter specifically for use in the
preparation thereof; and shall reimburse any legal or other expenses reasonably
incurred by the Company in connection with the investigation or defending
against any such loss, claim, damage, liability or action.
6.3 Right
to Provide Defense.
Promptly after receipt by an indemnified party under Section 6.1 or 6.2 above
of
written notice of a
claim
or the
commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such section, notify
the indemnifying party in writing of the claim or the commencement of that
action; the failure to notify the indemnifying party shall not relieve it of
any
liability which it may have to an indemnified party, except to the extent that
the indemnifying party did not otherwise have knowledge of the claim
or
the commencement
of the action and the indemnifying party’s ability to defend against
the claim
or
action
was prejudiced by such failure. Such failure shall not relieve the indemnifying
party from any other liability which it may have to the indemnified party or
any
person identified in Section 6.4 below. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying
party
thereof, the indemnifying party shall be entitled to participate therein and,
to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim
or
action, the indemnifying party shall not be liable to the indemnified party
under such section for any legal or other expenses subsequently incurred by
the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; except that the indemnified
party
shall
have the right to employ counsel to represent the indemnified
party
who may
be subject to liability arising out of any claim in respect of which indemnity
may be sought by the indemnified
party under this Section 6
if, in
the reasonable judgment of the indemnified
party,
it is
advisable for the indemnified
party
to be
represented by separate counsel, and in that event the fees and expenses of
such
separate counsel shall be paid by the indemnifying
party.
The
indemnified party may, but shall not be obligated to, participate in the defense
at its own expense with its own counsel.
6.4 Contribution.
If the
indemnification provided for in Sections 6.1 and 6.2 of this Agreement is
unavailable or insufficient to hold harmless an indemnified party, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages, or liabilities
referred to in Sections 6.1 or 6.2 above (a) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one
hand and the Underwriter or participating dealers on the other from the offering
of the Units; or (b) if the allocation provided by clause (a) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
the
relative benefits referred to in clause (a) above but also the relative fault
of
the Company on the one hand and the Underwriter or participating dealers on
the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Underwriter or participating dealers shall be deemed to be in the same
proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company bear to the total Underwriter’s
Compensation received
by the Underwriter or participating dealers
under
this Agreement.
Relative fault shall be determined by reference to, among other things, whether
the untrue statement of a material fact or the omission to state a material
fact
relates to information supplied by the Company, the Underwriter, or the
participating dealers and the parties’ relative intent, knowledge, access to
information, and opportunity to correct or prevent such untrue statement or
omission. For purposes of this Section 6.4, the term “damages” shall include
reasonable counsel fees or other expenses reasonably incurred by the Company,
the Underwriter, or participating dealers in connection with investigating
or
defending any action or claim which is the subject of the contribution
provisions of this Section 6.4. Notwithstanding the provisions of this Section
6.4, no Underwriter or participating dealer shall be required to contribute
any
amount in excess of the amount by which the total price at which the Units
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter or participating dealer
has otherwise been required to pay by reason of any such untrue statements
or
omissions. No person adjudged guilty of fraudulent misrepresentation (within
the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any
person who was not guilty of such fraudulent misrepresentation. Under this
Section 6.4, each Underwriter’s obligations, if there are ultimately more then
one underwriter, to contribute are several in proportion to their respective
underwriting obligations and not joint. Each party entitled to contribution
agrees that upon the service of a summons or other initial legal process upon
it
in any action instituted against it in respect of which contribution may be
sought, it shall promptly give written notice of such service to the party
or
parties from whom contribution may be sought, but the omission so to notify
such
party or parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in Section 6.4 hereof).
6.5 Extension
of Obligations.
The
obligations of the Company under this Section 6 shall be in addition to any
other liability which the Company may otherwise have, and shall extend, upon
the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriter under
this
Section shall be in addition to any liability that the respective Underwriter
may otherwise have, and shall extend, upon the same terms and conditions, to
each director of the Company (including any person who, with his consent, is
named in the Registration Statement as about to become a director of the
Company), to each officer of the Company who has signed the Registration
Statement, and to each person, if any, who controls the Company within the
meaning of the Act.
SECTION
7
EFFECTIVENESS
OF AGREEMENT
Once
fully executed, this Agreement shall become effective at 10:00 a.m., Los Angeles
time, on the first full business day after the Effective Date.
SECTION
8
CONDITIONS
OF THE UNDERWRITER’S OBLIGATIONS
The
obligations of the Underwriter hereunder to sell the Units on a “best efforts”
basis shall be subject to the accuracy,
of each
of the representations and warranties on the part of the Company herein
contained, to the performance by the Company of all its agreements herein
contained, to the fulfillment of or compliance by the Company with all covenants
and conditions hereof, and to the following additional conditions:
8.1 Effectiveness
of Registration Statement.
The
Registration Statement and all post-effective amendments thereto filed with
the
SEC prior to the Closing Date shall have become effective and any and all
filings required by Rule 424 and Rule 430A of the Rules and Regulations shall
have been made; no stop order suspending the effectiveness of the Registration
Statement or any amendment or supplement thereto shall have been issued; no
proceeding for that purpose shall have been initiated or threatened by the
SEC
or be pending; any request for additional information on the part of the SEC
(to
be included in the Registration Statement or Final Prospectus or otherwise)
shall have been complied with to the satisfaction of the SEC; and neither the
Registration Statement, the Effective Prospectus or Final Prospectus, nor any
amendment thereto shall have been filed to which counsel to the Underwriter
shall have reasonably objected in writing or have not given their
consent.
8.2 Accuracy
of Registration Statement.
The
Underwriter shall
not have
advised the Company that the Registration Statement or the Effective Prospectus
or Final Prospectus or any amendment thereof or supplement thereto contains
an
untrue statement of a fact which, in the opinion of counsel to the Underwriter,
is material, or omits to state a fact which, in the opinion of such counsel,
is
material and is required to be stated therein, or is necessary to make the
statements therein not misleading.
8.3 Casualty
and Other Calamity.
Since
the Effective Date, the Company shall not have sustained any loss on account
of
fire, explosion, flood, accident, calamity or any other cause,
of such
character as materially adversely affects its business or property considered
as
an entire entity, whether or not such loss is covered by insurance, and no
officer or director of the Company shall have suffered any injury, sickness
or
disability of a nature which would materially adversely affect his or her
ability to properly function as an officer or director of the
Company.
8.4 Litigation
and Other Proceedings.
Other
than as disclosed in the Registration Statement or Prospectus, there shall
be no
litigation instituted or threatened against the Company and there shall be
no
proceeding instituted or threatened against the Company before or by any federal
or state SEC, regulatory body or administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, management, licenses, operations
or financial condition or income of the Company considered as an
entity.
8.5 Lack
of Material Change.
Except
as contemplated herein or as set forth in the Registration Statement and Final
Prospectus, during the period subsequent to the date of the last audited balance
sheet included in the Registration Statement, the Company (a) shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the last audited balance sheet included in the
Registration Statement, and (b) except in the ordinary course of its business,
the Company shall not have incurred any liabilities, claims or obligations
(direct or contingent) or disposed of any of its assets, or entered into any
material transaction or suffered or experienced any substantially adverse change
in its condition, financial or otherwise. The capital stock and surplus accounts
of the Company shall be substantially the same as at the date of the last
audited balance sheet included in the Registration Statement, without
considering the proceeds from the sale of the Units, other than as may be set
forth in the Final Prospectus, and except as the surplus reflects the result
of
continued profits or losses from operations consistent with prior
periods.
8.6 Review
by Underwriter’s Counsel.
The
authorization of the Units, the Shares, the Warrants, the Warrant Shares, the
Underwriter’s Warrants, and the Underwriter’s Warrant Shares, the Registration
Statement, the Effective Prospectus and the Final Prospectus and all corporate
proceedings and other legal matters incident thereto and to this Agreement
shall
be reasonably satisfactory in all respects to counsel to the
Underwriter.
8.7 Opinion
of Counsel.
The
Company shall have furnished to the Underwriter opinions as of the Effective
Date and the Closing Date, addressed to the Underwriter, from legal counsel
to
the Company expressing such opinions as are reasonable and customary in
transactions such as the Offering.
8.8 Accountant’s
Letter.
The
Underwriter shall have each received letters addressed to each of them dated
the
Effective Date, and the Closing Date, respectively, and a draft of such letter
at least five days prior to the Effective Date, and the Closing Date, from
Squar, Xxxxxx, Xxxxxxx & Xxxxxxxxxx, LLP, confirming that they are
independent public accountants with respect to the Company within the meaning
of
the Act and the published Rules and Regulations. In the letter dated the date
of
this Agreement, they shall provide
such further “comfort” as the Underwriter may request consistent with the
professional standards applicable to certified public accountants.
The
Underwriter shall be furnished without charge, in addition to the original
signed copies, such number of signed or photostatic or conformed copies of
such
letters as the Underwriter shall reasonably request.
8.9 Officer’s
Certificate.
The
Company shall furnish to the Underwriter certificates, each signed by the Chief
Executive Officer, President and Chief Financial Officer of the Company, dated
as of the Effective Date and as of each Closing Date the
Underwriter designates
to the
effect that:
(a) The
representations and warranties of the Company in this Agreement are true and
correct at and as of the date of the certificate, and the Company has complied
with all the agreements and has satisfied all the conditions on its part to
be
performed or satisfied at or prior to the date of the certificate;
(b) The
Registration Statement has become effective and to the best of the knowledge
of
the respective signers no order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been initiated
or is threatened by the SEC; and
(c) The
respective signers have each examined the Registration Statement and the Final
Prospectus and any amendments and supplements thereto, and to the best of their
knowledge the Registration Statement and the Final Prospectus and any amendments
and supplements thereto contain all statements required to be stated therein,
do
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and, since the Effective Date, there has occurred no
event required to be set forth in an amended or a supplemented Prospectus which
has not been so set forth.
8.10 Tender
of Delivery of Units and Underwriter’s Warrants.
All of
the Units being offered by the Company and being sold by the Underwriter, and
the Underwriter’s Warrants being purchased from the Company by the Underwriter,
shall be tendered for delivery in accordance with the terms and provisions
of
this Agreement.
8.11 Blue-Sky
Registration or Qualification.
The
Units shall be registered or qualified in such states as the Underwriter and
the
Company may agree pursuant to Section 5.4, and each such registration or
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Dates. On the Effective Date and the Closing Date,
the
Underwriter’s counsel shall provide written information which contains the
following:
(a) the
names
of the states in which applications to register or qualify the Units have been
filed;
(b) the
status of such registrations or qualifications in such states as of the date
of
such letter;
(c) a
list
containing the name of each such state in which the Units may be legally offered
and sold by a dealer licensed in such state and the number of each which may
be
legally offered and sold in the Offering in each such state as of the date
of
such letter;
(d) with
respect to the written information provided on the Effective Date, a
representation that such counsel will promptly update such written information
if counsel receives actual notice of any material changes in the information
provided therein between the Effective Date and the final
Closing
Date;
(e) the
names
of the states in which the offer and sale of the Units in the Offering is exempt
from registration or qualification; and
(f) a
statement that the Underwriter and selected dealers in the Offering may rely
upon the information contained therein.
8.12 Approval
of Underwriter’s Counsel.
All
opinions, letters, certificates and evidence mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance satisfactory to counsel to the
Underwriter, whose approval shall not be unreasonably withheld. The suggested
form of such documents shall be provided to the counsel for the Underwriter
at
least three business days before the dates they are to be provided, that is,
the
Effective Date and the Closing Dates.
8.13 Officers’
Certificate as a Company Representation.
Any
certificate signed by an officer of the Company and delivered to the Underwriter
or counsel for the Underwriter shall be deemed a representation and warranty
by
the Company to the Underwriter as to the statements made therein.
TERMINATION
9.1 Termination
Because of Noncompliance.
This
Agreement may be terminated in its entirety by the Underwriter by notice to
the
Company prior to its effectiveness in the event that the Company shall have
failed or been unable to comply with any of the terms, conditions or provisions
of this Agreement which the Company is required by this Agreement to be
performed, complied with or fulfilled (including but not limited to those
specified in Sections 2, 3, 4, 5, and 8 hereof) within the respective times
herein provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Underwriter in
writing.
9.2 Market-out
Termination.
This
Agreement may be terminated by the Underwriter by notice to the Company at
any
time if, in the sole judgment of the Underwriter, payment for and delivery
of
the Units is rendered impracticable or inadvisable because of:
(a) Material
adverse changes in the Company’s business, business prospects, management,
earnings, properties or conditions, financial or otherwise;
(b) Any
action, suit, or proceedings, at law or in equity, hereafter threatened or
filed
against the Company by any person or entity, or by any federal, state or other
commission, board or agency wherein any unfavorable result or decision could
materially adversely affect the business, business prospects, properties,
financial condition or income or earnings of the Company;
(c) Additional
material governmental restrictions not in force and effect on the date hereof
shall have been imposed upon the trading in securities generally, or new
offering or trading restrictions shall have been generally established by a
registered securities exchange, the SEC, the National Association of Securities
Dealers, Inc. or other applicable regulatory authority, or trading in securities
generally on any such exchange, the Nasdaq Stock Market, or otherwise, shall
have been suspended, or a general moratorium shall have been established by
federal or state authorities;
(d) Substantial
and material changes in the condition of the market beyond normal fluctuations
such that it would be undesirable, impracticable or inadvisable in the judgment
of the Underwriter to proceed with this Agreement or with the public offering
of
the Units;
(e) Any
outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial national
or international calamity or emergency if, in the judgment of the Underwriter,
the effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the sale
of
and payment for the Units; or
9.3 Termination
Upon Expiration of Prospectus. The
Company may terminate the Offering when the term of the Offering period under
the Final Prospectus expires, unless the term is extended by mutual agreement
of
the parties.
9.4 Effect
of Termination Hereunder.
Any
termination of this Agreement pursuant to this Section 9 shall be without
liability of any character (including, but not limited to, loss of anticipated
profits or consequential damages) on the part of any party hereto, except that
the Company shall remain obligated to pay the costs and expenses provided to
be
paid by it specified in Sections 3.2, 3.4, and 5.7; and the Company and the
Underwriter shall be obligated to pay, respectively, all losses, claims, damages
or liabilities, joint or several, under Sections 6.1 or 6.4 in the case of
the
Company and Sections 6.2 or 6.4 in the case of the Underwriter. However,
notwithstanding the foregoing, in the event the Offering is not completed
pursuant to NASD Rule 2710(f)(2)(D) , the Underwriter and any other
participating NASD members will receive only a reimbursement of out-of-pocket
accountable expenses actually incurred.
SECTION
10
UNDERWRITER’S
REPRESENTATIONS AND WARRANTIES
The
Underwriter represents and warrants to and agrees with the Company
that:
10.1 Registration
as Broker-Dealer and Member of NASD.
The
Underwriter is registered as a broker-dealer with the SEC and is registered
as a
securities broker-dealer in all states in which it will sell Units and is a
member in good standing of the National Association of Securities Dealers,
Inc.
10.2 Incorporation
and Standing. The
Underwriter is, and at the Closing Date will be, duly incorporated and validly
existing in good standing as a corporation under the laws of the jurisdiction
of
its organization, with full power and authority to enter into this Agreement;
is
duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its properties (owned or
leased) or the nature of its business makes such qualification necessary except
where the failure to be so qualified would not have a material adverse effect
on
the Underwriter.
10.3 Authority.
The
execution and delivery by the Underwriter of this Agreement has been duly
authorized by all necessary corporate action and this Agreement is the valid,
binding and legally enforceable obligation of the Underwriter, except as rights
to indemnity hereunder may be limited by federal or state securities laws or
public policy and except as enforceability may be limited by bankruptcy,
insolvency, or similar laws affecting creditors rights generally and by general
equitable principles.
10.4 No
Pending Proceedings.
There
is not now pending or threatened against the Underwriter any action,
suit
or
proceeding before
any court, arbitration tribunal or government agency pending, or to the
knowledge of the Underwriter, threatened concerning its activities
as a broker or dealer or
otherwise which would materially affect the Underwriter’s capacity to complete
the terms of this Agreement.
10.5 Governmental
Compliance. The
Underwriter is not in violation of any law, ordinance, governmental rule or
regulation or court decree to which it may be subject which violation might
reasonably be expected to have a material adverse effect on such Underwriter’s
capacity to complete the terms of this Agreement.
10.6 Company’s
Right to Terminate.
In the
event any action or proceeding of the type referred to in Section 10.2 above
shall be instituted or threatened against an Underwriter at any time prior
to
the Effective Date hereunder, or in the event there shall be filed by or against
an Underwriter in any court pursuant to any federal, state, local or municipal
statute, a petition in bankruptcy or insolvency or for reorganization or for
the
appointment of a receiver or trustee of its assets or if it makes an assignment
for the benefit of creditors, the Company shall have the right on three days’
written notice to the Underwriter to terminate this Agreement without any
liability to the Underwriter or the Company of any kind except for the payment
of all expenses as provided herein. However, notwithstanding the foregoing,
in
the event the Offering is not completed pursuant to NASD Rule 2710(f)(2)(D)
,
the Underwriter and any other participating NASD members will receive only
a
reimbursement of out-of-pocket accountable expenses actually
incurred.
10.7 Underwriter’s
Covenants.
The
Underwriter covenants and agrees with the Company that (a) it will not offer
or
sell the Units in any state or other jurisdiction where it has not been advised
in writing by its legal counsel or counsel for the Company that the Units are
qualified for the offer and sale therein or exempt from such requirements;
(b)
it will not make any representation to any person in connection with the offer
and sale of the Units covered hereby except as set forth in the Registration
Statement or as authorized in writing by the Company and the Underwriter; (c)
it
will comply in good faith with all laws, rules and regulations applicable to
the
distribution of the securities, including the Rules of Fair Practice of the
NASD; (d) the Underwriter has the authority to execute this Agreement; and
(e)
the Underwriter will not deal with or engage any finder who is not a registered
broker/dealer or a foreign finder as allowed by NASD rules in connection with
the proposed Offering.
SECTION
11
NOTICE
Except
as
otherwise expressly provided in this Agreement:
11.1 Notice
to the Company.
Whenever notice is required by the provisions of this Underwriting Agreement
to
be given to the Company, such notice shall be in writing addressed to the
Company as follows:
U.S.
Dry
Cleaning Corporation
000
Xxxxxxxx Xxxxxx Xxx, Xxxxx 000
Xxxx
Xxxxxxx, XX 00000
Attn:
Xxxxxx X. Xxx, CEO
with
a
copy to:
Xxxx
X.
Xxxxxxxxxx, Esq.
Xxxxxxxxx
Traurig LLP
000
Xxxx
Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx
Xxxx, XX 00000
11.2 Notice
to the Underwriter.
Whenever notice is required by the provisions of this Agreement to be given
to
the Underwriter, such notice shall be given in writing addressed to the
Underwriter as follows:
US
EURO
Securities, Inc.
00000
Xxxxxxx Xxx Xx., Xxx. XX-0
Xxxxxxxxx,
XX 00000
Attn:
Xxxxxxx Xxx Xxxxxx, CEO
with
a
copy to:
Xxxxxx
& Yap, APC
00000
Xxxx Xxxxxx
Xxxxxx,
XX 00000
Attn:
Xxxxx Xxxxxx, Esq.
11.3 Effective
Date of Notices.
Such
notices shall be effective on the date of delivery set forth on the receipt
if
the notice is sent by registered or certified mail or any expedited
delivery.
SECTION
12
MISCELLANEOUS
12.1 Benefit.
This
Agreement is made solely for the benefit of the Underwriter, the Company, their
respective officers, directors and controlling persons referred to in Section
15
of the Act and such other persons as are identified in this Agreement, and
their
respective successors and assigns, and no other person shall acquire or have
any
right under or by virtue of this Agreement. The term “successor” or the term
“successors and assigns” as used in this Agreement shall not include any
purchasers, as such, of any of the Units.
12.2 Survival.
The
respective indemnities, agreements, representations, warranties, and covenants
of the Company or its officers and the Underwriter as set forth in or made
pursuant to this Agreement and the indemnity and contribution agreements
contained in Section 6 hereof of the Company and the Underwriter (as defined
in
Section 6) shall survive and remain in full force and effect, regardless of
(a)
any investigation made by or on behalf of the Company or the Underwriter or
any
such officer or director thereof or any controlling person of the Company or
of
the Underwriter, (b) delivery of or payment for the Units, and (c) the Closing
Date, and any successor of the Company or the Underwriter or any controlling
person, officer or director thereof, as the case may be, shall be entitled
to
the benefits hereof.
12.3 Governing
Law.
This
Agreement and the rights of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of California including
all
matters of construction, validity, performance, and enforcement and without
giving effect to the principles of conflict of laws.
12.4 Jurisdiction.
The
parties submit to the jurisdiction of the Courts of the County of Orange, State
of California or a Federal Court empaneled in the Central District of the State
of California for the resolution of all legal disputes arising under the terms
of this Agreement.
12.5 Attorneys’
Fees.
In the
event any Party hereto shall commence legal proceedings against the other to
enforce the terms hereof, or to declare rights hereunder, as the result of
a
breach of any covenant or condition of this Agreement, the prevailing party
in
any such proceeding shall be entitled to recover from the losing party its
costs
of suit, including reasonable attorneys’ fees, as may be fixed by the
court.
12.6 Assignment.
This
Agreement shall be binding upon the parties hereto, their successors and
assigns, and prior to the Closing Date shall not be assignable without the
express written consent of all parties hereto.
12.7 Entire
Agreement.
Other
than as set forth in Section 1.1, this Agreement contains the entire agreement
and understanding between the parties hereto, and supersedes any and all prior
agreements and understandings.
12.9 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original and all of which together will constitute one and the same
instrument.
12.10 Facsimile
Signatures.
The
parties hereto agree that this Agreement may be executed by facsimile signatures
and such signatures shall be deemed originals. The parties further agree that
within ten days following the execution of this Agreement, they shall exchange
original signature pages.
12.11 Amendments.
This
Agreement may be amended only by a written agreement executed by all of the
parties hereto.
12.12 Definition
of “Business Day.” For
purposes of this Agreement, “business day” means any day on which the New York
Stock Exchange, Inc. is open for trading.
Please
confirm that the foregoing correctly sets forth the Agreement between you and
the Company.
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Very
truly yours,
U.S.
Dry Cleaning Corporation,
a
Delaware corporation
|
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__________________________________
By:
Xxxxxx
X. Xxx
Its:
Chief
Executive Officer
|
The
foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date
first above written.
US
EURO Securities, Inc.,
|
|
a
California Corporation
|
|
|
|
|
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_____________________________________
|
___________________________________
|
By:
Xxxxxxx
Xxx Xxxxxx
|
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Its: Chairman
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