EXHIBIT 1.1
XXXXXX, INC.
00000 Xxx Xxxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
UNDERWRITING AGREEMENT
----------------------
____________, 1997
Xxxxxx Xxxxxxx & Associates, Inc.
As Representative of the Several Underwriters
Named in Schedule I hereto
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
XXXXXX, INC., a Delaware corporation (the "Company"), proposes to issue and
sell to the Underwriters named in Schedule I hereto (the "Underwriters")
pursuant to this Underwriting Agreement (the "Agreement"), an aggregate of
2,000,000 Units, each Unit consisting of one (1) share of Common Stock, $.001
par value per share (the "Shares"), and one (1) Redeemable Common Stock Purchase
Warrant (the "Warrants"), each exercisable to purchase one (1) share of Common
Stock at any time commencing on the effective date of the Registration Statement
(the "Effective Date") and ending on the fifth anniversary of the Effective
Date. The Warrant exercise price, subject to adjustment described below, will
be $_______ (150% of the initial public offering price of the Units). The
Warrants are subject to redemption at $.05 per Warrant on thirty (30) days'
prior written notice (i) if the closing bid price of the Common Stock as
reported on NASDAQ exceeds 200% of the initial public offering price of the
Units for a period of twenty (20) consecutive trading days ending within thirty
(30) days of the notice of redemption, or (ii) with your prior written consent.
The Shares and the Warrants will be separately transferable immediately upon
issuance. In addition, the Company and Aura Systems, Inc. ("Aura") propose to
grant to the Underwriters the option referred to in Section 2(b) to purchase all
or any part of an aggregate of 300,000 additional Units. The shares of Common
Stock included in such additional Units will be offered by Aura and the Warrants
included in such additional Units will be offered by the Company. Unless the
context otherwise indicates, the term "Units" shall include the additional Units
referred to above.
The aggregate of 2,000,000 Units, together with all or any part of the
300,000 Units which the Underwriters have the option to purchase, and the Shares
and the Warrants comprising such Units, are herein called the "Units." The
Common Stock of the Company to be outstanding after giving effect to the sale of
the Shares is herein called the "Common Stock." The Units, and the Shares and
Warrants included in the Units (including the 300,000 Units which the
Underwriters have the option to purchase) are herein collectively called the
"Securities."
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You have advised the Company and Aura that you desire to purchase the
Units, and that you have been authorized to execute this Agreement as
representative of the Underwriters (the "Representative"). The Company and Aura
confirm the agreements made by it with respect to the purchase of the Units by
you, as follows:
1. Representations and Warranties.
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A. Representations and Warranties of the Company and Aura.
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Each of the Company and Aura represents and warrants to, and agrees
with, each Underwriter that:
(a) A registration statement (File No. 333-31431) on Form S-1 relating
to the public offering of the Units, including a preliminary form of 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 Securities and Exchange Commission (the "Commission") thereunder, and has
been filed with the Commission under the Act. "Preliminary Prospectus" shall
mean each prospectus filed pursuant to Rule 430 of the Rules and Regulations.
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) or Rule 430A of the Rules and Regulations or otherwise
utilized and not required to be so filed shall differ from said prospectus as
then amended, the term "Prospectus" shall mean the prospectus first filed
pursuant to Rule 424(b) or Rule 430A or so utilized from and after the date on
which it shall have been filed or utilized, 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 defined in Section 2(b)), the term "Registration Statement" shall
include such registration statement as so amended, and the term "Prospectus"
shall include the prospectus as so amended or supplemented, or both, as the case
may be.
(b) At the time the Registration Statement becomes effective and at
all times subsequent thereto up to the Option Closing Date (hereinafter
defined), (i) the Registration Statement and Prospectus will in all material
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 the statements therein not misleading
in light of the circumstances under which they were made; provided, however,
that neither the Company nor Aura make representations, warranties or agreements
as to information contained in or omitted from the Registration
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Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by you or on behalf of any Underwriter
through you specifically for use in the preparation thereof. It is understood
that the statements set forth in the Prospectus with respect to stabilization,
the material set forth under the heading "Underwriting" and the identity of
counsel to the Underwriters under the heading "Legal Matters" constitute the
only information furnished in writing by you, or by any Underwriter through you,
for inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company 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 is not reasonably likely to materially adversely affect the Company's
business, properties or financial condition.
(d) The authorized capital stock of the Company as of the Effective
Date was as set forth under "Capitalization" in the Prospectus. The shares of
issued and outstanding capital stock of the Company set forth thereunder have
been duly authorized, validly issued and are fully paid and non-assessable;
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 shares of capital stock of the
Company have been granted or entered into by the Company. The Units, Shares,
Warrants and Representative's Warrant (as that term is defined in Section 12
herein, the "Representative's Warrant") conform in all material respects to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Units and Shares are duly authorized and, when issued,
delivered and paid for pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights of
any security holder of the Company. The certificates evidencing the Shares are
in valid and proper legal form. The Warrants and the Representative's Warrant
will be exercisable for shares of Common Stock of the Company in accordance with
the terms of the Warrants and the Representative's Warrant and at the prices
therein provided for. The shares of Common Stock have been duly authorized and
reserved for issuance upon such exercise, and such shares, when issued upon such
exercise in accordance with the terms of the Warrants and the Representative's
Warrant and when the price is paid, shall be fully paid and non-assessable.
Neither the filing of the Registration Statement nor the offering or sale of the
Units or any 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
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registration of any securities of the Company, except as described in the
Registration Statement.
(f) This Agreement, the Warrant Agreement and the Representative's
Warrant have been duly and validly authorized, executed and delivered by the
Company and Aura, as applicable, and assuming due execution by the other party
or parties hereto and thereto, constitute valid and binding obligations of the
Company enforceable against the Company and Aura, as applicable, in accordance
with their respective terms, except as rights to indemnity and contribution
hereunder may be limited by applicable law and except as enforceability may be
limited by bankruptcy, insolvency or other laws affecting the rights of
creditors generally or by general equitable principles. Each of the Company and
Aura has full power and lawful 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 Representative's Warrant, except such as may be required under
the Act or state securities laws.
(g) Except as described in the Prospectus, neither the Company nor
Aura is in violation, breach or default of or under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement, the Warrant Agreement and the Representative's Warrant will not
conflict with, or result in a breach of, any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance pursuant to the terms of, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which either the
Company or Aura is a party or by which either the Company or Aura may be bound
or to which any of the property or assets of the Company or Aura are subject,
which would have a material adverse effect on the business, properties or
financial condition of the Company or Aura, nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation
applicable to the Company or Aura of any court or of any regulatory authority or
other governmental body having jurisdiction over the Company or Aura, which
would have a material adverse effect on the business, properties or financial
condition of the Company or Aura or of the certificate of incorporation or the
by-laws of the Company or Aura, as amended.
(h) The Company owns no real property and, subject to the
qualifications stated in the Prospectus, the Company has good and valid title to
all properties and assets described in the Prospectus as owned by it, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
not materially significant or important in relation to its business; all of the
leases and subleases under which the Company is the lessor or sublessor of
properties or assets or under which the Company holds properties or assets as
lessee or sublessee as described in the Prospectus are in full force and effect,
and, except as described
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in the Prospectus, the Company is not in default in any respect with respect to
any of the terms or provisions of any of such leases or subleases which would
have a material adverse effect on the business, properties or financial
condition of the Company, and no claim has been asserted by anyone adverse to
rights of the Company as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above, or affecting or questioning the right of
the Company 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, which would have a material adverse effect on the business
properties or financial condition of the Company; and the Company 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) Xxxxxxx Xxxx Xxxxxxx, who have given their report on certain
financial statements filed and to be filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are 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 or the Registration Statement present fairly
the financial position and results of operations and changes in financial
position 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
statements and schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is consistent
during the periods involved.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, the Company has not incurred
any liabilities or obligations, direct or contingent, not in the ordinary course
of business, or entered into any transaction not in the ordinary course of
business, which is material to the business of the Company, and there has not
been any change in the capital stock of, or any incurrence of long-term debt by,
the Company or any issuance of options, warrants or other rights to purchase the
capital stock of the Company or any adverse change or any development involving,
so far as the Company can now reasonably foresee, a prospective adverse change
in the condition (financial or other), net worth, results of operations,
business, key personnel or properties of it which would be material to the
business or financial condition of the Company, and the Company has not become
party to, and neither the business nor the property of the Company has become
the subject of, any material litigation whether or not in the ordinary course of
business.
(l) Except as set forth in the Prospectus, there is not now pending
nor, to the knowledge of the Company, threatened, any action, suit or proceeding
(including those related to environmental matters or discrimination on the basis
of age, sex,
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religion or race) to which the Company is a party before or by any court or
governmental agency or body, which, if adversely determined, would result in any
material adverse change in the condition (financial or other), business
prospects, net worth or properties of the Company; and, except as set forth in
the Prospectus, no labor disputes involving the employees of the Company exist
which, if adversely determined, would result in any material adverse change in
the condition (financial or otherwise), business prospects, net worth or
property of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid all taxes 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
which has not been adequately reserved for on the Company's balance sheet.
(n) The Company 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 complying therewith and owns or possesses adequate rights to
use all material patents, patent applications, trademarks, 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. None of the activities or business of the Company is in violation of,
or causes the Company to violate, any law, rule, regulation or order of the
United States, any state, county or locality, or of any agency or locality, the
violation of which would have a material adverse effect upon the condition
(financial or otherwise), business prospects, net worth or properties of the
Company.
(o) The Company has not, directly or indirectly, at any time (i) made
any contributions to any candidate for foreign political office, or if made,
failed to disclose fully any such contribution made 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 or quasi-public duties,
other than payments or contributions required or allowed by applicable law. The
Company's internal accounting controls and procedures are sufficient to cause
the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(p) On the Closing Dates (as defined in Section 2(c)), 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 Units to the Underwriters hereunder
will have been fully paid or provided for by the Company or Aura, as applicable,
and all laws imposing such taxes will have been fully complied with.
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(q) All contracts and other documents of the Company which are, under
the Rules and Regulations, required to be filed as exhibits to the Registration
Statement have been so filed.
(r) Neither the Company nor Aura has taken and will 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 Units, Shares or Warrants or
to facilitate the sale or resale of the Securities.
(s) The Company has no subsidiaries.
(t) Except for this Agreement and other agreements with the
Representative, neither the Company nor Aura has 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 public offering.
(u) The Shares of Common Stock and Warrants have been approved by
listing on the Nasdaq National Market.
(v) Except for such rights which have been waived or satisfied and
expect as set forth in the Prospectus, no holder of securities of the Company
has any rights to the registration of securities of the Company because of the
filing of the Registration Statement or otherwise in connection with the sale of
the Units contemplated hereby.
(w) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940.
(x) The Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its respective business and (iii) is in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals will not in the aggregate have a material
adverse effect on the Company.
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(y) The Company maintains a system of internal accounting controls
that, taken as a whole, are sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company maintains its own cash management
system and none of the proceeds of this Offering payable to the Company shall in
any way be controlled or subject to direction by Aura or co-mingled with any
account or monies directly or indirectly controlled by Aura.
B. Representations and Warranties of Aura.
--------------------------------------
(a) Aura is the lawful owner of the shares of Common Stock to be sold
by it pursuant to this Agreement and has, and on the Option Closing Date will
have, good and clear title to such
8
Shares, free of all restrictions on transfer, liens, encumbrances, security
interests and claims whatsoever.
(b) Upon delivery of and payment for such shares of Common Stock
pursuant to this Agreement, good and clear title to such shares will pass to the
Underwriters, free of all restrictions on transfer, liens, encumbrances,
security interests and claims whatsoever.
(c) Aura has, and on the Option Closing Date will have, full legal
right, power and authority to enter into this Agreement and the Custody
Agreement between Aura and Interwest Transfer Company, Inc., Custodian (the
"Custody Agreement") and to sell, assign, transfer and deliver such Shares in
the manner provided herein and therein, and this Agreement and the Custody
Agreement have been duly authorized, executed and delivered by or on behalf of
Aura and each of this Agreement and the Custody Agreement is a valid and binding
agreement of Aura enforceable against Aura in accordance with its terms, except
as rights to indemnity and contribution hereunder may be limited by applicable
law and except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles.
(d) All information furnished by or on behalf of Aura relating to Aura
and Aura's shares of Common Stock that is set forth in the Registration
Statement and the Prospectus is, and at the time the Registration Statement
became or becomes, as the case may be, effective and at all times subsequent
thereto up to and on the Closing Date (hereinafter defined) was or will be,
true, correct and complete, and does not, and at the time the Registration
Statement became or becomes, as the case may be, effective and at all times
subsequent thereto up to and on the Closing Date, will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make such information not misleading.
(e) Neither Aura nor any of Aura's affiliates directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, or had any other association with (within the meaning of
Article I of the Bylaws of the National Association of Securities Dealers, Inc.
(the "NASD")), any member firm of the NASD.
(f) Aura shall in no event control or direct any of the proceeds of
this Offering payable to the Company or co-mingle any of said funds with any
account or monies directly or indirectly controlled by Aura.
2. Purchase, Delivery and Sale of the Units.
----------------------------------------
(a) Subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties
9
and agreements herein contained, the Company agrees to issue and sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to buy from
the Company at $_____ per Unit at the place and time hereinafter specified, the
number of Units set forth opposite each Underwriter's name in Schedule I hereto
(the "Firm Units").
Delivery of the Firm Units against payment therefor shall take place
at the offices of Xxxxxx Xxxxxxx & Associates, Inc., 0000 Xxxxxxxx Xxxxxxxxx,
Xxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (or at such other place as may be
designated by agreement between you and the Company) at 10:00 a.m. New York time
on __________________, 1997, or at such other time and date, not later than 5
business days thereafter, as you may designate, such time and date of payment
and delivery for the Firm Units being herein called the "First Closing Date."
Time shall be of the essence and delivery at the time and place specified in
this subsection (a) is a further condition to the obligations of the
Underwriters hereunder.
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company and Aura hereby grant the Underwriters an option
to purchase all or any part of an aggregate of 300,000 additional Units at the
same price per Unit as the Underwriters pay for the Firm Units being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Units being referred to herein as the "Option Units"). The shares of Common
Stock included in such Option Units will be offered by Aura and the Warrants
included in such Option Units will be offered by the Company. The purchase
price for each Warrant will be $.10. This option may be exercised on one
occasion within 45-days after the Effective Date upon notice by you to the
Company and Aura advising each of them as to the amount of Option Units as to
which the option is being exercised, the names and denominations in which the
certificates for such Option Units are to be registered and the time and date
when such certificates are to be delivered. Such time and date shall be
determined by you but shall not be earlier than three and not later than five
full business days after the exercise of said option, nor in any event prior to
the First Closing Date, and such time and date is referred to herein as the
"Option Closing Date." Delivery of the Option Units against payment therefor
shall take place at the offices of Xxxxxx Xxxxxxx & Associates, Inc., 0000
Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000. Time shall be
of the essence and delivery at the time and place specified in this subsection
(b) is a further condition to the obligations of the Underwriters hereunder.
The Option granted hereunder may be exercised only to cover over-
allotments in the sale by the Underwriters of Firm Units referred to in
subsection (a) above.
(c) The Company and Aura, as applicable, will make the certificates
for the Securities comprising the Units to be
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purchased by the Underwriters hereunder available to you for checking at least
two full business days prior to the First Closing Date or the Option Closing
Date (which are collectively referred to herein as the "Closing Dates" and
individually as a "Closing Date"), as the case may be. The certificates shall be
in such names and denominations as you may request, at least two full business
days prior to the relevant Closing Dates. Time shall be of the essence and the
availability of the certificates at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriters.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriters hereunder will be delivered by the Company and
Aura, as applicable, to you for the several accounts of the Underwriters against
payment of the purchase price by you, at your option, by certified or bank
cashier's checks in New York Clearing House funds or by wire transfer, payable
to the order of the Company.
In addition, in the event the Underwriters exercise the option to
purchase from the Company and Aura all or any portion of the Option Units
pursuant to the provisions of subsection (b) above, payment for such Option
Units shall be made to or upon the order of the Company and Aura by you, for the
several accounts of the Underwriters at your option, by certified or bank
cashier's checks payable in New York Clearing House funds or by wire transfer,
at the offices of Xxxxxx Xxxxxxx & Associates, Inc. at the time and date of
delivery of such Option Units as required by the provisions of subsection (b)
above, against receipt of the certificates for such Option Units by you, for the
several accounts of the Underwriters registered in such names and in such
denominations as you may request. The shares of Common Stock included in such
Option Units will be offered by Aura and the Warrants included in such Option
Units will be offered by the Company. The purchase price for each Warrant will
be $.10.
It is understood that the Underwriters propose to offer the Units to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
3. Covenants of the Company.
------------------------
The Company covenants and agrees with the Underwriters that:
(a) Company will use its best efforts to cause the Registration Statement
to become effective and, 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 have been advised and furnished with a copy or to which you or your
counsel shall have reasonably objected in writing or which is not in compliance
with the Act and the Rules and Regulations. At any time prior to the later of
(A) the
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completion by you of the distribution of the Units contemplated hereby (but in
no event more than nine months after the Effective Date) and (B) 25 days after
the Effective Date, the Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or Prospectus which, in your reasonable opinion, may be necessary or
advisable in connection with the distribution of the Units.
Promptly after you or the Company is advised thereof, you will advise the
Company or the Company will advise you, as the case may be, 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 orders or other order suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of the suspension of the qualification of the
Units for offering in any jurisdiction, or 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 the Company has consented and hereby consents to the use of such
copies for the purposes permitted by the Act. The Company authorizes the
Underwriters and selected dealers to use the Prospectus in connection with the
sale of the Units for such period not to exceed nine months from the Effective
Date as in the reasonable opinion of counsel for you 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
an underwriter or dealer, of any event of which the Company or Aura has
knowledge and which materially affects the Company or the Securities, or which
in the opinion of counsel for the Company or counsel for the Underwriters 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 Units, or in case it shall be necessary to amend
or supplement the Prospectus to comply with the Act or with the Rules and
Regulations, the Company or Aura 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
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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 Underwriters, except that in case the Underwriters are required,
in connection with the sale of the Units, to deliver a Prospectus nine months or
more after the Effective Date, the Company will upon request of and at your
expense, amend or supplement the Registration Statement and Prospectus and
furnish the Underwriters with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.
(b) The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations thereunder in connection with the offering and issuance of
the Units.
The Company will use its best efforts to qualify or register the Securities
for sale under the securities or "blue sky" laws of such jurisdictions as you
may have designated in writing prior to the execution hereof and will make such
applications and furnish such information to counsel for the Underwriters as may
be required for that purpose and to comply with such laws, provided that 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 process in any
jurisdiction. 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 you may reasonably require for the
distribution of the Units. Legal fees for such qualifications shall be itemized
based on the time expended and costs incurred, shall be reasonable and shall not
in any event exceed $30,000.00, exclusive of filing fees.
(c) The Company will instruct its transfer agent to provide you with
copies of the Depository Trust Company stock transfer sheets on a weekly basis
for a period of six months from the First Closing Date and on a monthly basis
thereafter for six additional months.
(d) The Company will use its best efforts to cause a Registration
Statement under the Exchange Act to be declared effective on the Effective Date.
(e) For so long as the Company is a reporting company under either
Section 12(g), 13 or 15(d) of the Exchange Act, the Company, at its expense,
will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail and
at its expense, will furnish to you during the period ending five years from the
date hereof, (i) as soon as practicable after the end of each fiscal year, a
balance sheet of the Company and any subsidiaries as at the end of such fiscal
year, together with statements of income, stockholders' equity and cash flows of
the Company and any subsidiaries as at the end of 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
13
security holders; (iii) as soon as they are available, a copy of all non-
confidential reports and financial statements furnished to or filed with the
Commission; and (iv) such other information of a public nature 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 deliver to you at or before the First Closing
Date one signed copy of the Registration Statement including all financial
statements and exhibits filed therewith, and of all amendments thereto. The
Company will deliver to or upon your order, from time to time until the
Effective Date as many copies of any Preliminary Prospectus filed with the
Commission prior to the Effective Date as the Underwriters may reasonably
request. The Company will deliver to you on the Effective Date 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 Prospectus, in final form, or as thereafter
amended or supplemented, as the Underwriters may from time to time reasonably
request.
(h) The Company will make generally available to its security holders
and deliver to you as soon as it is practicable to do so, but in no event later
than 90 days after the end of 12 months after its current fiscal quarter, an
earnings statement (which need not be audited) covering a period of at least 12
consecutive months beginning after the Effective Date which shall satisfy the
requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the Units
substantially for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 of the Rules and Regulations.
(j) 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
opinion of Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, counsel to you may be
reasonably necessary or advisable in connection with the distribution of the
Units and will use its best efforts to cause the same to become effective as
promptly as possible.
(k) Prior to the Effective Date, the Company will cause Aura and all
of the Company's directors and executive officers to enter into a written
agreement with the Representative, which, among other things, shall provide that
for a period of 12 months following the closing date of the Offering, Aura and
such persons will not sell, assign, hypothecate or pledge, other than intra-
family transfers or transfers to trusts for estate planning
14
purposes, any of the shares of Common Stock of the Company owned by them on the
Effective Date, or subsequently acquired by the exercise of any options or
warrants or conversion of any convertible security of the Company held by them
on the Effective Date directly or indirectly, except with your prior written
consent, which consent may be unreasonably withheld, and such stockholders will
permit all certificates evidencing those shares to be stamped with an
appropriate restrictive legend, and will cause the transfer agent for the
Company to note such restrictions on the transfer books and records of the
Company.
(l) The Company shall, upon the initial filing of the Registration
Statement, make all filings required to obtain approval for the quotation of the
Shares and Warrants on the National Association of Securities Dealers, Automated
Quotation System ("NASDAQ") National Market System and will use its best efforts
to effect and maintain the aforesaid approval for at least five (5) years from
the date of this Agreement. Within ten (10) days after the Effective Date, the
Company shall cause the Company to be listed in the Xxxxx'x OTC Industrial
Manual and cause such listing to be maintained for five years from the date of
this Agreement.
(m) The Company represents that it has not taken, and agrees that it
will not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Units, Shares or Warrants or
to facilitate the sale or resale of the Securities.
(n) During the period of the offering, and for a period of twelve (12)
months from the Effective Date, the Company will not sell or otherwise dispose
of any securities of the Company (except for up to 1,000,000 shares under the
Company's Stock Option Plan) without your prior written consent.
(o) The Company shall retain a public relations firm reasonably
acceptable to you, and shall continue to retain such firm, or any alternate firm
acceptable to you, for a minimum period of one (1) year following the Effective
Date.
(p) The Company will reserve and keep available that maximum number of
its authorized but unissued securities which are issuable upon exercise of the
Warrants and the Representative's Warrant outstanding from time to time.
(q) So long as any Warrants are outstanding, the amendments to the
Registration Statement which may be on Form XX-0, X-0, X-0 or S-3 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 to each Underwriter and each dealer as many copies of
each such Prospectus as such Underwriters or dealers may reasonably request. In
addition, for so long as any Warrant is
15
outstanding, the Company will provide you with copies of all filings made by the
Company pursuant to the provisions of the Act and the Securities Exchange Act of
1934, as amended.
(r) The Company shall deliver to you, at the Company's expense, three
(3) bound volumes containing the Registration Statement and all exhibits filed
therewith, and all amendments thereto, and all other material correspondence,
filings, certificates and other documents filed and/or delivered in connection
with this offering. The Company shall use its reasonably best efforts to
deliver such volumes with one hundred eighty (180) days of the First Closing
Date.
(s) The Company shall deliver to you an executed financial consulting
agreement in form and substance reasonably acceptable to you whereby you agree
to act as a financial consultant for a period of two years from the First
Closing Date for a fee of $3,000 per month payable on a monthly basis.
(t) For a period of forty-eight (48) months from the First Closing
Date, the Representative shall have the right to designate two members of the
Board of Directors provided that the designees are acceptable to the Company and
Aura shall vote the shares of the Company held by Aura in favor of electing such
designees to the Board of Directors of the Company. If notified by the
Representative of its election to designate said two members, the Company will
cause such election to occur within 30 days of the date of election. If the
Representative requests said inclusion of designees, this request shall be
satisfied by a resolution of the Board of Directors increasing the authorized
number of directors to accommodate the designees and then appointing such
designees to fill the newly created vacancies. In addition, the Company shall
cause such designees to be on the slate of directors presented to the Company's
stockholders for election at any annual or special meeting of stockholders where
directors of the Company are elected and the Company and Aura shall cause such
designees to be included in any of their respective proxy material prepared for
use at such meeting. Such members shall be entitled to the same compensation,
reimbursements and indemnification as other members of the Company's Board of
Directors. In the event that the Company is unable to obtain the Directors' and
Officers' Liability Insurance described in sub-paragraph (u) below, the
Representative shall have the right for such forty-eight (48) month period to
designate a consultant to the Board of Directors of the Company, which
consultant shall have the right to attend all Board and Board committee meetings
and shall be compensated on the same basis as outside members of the Board.
(u) The Company shall have acquired a reasonable amount of Directors'
and Officers' Liability Insurance (provided that such insurance can be obtained
at a reasonable cost as determined by the Company and the Representative) from a
responsible insurer, all reasonably satisfactory to the Representative.
(v) The Company will not solicit Warrant exercises other than through
the Representative. Upon exercise of any Warrants, the Company will pay the
Representative a fee of 3% of the aggregate exercise price, if (i) the market
price of the Company Common Shares on the date the Warrant is exercised is
greater than the then exercise price of the Warrant; (ii) the exercise of the
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. who is so designated in writing by the holder exercising the
Warrant; (iii) the Warrant is not held in a discretionary account except where
prior specific written approval for the exercise has been received; (iv)
disclosure of compensation arrangements was made both at the time of the
offering and at the time of exercise of the Warrant; (v) the solicitation of the
exercise of the Warrant was not in violation of Rule 10b-6 promulgated under the
Exchange Act; and (vi) the Representative provides bona fide services in
connection with the solicitation of
16
the Warrant. No solicitation fee will be paid to the Representative on Warrants
exercised within one year of the First Closing Date or on Warrants voluntarily
exercised at any time without solicitation.
4. Conditions of Obligations of Xxxxxx Xxxxxxx & Associates, Inc.
--------------------------------------------------------------
The obligations of the Underwriters to purchase and pay for the Units which
they have agreed to purchase hereunder are subject to the accuracy (as of the
date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and you
shall have received notice thereof not later than 5:00 p.m., New York time, on
the date of this Agreement, or at such later time or on such later date as to
which you may agree in writing; on the Closing Dates, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that or any similar purpose shall have been instituted or shall
be pending or, to the knowledge of any Underwriter or to the knowledge of the
Company, shall be contemplated by the Commission; any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, counsel
to you; and no stop order shall be in effect denying or suspending effectiveness
of the Registration Statement nor shall any stop order proceedings with respect
thereto be instituted or pending or threatened under the Act.
(b) At the First Closing Date, you shall have received the opinion,
dated as of the First Closing Date, of Pillsbury Madison & Sutro LLP, counsel
for the Company and Aura, in form and substance reasonably satisfactory to
counsel for you, to the effect that:
(i) the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware and
is duly qualified or licensed to do business as a foreign corporation in
good standing in each other jurisdiction in which the ownership or leasing
of its properties or the conduct of its business requires such
qualification, except where failure to so qualify will not have a material
adverse effect in the business, properties or financial condition of the
Company. The Company has the corporate power to own, lease and operate its
properties and to conduct its business as described in the Prospectus and
to enter into and perform its obligations under this Agreement, the Warrant
Agreement and the Representative Warrant;
(ii) the authorized capitalization of the Company as of the date of
the Prospectus was as set forth in the Prospectus;
17
all of the shares of the Company's outstanding stock requiring
authorization for issuance by the Company's Board of Directors have been
duly authorized and validly issued, are fully paid and non-assessable and
conform in all material respects to the description thereof contained in
the Prospectus; to such counsel's knowledge, the outstanding shares of
Common Stock of the Company have not been issued in violation of the
preemptive rights of any stockholder and the stockholders of the Company do
not have any preemptive rights or other rights to subscribe for or to
purchase; except for the transfer restrictions regarding "affiliates"
contained in Rule 144 promulgated under the Act and restrictions provided
for in this Agreement, to the knowledge of such counsel, there are no
restrictions upon the voting or transfer of, any of the Shares; the Common
Stock, the Warrants, the Underwriter's Warrant and the Warrant Agreement
dated as of _______________, 1997 between and among the Company and
Interwest Transfer Company, Inc. (the "Warrant Agreement") conform in all
material respects to the respective descriptions thereof contained in the
Prospectus; the Shares and Warrants to be issued as contemplated in the
Registration Statement and this Agreement have been duly authorized and,
when paid, will be validly issued, fully paid and non-assessable and free
of preemptive rights contained in the Company's certificate of
incorporation or By-laws, or any other document, instrument or agreement
known to counsel; a sufficient number of shares of Common Stock has been
reserved for issuance upon exercise of the Warrants and the
Representative's Warrant; 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 contemplated by the Representative's Warrant or which have been
waived or satisfied, for or relating to the registration of the Securities.
The Company has no subsidiaries;
(iii) this Agreement, the Warrant Agreement and the Representative's
Warrant (sometimes hereinafter collectively referred to as the
"Representative Agreements") have been duly and validly authorized,
executed and delivered by the Company, and assuming due execution and
delivery of this Agreement by you, and of the Warrant Agreement by you and
the Warrant Agent, all of such agreements are, or when duly executed will
be, the valid and legally binding obligations of the Company except as
enforceability may be limited by bankruptcy, insolvency, moratorium or
other laws affecting the rights of creditors, or by general equitable
principles; provided that no opinion need be expressed as to the
enforceability of the indemnity and contribution provisions contained in
Section 6 or the contribution provisions contained in Section 7 of this
Agreement;
(iv) the certificates evidencing the Shares and Warrants are in valid
and proper legal form; the Warrants and the Representative's Warrant will
be exercisable for shares of Common Stock of the Company in accordance with
the terms of the Warrants and the Representative's Warrant and at the
prices therein provided for; the shares of Common Stock of the Company
issuable upon exercise of the Warrants and the Underwriter's Warrants have
been duly authorized and reserved
18
for issuance upon such exercise, and such shares, when issued upon such
exercise in accordance with the terms of the Warrants and the
Representative's Warrant and when the price is paid shall be fully paid and
non-assessable;
(v) Such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which are required
to be described or referred to in the Registration Statement which are not
so described or referred to;
(vi) The execution and delivery of this Agreement, the Warrant
Agreement and the Representative's Warrant and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated will not result in a violation
of, or constitute a default under, the certificate or articles of
incorporation or by-laws of the Company, or in a violation of or default
under any obligation, agreement, covenant or condition contained in any
material bond, debenture, note or other evidence of indebtedness or in any
of the contracts, indentures, mortgages, loan agreements, leases, joint
ventures or other agreements or instruments to which the Company is a party
that are filed as Exhibits to the Registration Statement or otherwise known
to counsel, except where such violation or default would not have a
material adverse effect on the Company or result in a violation of, or
constitute a default under the certificate of articles of incorporation or
by-laws of the Company;
(vii) The Registration Statement has become effective under the Act,
and to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement is in effect, no proceedings for that purpose
have been instituted or are pending before, or threatened by, the
Commission and the Registration Statement and the Prospectus (except, in
the case of both the Registration Statement and any Amendment thereto, and
the Prospectus and any supplement thereto for the financial statements and
notes and schedules thereto, and other financial information or statistical
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;
(viii) All descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts, plans,
options and other documents are accurate and fairly present the information
required to be shown, and such counsel is familiar with all contracts and
other documents referred to in the Registration Statement and the
Prospectus and any such amendment or supplement, or filed as exhibits to
the Registration Statement, and such counsel does not know of any contracts
or documents of a character required to be summarized or described therein
or to be filed as exhibits thereto which are not so summarized, described
or filed;
19
(ix) 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, the Warrant Agreement or the Underwriter's
Warrant by the Company or in connection with the taking of any action
contemplated herein or therein, or the issuance of the Underwriter's
Warrant or the Securities underlying the Warrants and Underwriter's
Warrant, other than registration or qualification of the Securities under
applicable state or foreign securities or blue sky laws (as to which such
counsel need express no opinion) and registration under the Act;
(x) The statements in the Registration Statement under the caption
"Description of Securities," to the extent that such statements constitute
a matter of law or legal conclusion have been reviewed by such counsel and
are correct in all material respects;
(xi) The Common Stock and Warrants have been approved for listing on
the Nasdaq National Market;
(xii) The Company is not, and immediately after receipt of payment for
the Units will not be, an "investment company" within the meaning of the
Investment Company Act;
(xiii) Except as disclosed in the Prospectus, to the best knowledge
of such counsel, there are no persons with registration or other similar
rights to have any equity or debt securities registered for sale under the
Registration Statement or included in the offering contemplated by this
Agreement;
(xiv) Neither the Company nor Aura is in default in the performance
and observance of any obligation, agreement, covenant or condition
contained in any material existing instrument, except in each such case for
such violations or defaults as would not, individually or in the aggregate,
result in a material adverse change in the financial condition or results
of operations of either the Company or Aura or is in violation of its
charter or by-laws or any law, administrative regulation or administrative
or court decree known to such counsel applicable to the Company;
(xv) The Underwriting Agreement has been duly authorized, executed
and delivered by or on behalf of, and is a valid and binding agreement of
Aura, enforceable in accordance with its terms, except as rights to
indemnification and contribution thereunder may be limited by applicable
law and except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles;
20
(xvi) The execution and delivery by Aura of, and the performance by
Aura of its obligations under, the Underwriting Agreement and its Custody
Agreement will not contravene or conflict with, result in a breach of, or
constitute a default under, the charter or by-laws, partnership agreement,
trust agreement or other organizational documents, as the case may be, of
Aura, or to the best of such counsel=s knowledge, violate or contravene any
provision of applicable law or regulation, or violate, result in a breach
of or constitute a default under the terms of any other agreement or
instrument to which Aura is a party or by which it is bound or any
judgment, order or decree applicable to any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over Aura except where such violations, contraventions, breaches or
defaults will not have a material adverse effect on Aura.
(xvii) Aura has good and valid title to all of the Common Stock which
may be sold by Aura under the Underwriting Agreement and has the legal
right and power, and all authorizations and approvals required under its
charter and bylaws or other organizational documents, as the case may be,
to enter into this Agreement and its Custody Agreement, to sell, transfer
and deliver all of the Common Stock which may be sold by Aura under the
Underwriting Agreement and to comply with its other obligations under the
Underwriting Agreement and the Custody Agreement of Aura has been duly
authorized, executed and delivered by Aura and is a valid and binding
agreement of Aura, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by applicable law and
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(xviii) Assuming that the Underwriters purchase the Common Stock
which is sold by Aura pursuant to the Underwriting Agreement for value, in
good faith and without notice of any adverse claim, the delivery of such
Common Stock pursuant to the Underwriting Agreement will pass good and
valid title to such Common Stock, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or other claim known to such counsel
after reasonable investigation and
(xix) No consent, approval, authorization or other order of, or
registration or filing with, any court or governmental authority or agency,
is required for the consummation by Aura of the transactions contemplated
in the Underwriting Agreement, except as required under the Securities Act,
applicable state securities or blue sky laws, and from the NASD (as to
which such counsel need express no opinion)
Such counsel has participated in the preparation of the Registration
Statement and the Prospectus and although such counsel has not reviewed the
accuracy or completeness of the statements contained in the Registration
Statement or Prospectus nothing has come to the attention of such counsel
21
that caused 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 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
necessary in order to make statements therein in light of the circumstances
under which they were 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 and schedules
thereto and other financial information and statistical data contained
therein, as to which such counsel need express no opinion);
In rendering such opinion, such counsel may rely upon certificates of
any officer of the Company, Aura or public officials as to matters of fact;
and in rendering such opinion may rely as to (i) all matters of law
regarding Aura, upon opinions of Aura in-house counsel and (ii) all matters
of law other than the law of the United States or of the State of
California, upon opinions of counsel satisfactory to you, in which case the
opinion of Aura in-house counsel or such other counsel shall state that
they have no reason to believe that you and they are not entitled to so
rely.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus, and other related matters
shall be reasonably satisfactory to or approved by Freshman, Marantz, Orlanski,
Xxxxxx & Xxxxx, counsel to the Underwriters, and you shall have received from
such counsel a signed opinion, dated as of the First Closing Date, with respect
to the validity of the issuance of the Units, the form of the Registration
Statement and Prospectus (other than the financial statements and other
financial data contained therein), the execution of this Agreement and other
related matters as you may reasonably require. The Company shall have furnished
to counsel for the Underwriters such documents as they may reasonably request
for the purpose of enabling them to render such opinion.
(d) You shall have received a letter on and as of the Effective Date
and again on and as of the First Closing Date, in each instance describing
procedures carried out to a date within five (5) days of the date of the letter,
from Xxxxxxx Xxxx Xxxxxxx, independent public accountants for the Company,
substantially in the form approved by you.
(e) At each of the Closing Dates, (i) the representations and
warranties of the Company and Aura contained in this Agreement shall be true and
correct with the same effect as if made on and as of such Closing Date, and each
of the Company and Aura shall have performed all of its obligations hereunder
and satisfied all the conditions on its part to be satisfied at or prior to such
Closing Date; (ii) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all statements which are
required to be stated therein in
22
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 statements of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made; (iii) there shall have been, since the respective dates as of which
information is given, no material adverse change in the business, properties,
condition (financial or otherwise), results of operations, capital stock, long-
term or short-term debt or general affairs of the Company from that set forth in
the Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the Effective
Date and the Company shall not have incurred any material liabilities nor
entered into any agreement not in the ordinary course of business other than as
referred to in the Registration Statement and Prospectus; and (iv) except as set
forth in the Prospectus, no action, suit or proceeding at law shall be pending
or threatened against the Company which would be required to be disclosed in the
Registration Statement, and no proceedings shall be pending or threatened
against the Company before or by any commission, board or administrative agency
in the United States or elsewhere, wherein an unfavorable decision, ruling or
finding would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company. In addition, you shall have received, at the First Closing Date, a
certificate signed by the President and the principal financial or accounting
officer of each of the Company and Aura, dated as of the First Closing Date,
evidencing compliance with the provisions of this subsection (e).
(f) Upon exercise of the option provided for in Section 2(b) hereof,
the obligations of the several Underwriters to purchase and pay for the Option
Units 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, 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 reasonable satisfaction of Freshman, Marantz, Orlanski, Xxxxxx
& Xxxxx, counsel to the Underwriters.
(ii) At the Option Closing Date there shall have been delivered to you
the signed opinion of Pillsbury Madison & Sutro LLP, counsel for the
Company and Aura, dated as of the Option Closing Date, in form and
substance reasonably satisfactory to Freshman, Marantz, Orlanski, Xxxxxx &
Xxxxx, counsel to the Underwriters, which opinion shall be
23
substantially the same in scope and substance as the opinion furnished to
you at the First Closing Date pursuant to Section 4(b) hereof, except that
such opinion, where appropriate, shall cover the Option Units rather than
the Firm Units. If the First Closing Date is the same as the Option Closing
Date, such opinions may be combined.
(iii) At the Option Closing Date, there shall have been delivered to
you a certificate of the President and the Chairman of the Board of each of
the Company and Aura dated the Option Closing Date, in form and substance
reasonably satisfactory to Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx,
counsel to the Underwriters, substantially the same in scope and substance
as the certificates furnished to you at the First Closing Date pursuant to
Section 4(e) hereof.
(iv) At the Option Closing Date, there shall have been delivered to
you a letter in form and substance satisfactory to you from Xxxxxxx Xxxx
Xxxxxx, dated the Option Closing Date and addressed to you, confirming the
information in their letter referred to in Section 4(d) hereof as of the
date thereof and stating that, without any additional investigation
required, 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 (5) 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 Units shall be
reasonably satisfactory in form and substance to you, and you and Freshman,
Marantz, Orlanski, Xxxxxx & Xxxxx, counsel to the Underwriters, shall have
been furnished with all such documents and certificates 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
each of the Company and Aura or either of their compliance with any of the
covenants or conditions contained therein.
(g) If any of the conditions herein provided for in this Section shall
not have been completely fulfilled as of the date indicated, this Agreement and
all obligations of the Underwriters under this Agreement may be canceled at, or
at any time prior to, each Closing Date by your notifying the Company and Aura
of such cancellation in writing or by telegram at or prior to the applicable
Closing Date. Any such cancellation shall be without liability of any
Underwriter to the Company and Aura, as applicable, except as otherwise provided
herein.
5. Conditions of the Obligations of the Company and Aura.
-----------------------------------------------------
The obligation of the Company and Aura, as applicable, to sell and deliver
the Units is subject to the following conditions:
24
(a) The Registration Statement shall have become effective not later
than 5:00 p.m. New York time, on the date of this Agreement, or on such later
date or time as you and the Company may agree in writing.
(b) On the Closing Dates, no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company and Aura, provided for
in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company and Aura to sell and deliver the Option
Units on exercise of the option provided for in Section 2(b) hereof shall be
affected.
6. Indemnification.
---------------
(a) Indemnification of the Underwriters. The Company and Aura,
jointly and severally, agree to indemnify and hold harmless each Underwriter,
its officers and employees, and each person, if any, who controls any
Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company or Aura), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based (i)
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434 under
the Securities Act, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading; or (ii) upon any untrue statements or alleged untrue statement
of a material fact contained in any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading; or
(iii) in whole or in part upon any inaccuracy in the representations and
warranties of the Company or Aura contained herein, or (iv) any act or failure
to act or any alleged act or failure to act by any Underwriter in connection
with, or relating in any manner to, the Common Stock or Warrants or the offering
contemplated hereby, and which is included as part of
25
or referred to in any loss, claim, damage, liability or action arising out of or
based upon any matter covered by clause (i) or (ii) above, provided that the
Company and Aura shall not be liable under this clause (iv) to the extent that
a court of competent jurisdiction shall have determined by a final judgment that
such loss, claim, damage, liability or action resulted directly from any such
acts or failures to act undertaken or omitted to be taken by such Underwriter
through its bad faith or willful misconduct; and to reimburse each Underwriter
and each such controlling person for any and all expenses (including the fees
and disbursements of counsel chosen by Xxxxxx Xxxxxxx & Associates, Inc.) as
such expenses are reasonably incurred by such Underwriter or such controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the foregoing indemnity agreement shall not apply to any loss,
claim, damage, liability or expense to the extent, but only to the extent,
arising out of or based upon any 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 or Aura by the Representative
expressly for use in the Registration Statement, any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto); and provided, further,
that with respect to any preliminary prospectus, the foregoing indemnity
agreement shall not inure to the benefit of any Underwriter from whom the person
asserting any loss, claim, damage, liability or expense purchased units, or any
person controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to the provision hereunder and a copy of
the Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Units to
such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage, liability or expense;
and provided, further, that the Company, and Aura may agree, as among themselves
and without limiting the rights of the Underwriters under this Agreement, as to
the respective amounts of such liability for which they each shall be
responsible. The indemnity agreement set forth in this Section 6(a) shall be in
addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, Aura and each of their Directors
and Officers. Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, Aura and each of its officers and directors
and each person, if any, who controls the Company or Aura within the meaning of
the Securities Act or the Exchange Act, against any loss, claim, damage,
liability or expense, as incurred to which the Company, Aura or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or
26
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto, or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated thereon or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
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 and
Aura by the Representative expressly for use therein; and to reimburse the
Company, Aura, or any such director, officer or controlling person for any legal
and other expense reasonably incurred by the Company, Aura, or any such
director, officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. Each of the Company and Aura hereby acknowledges
that the only information that the Underwriters have furnished to the Company
and Aura expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth (A) as the paragraph on the inside front cover page of the
Prospectus concerning stabilization by the Underwriters and (B) information
under the caption "Underwriting" in the Prospectus; and the Underwriters confirm
that such statements are correct. The indemnity agreement set forth in this
Section 6(b) shall be in addition to any liabilities that each Underwriter may
otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 6 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 6, notify
the indemnifying party in writing 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 for contribution or otherwise than under
the indemnity agreement contained in this Section 6 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party;
27
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying parties election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the provisions to the next preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (Xxxxxx Xxxxxxx & Associates, Inc.
In the case of Section 6(b) and Section 7), representing the indemnified parties
who are parties to such action) or (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 6 shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
6(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an
28
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.
7. Contribution.
------------
If the indemnification provided for in Section 6 is for any reason held to
be unavailable to or otherwise insufficient to hold harmless an indemnified
party of any losses, claims, damages, liabilities or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
paid or payable by such indemnified party, as incurred, as a result of any
losses, claims, damages, liabilities or expenses referred to therein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and Aura, on the one hand, and the Underwriters, on the other hand, from
the offering of the Units pursuant to this Agreement 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, and Aura, on
the one hand, and the Underwriters, on the other hand, in connection with the
statements or omissions or inaccuracies in the representations and warranties
herein which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative benefits
received by the Company, and Aura, on the one hand, and the Underwriters, on the
other hand, in connection with the offering of the Units pursuant to this
Agreement shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Units pursuant to this Agreement (before
deducting expenses) received by the Company, and Aura, and the total
underwriting discount received by the Underwriters, in each case as set forth on
the front cover page of the Prospectus bear to the aggregate initial public
offering price of the Units as set forth on such cover. The relative fault of
the Company, and Aura, on the one hand, and the Underwriters, on the other hand,
shall be determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company, or
Aura, on the one hand, or the Underwriters, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 6(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 6(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 7; provided, however, that no
additional notice shall be required
29
with respect to any action for which notice has been given under Section 6(c)
for purposes of indemnification.
The Company, Aura and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 7.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
Schedule I. For purposes of this Section 7, each officer and employee of an
----------
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the Securities Act and the Exchange
Act shall have the same rights to contribution as the Company.
8. Costs and Expenses.
------------------
(a) Whether or not this Agreement becomes effective or the sale of the
Units to the Underwriters 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), each 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 Units contemplated hereby; all expenses, including reasonable
fees (but not in excess of the amount set forth in Section 3(b)) and
disbursements of counsel to the Underwriters, in connection with the
qualification of the Units under the State Securities or Blue Sky Laws which you
shall designate; the cost of printing and furnishing to you copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, this
Agreement, the Warrant Agreement and the Blue Sky Memorandum; the cost of
printing the certificates representing the Securities, the expenses of Company
due diligence meetings and presentations, (but not of any Underwriter or
Underwriter's counsel in connection therewith) and
30
the expense (which shall not exceed $7,500) of placing one or more "tombstone"
advertisements as directed by you. The Company shall reimburse you for "road
shows" expenses incurred in an amount not to exceed $10,000.00. The Company
shall pay any and all taxes (including any transfer, franchise, capital stock or
other tax imposed by any jurisdiction) on sales to the Underwriters 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 as
called for in Section 3(a) of this Agreement except as otherwise set forth in
said Section.
(b) In addition to the foregoing expenses, the Company shall at the
First Closing Date pay to you the balance of a non-accountable expense allowance
2.5% of the gross proceeds of the offering, of which a portion has been paid.
In the event the over-allotment option is exercised in part or in full, the
Company shall pay to you at the Option Closing Date an additional amount equal
to 2.5% of the gross proceeds received upon exercise of the over-allotment
option. In the event the transactions contemplated hereby are not consummated
for any reason, the Company shall be liable for your actual accountable out-of-
pocket expenses (with credit given to the amount heretofore paid), including
legal fees, provided however, that any portion of the $40,000 paid by the
Company that has not been utilized by you in connection with the offering on an
accountable basis shall be refunded by you to the Company; and further provided
that if the contemplated transactions are not consummated by reason of breach by
the Company of this Agreement or of any representation, warranty, covenant or
condition contained herein, the Company shall be liable for your accountable
out-of-pocket expenses.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from any 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 each Underwriter, and the Underwriters
agree to indemnify and hold harmless, severally and not jointly, the Company
from and 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 reasonable
attorneys' fees), to which the indemnified party 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. Default of One or More of the Several Underwriters.
--------------------------------------------------
If, on the First Closing Date or the Option Closing Date, as the case may
be, any one or more of the several Underwriters fail or refuse to purchase Units
that it or they have agreed to purchase
31
hereunder on such date, and the aggregate number of Units which such defaulting
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Units to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Units set forth opposite their respective names on Schedule I bears to
----------
the aggregate number of Firm Units set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to purchase
the Units which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date. If, on the First Closing Date or the Option
Closing Date, as the case may be, any one or more of the Underwriters shall fail
or refuse to purchase Units and the aggregate number of Units with respect to
which such default occurs exceeds 10% of the aggregate number of Units to be
purchased on such date, and arrangements satisfactory to the Representative and
the Company for the purchase of such Units are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 6, Section 7 and Section 8
shall at all times be effective and shall survive such termination. In any such
case either the Representative or the Company shall have the right to postpone
the First Closing Date or the Option Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Registration Statement and the Prospectus or any other document or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
9. Any action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
10. Effective Date.
--------------
The Agreement shall become effective upon its execution, except that you
may, at your option, delay its effectiveness until the earlier to occur of 10:00
A.M., New York time on the first full business day following the Effective Date
as you in your discretion shall first commence the initial public offering by
you of any of the Units. The time of the initial public offering shall mean the
time of release by you of the first newspaper advertisement with respect to the
Units, or the time when the Units are first generally offered by you to dealers
by letter or telecopier, whichever shall first occur. This Agreement may be
terminated by you at any time before it becomes effective as provided above,
except that Sections 6, 7, 8, 13, 14, 15 and 16 shall remain in effect
notwithstanding such termination.
11. Termination.
-----------
32
(a) This Agreement, except for Sections 6, 7, 8, 13, 14, 15 and 16,
may be terminated at any time prior to the First Closing Date, and the option
referred to in Section 2(b), if exercised, may be canceled, 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 you for the resale of the Units agreed
to be purchased hereunder, by reason of (i) the Company having sustained a
material loss, whether or not insured, by reason of fire, earthquake, flood,
accident or other calamity, or from any labor dispute or court or government
action, order or decree, (ii) trading in securities 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 which are not in force and effect on the date hereof, (iv) a banking
moratorium having been declared by federal of New York 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 accounting institute or board, or any governmental executive,
which is reasonably believed likely by you to have a material adverse impact on
the business, financial condition or financial statements of the Company, (vii)
any material adverse change in the financial or securities markets beyond normal
fluctuations in the United States having occurred since the date of this
Agreement, or (viii) any material adverse change having occurred, since the
respective dates for 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.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 10 or in Section 9, the
Company shall be promptly notified by you, by telephone or facsimile
transmission, confirmed by letter.
12. Representative's Warrant.
------------------------
On the First Closing Date, the Company will issue to you, for a
consideration of $200.00 and upon the terms and conditions set forth in the form
of Representative's Warrant annexed as an exhibit to the Registration Statement,
the Representative's Warrant to purchase $200,000 Units. In the event of
conflict in the terms of this Agreement and the Representative's Warrant, the
language of the Representative's Warrant shall control.
13. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
The respective indemnities, agreements, representations, warranties and
other statements of the Company or its Existing Shareholders, where appropriate,
and you, set forth in or made pursuant to this Agreement will remain in full
force and effect
33
regardless of any investigation made by or on behalf of the Underwriters, the
Company or any of its officers or directors or any controlling persons and will
survive delivery of and payment for the Units and the termination of this
Agreement.
14. Notice.
------
All communications hereunder will be in writing and, except as otherwise
expressly provided herein, if sent to any Underwriter, will be mailed, delivered
or telecopied and confirmed to it at Xxxxxx Xxxxxxx & Associates, Inc., 0000
Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, with a copy
sent to Xxxxxx X. Xxxxxxx, Esq. at Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx,
0000 Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx Xxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000,
of if sent to the Company, will be mailed, delivered, or facsimiled and
confirmed to XxxXxx, Inc., 31166 Via Colinas, Xxxxxxxx Xxxxxxx, Xxxxxxxxxx
00000, with a copy sent to Xxxxx X. del Xxxxx, Esq. at Pillsbury Madison &
Sutro, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000-0000.
15. Parties in Interest.
-------------------
The Agreement herein set forth is made solely for the benefit of the
Underwriters, the Company and, to the extent expressed, Aura, any person
controlling the Company, Aura or any Underwriter, and directors of the Company,
nominees for directors of the Company (if any) named in the Prospectus, the
officers of the Company who have signed the Registration Statement, and their
respective executors, administrators, successors and assigns, and no other
person shall acquire for have any right under or by virtue of this Agreement.
The term "successors and assigns" shall not include any purchaser, as such
purchaser, from any Underwriter of the Units.
16. Applicable Law.
---------------
This Agreement will be governed by, and construed in accordance with, the
laws of the State of California applicable to agreements made and to be entirely
performed within California.
34
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this Underwriting Agreement, whereupon it will become a
binding agreement between the Company and the Underwriters in accordance with
its terms.
Very truly yours,
XxxXxx, Inc.
Dated: ___________, 1997 By:___________________________
Sultan X. Xxxx
Chief Executive Officer
and President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
Xxxxxx Xxxxxxx & Associates, Inc.
Date: ___________, 1997 By:___________________________
Authorized Officer
35
SCHEDULE I
----------
Underwriting Agreement dated ____________, 1997
Number of Firm Units
Underwriter to be Purchased
----------- --------------------
Xxxxxx Xxxxxxx & Associates, Inc.
Total . . . . . . . . . . . . . . 2,000,000
36
