Exhibit 1.0 THE HAVANA GROUP, INC.
460,000 UNITS
UNDERWRITING AGREEMENT
New York, New York
_____, 1998
VTR Capital, Inc.
Ladies and Gentlemen:
The undersigned, The Havana Group, Ltd., a Delaware corporation (the
"Company"), hereby confirms its agreement with VTR Capital, Inc. ("VTR",
being referred to herein variously as "you" or the "Underwriters"), as
follows:
1. Purchase and Sale of Securities.
1.1 Firm Units.
1.1.1 Purchase of Firm Units. On the basis of the representations
and warranties herein contained, but subject to the terms and conditions
herein set forth, the Company agrees to issue and sell, and the Underwriters
agree to purchase, 460,000 units ("Firm Units;") for a gross purchase price
of $6.00 per Firm Unit less a 10% discount ($.60) per Firm Unit. Each Firm
Unit consists of one share of the Company's Common Stock, par value $.01
("Common Stock"), and two Redeemable Common Stock Purchase Warrants
("Warrant(s)"). The shares of Common Stock and the Warrants included in the
Firm Units will be detachable and separately transferable on the earlier of
(i) six months from the date hereof or (ii) the date on which VTR grants its
written consent thereto (the "Separation Date"). Each Warrant entitles its
holder to purchase one share of Common Stock at an initial exercise price of
$5.25 per share commencing on the first anniversary of the Effective Date (as
defined in Section 1.1.2 below) and ending on the fifth anniversary of the
Effective Date.
1.1.2 Payment and Delivery. Delivery and payment for the Firm Units
shall be made at 10:00 A.M., New York time, on or before the fifth business
day following the effective date ("Effective Date") of the Registration
Statement (as hereinafter defined) or at such earlier time as the
Underwriters shall determine, or at such other time as shall be agreed upon
by the Underwriters and the Company, at the offices of VTR or at such other
place as shall be agreed upon by the Underwriters and the Company. The hour
and date of delivery and payment for the Firm Units are called the "Closing
Date." Payment for the Firm Units shall be made on the Closing Date at the
Underwriters' election by certified or bank cashier's check(s) in New York
Clearing House funds, payable to the order of the Company upon delivery to
you of certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Units for the accounts of the Underwriters. The Firm
Units shall be registered in such name or names and in such authorized
denominations as the Underwriters may request in writing at least two full
business days prior to the Closing Date.
The Company will permit the Underwriters to examine and package the Firm
Units for delivery at least one full business day prior to the Closing Date.
The Company shall not be obligated to sell or deliver the Firm Units except
upon tender of payment by the Underwriters for all the Firm Units.
1.2 Over-Allotment Option.
1.2.1 Option Units. For the purposes of covering any
over-Allotments in connection with the distribution and sale of the Firm
Units, the Underwriters are hereby granted an option to purchase up to an
additional 46,000 Units from ▇▇▇▇▇▇ ▇▇▇▇ Co. Ltd. ("Over-Allotment Option").
Such additional Units are hereinafter referred to as the "Option Units."
The Firm Units and the Option Units are, together with the shares of Common
Stock issuable upon exercise of the Warrants, hereinafter referred to
collectively as the "Public Securities." The purchase price to be paid for
the Option Units will be the same price per Option Unit as the price per Firm
Unit set forth in Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Over-Allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Underwriters as to
all or any part of the Option Units at any time, from time to time, within
forty-five days after the Effective Date. The Underwriters will not be under
any obligation to purchase any Option Units prior to the exercise of the
Over-Allotment Option. The Over-Allotment Option granted hereby may be
exercised by the giving of oral notice to the Company from the Underwriters,
which must be confirmed by a letter or telecopy setting forth the number of
Option Units to be purchased, the date and time for delivery of and payment
for the Option Units and stating that the Option Units referred to therein
are to be used for the purpose of covering over-Allotments in connection with
the distribution and sale of the Firm Units. If such notice is given at
least two full business days prior to the Closing Date, the date set forth
therein for such delivery and payment will be the Closing Date. If such
notice is given thereafter, the date set forth therein for such delivery and
payment will not be earlier than five full business days after the date of
the notice. If such delivery and payment for the Option Units does not occur
on the Closing Date, the date and time of the closing for such Option Units
will be as set forth in the notice (hereinafter the "Option Closing Date").
Upon exercise of the Over-Allotment Option, ▇▇▇▇▇▇ ▇▇▇▇ Co. Ltd. will become
obligated to convey to the Underwriters, and, subject to the terms and
conditions set forth herein, the Underwriters will become obligated to
purchase, the number of Option Units specified in such notice.
1.2.3 Payment and Delivery. Payment for the Option Units will be
at the Underwriters' election by certified or bank cashier's check(s) in New
York Clearing House funds, payable to the order of the Company at the offices of
VTR or at such other place as shall be agreed upon by the Underwriters and the
Company upon delivery to you of certificates representing such securities for
the account of the Underwriters. The certificates representing the Option Units
to be delivered will be in such denominations and registered in such names as
the Underwriters request not less than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be, and will be made
available to the Underwriters for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less than
one full business day prior to such Closing Date or Option Closing Date.
1.3 Underwriters' Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue and
sell to the Underwriters (and/or their designees) on the Closing Date an option
for an aggregate purchase price
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of $46.00 ("Underwriters' Purchase Option") for the purchase of an aggregate of
46,000 Units ("Underwriters' Units"). The Underwriters' Units are initially
exercisable at $9.00 per Unit. The Underwriters' Units are identical to the
Firm Units. The Underwriters' Purchase Option, the Underwriters' Units, the
warrants included in the Underwriters' Units ("Underwriters' Warrants"), the
shares of Common Stock issuable upon exercise of the Underwriters' Purchase
Option and the shares of Common Stock issuable upon exercise of the
Underwriters' Warrants are hereinafter referred to collectively as the
"Underwriters' Securities." The Public Securities and the Underwriters'
Securities are hereinafter referred to collectively as the "Securities".
1.3.2 Payment and Delivery. Delivery and payment for the
Underwriters' Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriters, upon payment therefor, certificates for
the Underwriters' Purchase Option in the name or names and in such authorized
denominations as the Underwriters may request. The Underwriters' Purchase
Option shall be exercisable for a period of four years commencing one year
from the Effective Date.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriters as follows:
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement
and an amendment or amendments thereto, on Form SB-2 (Registration File No.
333-_______), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Public Securities under the
Securities Act of 1933, as amended ("Act"), which registration statement and
amendment or amendments have been prepared by the Company in conformity with
the requirements of the Act, and the rules and regulations ("Regulations") of
the Commission under the Act. Except as the context may otherwise require,
such registration statement, as amended, on file with the Commission at the
time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the
Regulations), is hereinafter called the "Registration Statement," and the
form of the final prospectus dated the Effective Date (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of
the Regulations), is hereinafter called the "Prospectus." The Registration
Statement has been declared effective by the Commission on the date hereof.
2.1.2 Pursuant to the Exchange Act. The Company has filed with the
Commission a Registration Statement on Form 8-A providing for the
registration under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), of the Securities. Such registration of the Securities has been
declared effective by the Commission on the date hereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has
instituted or, to the best of the Company's knowledge, threatened to
institute any proceedings with respect to such an order.
2.3 Disclosures in Registration Statement.
2.3.1 10b-5 Representation. At the time the Registration Statement
became
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effective and at all times subsequent thereto up to the Closing Date and the
Option Closing Date, if any, the Registration Statement and the Prospectus
will contain all material statements which are required to be stated therein
in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations; neither
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, on such dates, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. When any
Preliminary Prospectus was first filed with the Commission (whether filed as
part of the Registration Statement for the registration of the Securities or
any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when
any amendment thereof or supplement thereto was first filed with the
Commission, such Preliminary Prospectus and any amendments thereof and
supplements thereto complied or will comply in all material respects with the
applicable provisions of the Act and the Regulations and did not and will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The representation and warranty made in this Section 2.3.1
does not apply to statements made or statements omitted in reliance upon and
in conformity with written information furnished to the Company with respect
to the Underwriters expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
2.3.2 Disclosure of Contracts. The description in the Registration
Statement and the Prospectus of contracts and other documents is accurate and
presents fairly the information required to be disclosed and there are no
contracts or other documents required to be described in the Registration
Statement or the Prospectus or to be filed with the Commission as exhibits to
the Registration Statement which have not been so described or filed. Each
contract or other instrument (however characterized or described) to which
the Company is a party or by which its property or business is or may be
bound or affected and (i) which is referred to in the Prospectus, or (ii) is
material to the Company's business, has been duly and validly executed, is in
full force and effect in all material respects and is enforceable against the
parties thereto in accordance with its terms, and none of such contracts or
instruments has been assigned by the Company, and neither the Company nor, to
the best of the Company's knowledge, any other party is in default thereunder
and, to the best of the Company's knowledge, no event has occurred which,
with the lapse of time or the giving of notice, or both, would constitute a
default thereunder. None of the material provisions of such contracts or
instruments violates or will result in a violation of any existing applicable
law, rule, regulation, judgment, order or decree of any governmental agency
or court having jurisdiction over the Company or any of its respective assets
or businesses, including, without limitation, those relating to environmental
laws and regulations.
2.3.3 Prior Securities Transactions. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of,
any person or persons controlling, controlled by, or under common control
with the Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no
material adverse change in the condition, financial or otherwise, or in the
results of operations, business or business prospects of the Company,
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including, but not limited to, a material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, whether or not arising in the ordinary course of
business, and (ii) there have been no transactions entered into by the
Company, other than those in the ordinary course of business, which are
material with respect to the condition, financial or otherwise, or to the
results of operations, business or business prospects of the Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not (i) issued any securities
or incurred any liability or obligation, direct or contingent, for borrowed
money; or (ii) declared or paid any dividend or made any other distribution
on or in respect to its capital stock.
2.5 Independent Accountants. ▇▇▇▇▇▇▇ + ▇▇▇▇▇▇, whose report is filed
with the Commission as part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.
2.6 Financial Statements. The financial statements, including the notes
thereto included in the Registration Statement and Prospectus, fairly present
the financial position and the results of operations of the Company at the
dates and for the periods to which they apply; and such financial statements
have been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved; included in
the Registration Statement present fairly the information required to be
stated therein.
2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date
there will be no options, warrants, or other rights to purchase or otherwise
acquire any authorized but unissued shares of Common Stock of the Company, or
any security convertible into shares of Common Stock of the Company, or any
contracts or commitments to issue or sell shares of Common Stock or any such
options, warrants, rights or convertible securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully
paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of
the preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company. The outstanding options
and warrants to purchase shares of Common Stock constitute the valid and
binding obligations of the Company, enforceable in accordance with their
terms. The authorized Common Stock and outstanding options and warrants to
purchase shares of Common Stock conform to all statements relating thereto
contained in the Registration Statement and the Prospectus. The offers and
sales of the outstanding Common Stock, options and warrants to purchase
shares of Common Stock were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky Laws or exempt from such
registration requirements.
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2.8.2 Securities Sold Pursuant to this Agreement. The Securities
have been duly authorized and, when issued and paid for, will be validly
issued, fully paid and non-assessable; the holders thereof are not and will
not be subject to personal liability by reason of being such holders; the
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted
by the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. When issued, the Underwriters' Purchase Option, the Underwriters'
Warrants and the Warrants will constitute valid and binding obligations of
the Company to issue and sell, upon exercise thereof and payment therefor,
the number and type of securities of the Company called for thereby and the
Underwriters' Purchase Option, the Underwriters' Warrants and the Warrants
are enforceable against the Company in accordance with their respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (iii) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
2.9 Registration Rights of Third Parties. Except as set forth in the
Prospectus, no holders of any securities of the Company or of any options or
warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities
in a registration statement to be filed by the Company.
2.10 Validity and Binding Effect of Agreements. This Agreement, the
Warrant Agreement (as hereinafter defined) and the Consulting Agreement (as
hereinafter defined), have been duly and validly authorized by the Company
and constitute, or when executed and delivered will constitute, the valid and
binding agreements of the Company, enforceable against the Company in
accordance with their respective terms, except (i) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement, the Warrant Agreement and the Consulting
Agreement, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof
and thereof do not and will not, with or without the giving of notice or the
lapse of time or both, (i) result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms
of any indenture, mortgage, deed of trust, note, loan or credit agreement or
any other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which any of the property or
assets of the Company is subject; (ii) result in any violation of the
provisions of the Certificate of Incorporation or the By-Laws of the Company;
(iii) violate any existing applicable law, rule, regulation, judgment, order
or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business; or (iv)
have a material adverse effect on any permit, license, certificate,
registration, approval, consent, license or franchise
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concerning the Company.
2.12 No Defaults; Violations. Except as described in the Prospectus, no
default exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, deed of
trust, note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement
or instrument to which the Company is a party or by which the Company may be
bound or to which any of the properties or assets of the Company is subject.
The Company is not in violation of any term or provision of its Certificate
of Incorporation or By-Laws or in violation of any franchise, license,
permit, applicable law, rule, regulation, judgment or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over
the Company or any of its properties or business, except as described in the
Prospectus.
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite corporate
power and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies to own or lease its properties and conduct its business
as described in the Prospectus, and the Company is and has been doing
business in compliance with all such material authorizations, approvals,
orders, licenses, certificates and permits and all federal, state and local
laws, rules and regulations. The disclosures in the Registration Statement
concerning the effects of federal, state and local regulation on the
Company's business as currently contemplated are correct in all material
respects and do not omit to state a material fact.
2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out
the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid issuance, sale and delivery,
of the Securities pursuant to this Agreement, the Warrant Agreement and the
Underwriters' Purchase Option, and as contemplated by the Prospectus, except
with respect to applicable federal and state securities laws.
2.14 Title to Property; Insurance. The Company has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real
and personal property (tangible and intangible) owned or leased by it, free
and clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to
in the Prospectus and liens for taxes not yet due and payable. The Company
has adequately insured its properties against loss or damage by fire or other
casualty and maintains, in adequate amounts, such other insurance as is
usually maintained by companies engaged in the same or similar business.
2.15 Litigation; Governmental Proceedings. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or threatened
against, or involving the properties or business of, the Company which might
materially and adversely affect the financial position, prospects, value or
the operation or the properties or the business of the Company, or which
question the validity of the capital stock of the Company or this Agreement
or of any action taken or to be taken by the Company pursuant to, or in
connection with, this Agreement. There are no outstanding orders, judgments
or decrees of any court, governmental agency or other tribunal naming the
Company and enjoining the Company from
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taking, or requiring the Company to take, any action, or to which the
Company, its properties or business is bound or subject.
2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which ownership or leasing of
any properties or the character of its operations requires such qualification or
licensing, except where the failure to qualify would not have a material adverse
effect on the Company.
2.17 Taxes. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof. The Company has
paid all taxes (as hereinafter defined) shown as due on such returns that
were filed and has paid all taxes imposed on or assessed against the Company.
The provisions for taxes payable, if any, shown on the financial statements
filed with or as part of the Registration Statement are sufficient for all
accrued and unpaid taxes, whether or not disputed, and for all periods to and
including the dates of such consolidated financial statements. Except as
disclosed in writing to the Underwriters, (i) no issues have been raised (and
are currently pending) by any taxing authority in connection with any of the
returns or taxes asserted as due from the Company, and (ii) no waivers of
statutes of limitation with respect to the returns or collection of taxes
have been given by or requested from the Company. The term "taxes" mean all
federal, state, local, foreign, and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments, or charges of any kind whatever,
together with any interest and any penalties, additions to tax, or additional
amounts with respect thereto. The term "returns" means all returns,
declarations, reports, statements, and other documents required to be filed
in respect to taxes.
2.18 [Intentionally Omitted].
2.19 Transactions Affecting Disclosure to NASD.
2.19.1 Finder's Fees. Except as described in the Prospectus, there
are no claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or any other arrangements, agreements,
understandings, payments or issuance with respect to the Company that may
affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
2.19.2 Payments Within Twelve Months. The Company has not made any
direct or indirect payments (in cash, securities or otherwise) to (i) any
person, as a finder's fee, investing fee or otherwise, in consideration of
such person raising capital for the Company or introducing to the Company
persons who provided capital to the Company, (ii) to any NASD member, or
(iii) to any person or entity that has any direct or indirect affiliation or
association with any NASD member within the twelve month period prior to the
date on which the Registration Statement was filed with the Commission
("Filing Date") or thereafter, other than payments to the Underwriters.
2.19.3 Use of Proceeds. None of the net proceeds of the offering
will be paid by the Company to any NASD member or any affiliate or associate
of any NASD member, except as
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specifically authorized herein.
2.19.4 Insiders' NASD Affiliation. No officer or director of the
Company or owner of any of the Company's securities has any direct or
indirect affiliation or association with any NASD member, except as provided
on Schedule 2.19.4 attached hereto. The Company covenants that it will
advise the Corporate Financing Department of the NASD if any 5% or greater
stockholder of the Company becomes an affiliate or associated person of an
NASD member participating in the distribution of the securities which are the
subject of the Registration Statement.
2.20 Foreign Corrupt Practices Act. Neither the Company nor any of its
officers, directors, employees, agents or any other person acting on behalf
of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
the Company (or assist it in connection with any actual or proposed
transaction) which (i) might subject the Company to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (ii) if not
given in the past, might have had a materially adverse effect on the assets,
business or operations of the Company as reflected in any of the financial
statements contained in the Prospectus or (iii) if not continued in the
future, might adversely affect the assets, business, operations or prospects
of the Company. The Company's internal accounting controls and procedures
are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
2.21 Nasdaq and The Boston Stock Exchange Eligibility. As of the
Effective Date, the Public Securities have been approved for quotation on the
Nasdaq SmallCap Market and for listing on The Boston Stock Exchange ("BSE").
2.22 Intangibles. The Company owns or possesses the requisite licenses
or rights to use all trademarks, service marks, service names, trade names,
patents and patent applications, copyrights and other rights (collectively,
"Intangibles") described as being licensed to or owned by it in the
Registration Statement. The Company's Intangibles which have been registered
in the United States Patent and Trademark Office have been fully maintained
and are in full force and effect. There is no claim or action by any person
pertaining to, or proceeding pending or threatened and the Company has not
received any notice of conflict with the asserted rights of others which
challenges the exclusive right of the Company with respect to any Intangibles
used in the conduct of the Company's business except as described in the
Prospectus. The Intangibles and the Company's current products, services and
processes do not infringe on any intangibles held by any third party. To the
best of the Company's knowledge, no others have infringed upon the
Intangibles of the Company.
2.23 Relations With Employees.
2.23.1 Employee Matters. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all federal, state and local laws
and regulations respecting the employment of its employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. There are no pending investigations involving the Company by the
U.S. Department of Labor or any
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other governmental agency responsible for the enforcement of such federal,
state or local laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving the Company or any
predecessor entity, and none has ever occurred. No question concerning
representation exists respecting the employees of the Company and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the
Company, if any.
2.23.2 Employee Benefit Plans. Other than as set forth in the
Registration Statement's financial statement footnotes, the Company neither
maintains, sponsors nor contributes to, nor is it required to contribute to,
any program or arrangement that is an "employee pension benefit plan," an
"employee welfare benefit plan," or a, "multi-employer plan" as such terms
are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans").
The Company does not, and has at no time, maintained or contributed to a
defined benefit plan, as defined in Section 3(35) of ERISA. If the Company
does maintain or contribute to a defined benefit plan, any termination of the
plan on the date hereof would not give rise to liability under Title IV of
ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended ("Code"), which
could subject the Company to any tax penalty for prohibited transactions and
which has not adequately been corrected. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Code
and ERISA as they relate to any such ERISA Plan. Determination letters have
been received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a), stating that such
ERISA Plan and the attendant trust are qualified thereunder. The Company has
never completely or partially withdrawn from a "multi-employer plan".
2.24 Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel
shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
2.25 Warrant Agreement. The Company has entered into a warrant agreement
with respect to the Warrants and the Underwriters' Warrants substantially in
the form filed as an exhibit to the Registration Statement ("Warrant
Agreement") with Continental Stock Transfer & Trust Company, in form and
substance satisfactory to the Underwriters, providing for, among other
things, no redemption of the Warrants without the consent of the Underwriters.
2.26 Agreements With Insiders.
2.26.1 Insiders' Lock-Up Agreements. The Company has caused to be
duly executed legally binding and enforceable agreements pursuant to which
all of the officers and directors of the Company as of the date hereof
(including their family members and affiliates) and persons (including their
family members and affiliates) who beneficially own or hold five percent or
more of the outstanding Common Stock of the Company (collectively,
"Insiders") agree not to sell any shares of Common Stock owned by them
(either pursuant to Rule 144 of the Regulations or otherwise) for a period of
36 months following the Effective Date except with the prior written consent
of the Underwriters and, if applicable, the Pennsylvania Securities
Commission.
10
2.26.2 Other Lock-Up Agreements. The Company has caused to be duly
executed legally binding and enforceable agreements pursuant to which all
persons (including their family members and affiliates) who beneficially own
or hold at least two percent but less than five percent of the outstanding
Common Stock of the Company as of the date hereof agree not to sell any
shares of Common Stock owned by them (either pursuant to Rule 144 of the
Regulations or otherwise) for a period of 12 months following the Effective
Date except with the prior written consent of VTR. The Company has caused to
be duly executed legally binding and enforceable agreements pursuant to which
all stockholders of the Company whose shares of Common Stock are being
registered by the Registration Statement agree not to sell until ____ any
shares of Common Stock so registered except with the prior written consent of
both VTR. The persons described in this Section 2.26.2 are hereinafter
referred to as the "Other Insiders."
2.27 Subsidiaries. The representations and warranties made by the
Company in this Agreement shall, in the event that the Company has one or
more subsidiaries (a "subsidiary(ies)"), also apply and be true with respect
to each subsidiary, individually and taken as a whole with the Company and
all other subsidiaries, as if each representation and warranty contained
herein made specific reference to the subsidiary each time the term "Company"
was used.
2.28 Losses. [reserved]
2.29 Net Sales. [reserved]
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to
the Underwriters, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Underwriters
shall reasonably object. The Company will submit to the NASD at the same
time (or as soon as practical thereafter) they are filed with the Commission
all post-effective amendments or prospectus supplements, if any, disclosing
actual price and selling terms by the stockholders of the Company whose
shares of Common Stock have been registered for resale.
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is required to
be delivered under the Act and for at least 45 days from the Effective Date
the Company will use all reasonable efforts to comply with all requirements
imposed upon it by the Act, the Regulations and the Exchange Act and by the
regulations under the Exchange Act, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Public
Securities in accordance with the provisions hereof, the Prospectus. If at
any time when a Prospectus relating to the Public Securities is required to
be delivered under the Act and, in any event, for a period of 45 days from
the Effective Date, any event shall have occurred as a result of which, in
the opinion of counsel for the Company or counsel for the Underwriters, the
Prospectus, as then amended or supplemented, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Underwriters promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance
11
with Section 10 of the Act.
3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance satisfactory to the Underwriters) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years from
the Effective Date, the Company will use its best efforts to maintain the
registration of the Units, Common Stock and Warrants under the provisions of
the Exchange Act.
3.3 Blue Sky Filing. The Company will endeavor in good faith, in
cooperation with the Underwriters, at or prior to the time the Registration
Statement becomes effective to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriters may
reasonably designate, provided that no such qualification shall be required
in any jurisdiction where, as a result thereof, the Company would be subject
to service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Underwriters agree that such
action is not at the time necessary or advisable, use all reasonable efforts
to file and make such statements or reports at such times as are or may be
required by the laws of such jurisdiction.
3.4 Delivery to Underwriters of Prospectuses. The Company will deliver
to the Underwriters, without charge, from time to time during the period when
the Prospectus is required to be delivered under the Act and, in any event,
for at least 90 days from the Effective Date, or the Exchange Act such number
of copies of each Preliminary Prospectus and the Prospectus as the
Underwriters may reasonably request and, as soon as the Registration
Statement or any amendment or supplement thereto becomes effective, deliver
to you two original executed Registration Statements, including exhibits, and
all post-effective amendments thereto and copies of all exhibits filed
therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5 Events Requiring Notice to the Underwriters. The Company will
notify the Underwriters immediately and confirm the notice in writing (i) of
the effectiveness of the Registration Statement and any amendment thereto,
(ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding for that purpose, (iii) of
the issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Public Securities for offering or sale
in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the mailing and delivery to the
Commission for filing of any amendment or supplement to the Registration
Statement or Prospectus, (v) of the receipt of any comments or request for
any additional information from the Commission, and (vi) of the happening of
any event during the period described in Section 3.4 hereof which, in the
judgment of the Company, makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or which requires the making
of any changes in the Registration Statement or the Prospectus in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. If the Commission or any state securities
commission shall enter a stop order or suspend such qualification at any
time, the Company will make every reasonable effort to obtain promptly the
lifting of such order.
3.6 Review of Financial Statements. For a period of five years from the
Effective Date, the Company, at its expense, shall cause its regularly
engaged independent certified public
12
accountants to consult with the Company concerning the Company's financial
statements for each of the first three fiscal quarters in such years prior to
the announcement of quarterly financial information, the filing of the
Company's Form 10-Q quarterly report and the mailing of quarterly financial
information to stockholders. The purpose of such consultation is to obtain
the assistance and input of such accountants so that each of such financial
statements will comply in all material respects with the applicable
accounting requirements of the Act and the regulations promulgated thereunder
and will be fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the then
most recently audited financial statements of the Company. It is not the
intended purpose of this provision that such accountants audit or review such
financial statements within the meaning of the AICPA's Statement on Auditing
Standards or that such accountants issue any report to the Company or the
Underwriter.
3.7 [Intentionally Omitted].
3.8 Secondary Market Trading and Standard & Poor's. The Company will take
all necessary and appropriate actions to be included in Standard and Poor's
Daily News and Corporation Records Corporate Descriptions for a period of five
years from the Effective Date, including the payment of any necessary fees and
expenses. The Company shall take such action as may be reasonably requested by
the Underwriters to obtain a secondary market trading exemption in such States
as may be requested by the Underwriters, including the payment of any necessary
fees and expenses and the filing of a Form (e.g. 25101(b)) for secondary market
trading in the State of California 90 days following the Effective Date.
3.9 Nasdaq and BSE Maintenance and De-listing of Units. [reserved]
3.10 Warrant Solicitation and Registration of Common Stock underlying the
Warrants.
3.10.1 Warrant Solicitation. [Intentionally omitted]
3.10.2 Registration of Common Stock. The Company agrees that prior
to the date that the Warrants become exercisable, it shall file with the
Commission a post-effective amendment to the Registration Statement, if
possible or a new registration statement, for the registration, under the
Act, of the Common Stock issuable upon exercise of the Warrants. In either
case, the Company shall cause the same to become effective at or prior to the
date that the Warrants become exercisable, and to maintain the effectiveness
of such registration statement and keep current a prospectus thereunder until
the expiration of the Warrants in accordance with the provisions of the
Warrant Agreement.
3.11 Reports to the Underwriters.
3.11.1 Periodic Reports, Etc. For a period of five years from the
Effective Date, the Company will furnish to the Underwriters copies of such
financial statements and other periodic and special reports as the Company
from time to time furnishes generally to holders of any class of its
securities, and promptly furnish to the Underwriters (i) a copy of each
periodic report the Company shall be required to file with the Commission,
(ii) a copy of every press release and every news item and article with
respect to the Company or its affairs which was released by the Company,
(iii) copies of each Form SR, (iv) a copy of each Form 8-K or Schedules 13D,
13G, 14D-1 or 13E-4 received or prepared by the Company, (v) a copy of
monthly statements setting forth such information regarding the Company's
results of operations and financial position (including balance sheet, profit
13
and loss statements and data regarding outstanding purchase orders) as is
regularly prepared by management of the Company, and (vi) such additional
documents and information with respect to the Company and the affairs of any
future subsidiaries of the Company as the Underwriters may from time to time
reasonably request.
3.11.2 Transfer Sheets and Weekly Position Listings. For a period
of five years from the Closing Date, the Company will furnish to the
Underwriters at the Company's sole expense such transfer sheets and position
listings of the Company's securities as the Underwriters may request,
including the daily, weekly and monthly consolidated transfer sheets of the
transfer agent of the Company and the weekly security position listings of
the Depository Trust Co.
3.11.3 Secondary Market Trading Memorandum. Until such time as the
Public Securities are listed or quoted, as the case may be, on the New York
Stock Exchange, the American Stock Exchange or Nasdaq National Market, the
Company shall engage the Underwriters' legal counsel to deliver to the
Underwriters and to the Company at the times set forth below a written
opinion detailing those states in which Public Securities may be traded in
non-issuer transactions under the Blue Sky laws of the fifty states
("Secondary Market Trading Memorandum"). The Secondary Market Trading
Memorandum shall be delivered to the Underwriters and to the Company on the
Effective Date and on the first day of every calendar quarter thereafter.
The Company shall pay to Underwriters' legal counsel a one-time fee of $5,000
for such services at the Closing.
3.12 Agreements between the Underwriters and the Company.
3.12.1 [Intentionally Omitted].
3.12.2 Underwriters' Purchase Option. On the Closing Date, the
Company will execute and deliver the Underwriters' Purchase Option to the
Underwriters substantially in the form filed as an exhibit to the
Registration Statement.
3.13 Disqualification of Form S-1 (or other appropriate form). For a
period equal to seven years from the date hereof, the Company will not take
any action or actions which may prevent or disqualify the Company's use of
Form S-1 (or other appropriate form) for the registration of the Warrants and
the Underwriters' Warrants under the Act.
3.14 Payment of Expenses.
3.14.1 General Expenses. The Company hereby agrees to pay on each
of the Closing Date and the Option Closing Date, if any, to the extent not
paid at Closing Date, all expenses incident to the performance of the
obligations of the Company under this Agreement, including but not limited to
(i) the preparation, printing, filing, delivery and mailing (including the
payment of postage with respect to such mailing) of the Registration
Statement, the Prospectus and the Preliminary Prospectuses and the printing
and mailing of this Agreement and related documents, including the cost of
all copies thereof and any amendments thereof or supplements thereto supplied
to the Underwriters in quantities as may be required by the Underwriters,
(ii) the printing, engraving, issuance and delivery of the Units, the shares
of Common Stock and the Warrants included in the Units and the Underwriters'
Purchase Option, including any transfer or other taxes payable thereon, (iii)
the qualification of the Public Securities under state or foreign securities
or Blue Sky laws, including the filing fees under such Blue Sky laws, the
costs of printing and mailing the "Preliminary Blue Sky Memorandum," and all
amendments and supplements thereto, fees up to an aggregate of
14
$60,000 and disbursements of Underwriters' counsel, iv) filing fees incurred
in registering the offering with the NASD, (v) costs of placing "tombstone"
advertisements in The Wall Street Journal and an industry publication
mutually selected by the Company and the Underwriters; (vi) fees and
disbursements of the transfer and warrant agent, (viii) the preparation,
binding and delivery of five sets of transaction "bibles," in form and style
satisfactory to the Underwriters and transaction lucite cubes or similar
commemorative items in a style and quantity as requested by the Underwriters,
(ix) any listing of the Public Securities on the OTC Bulletin Board and (x)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section
3.14.1. Since an important part of the public offering process is for the
Company to appropriately and accurately describe both the background of the
principals of the Company and the Company's competitive position in its
industry, the Company has engaged and will pay for an investigative search
firm of the Underwriters' choice to conduct an investigation of principals of
the Company mutually selected by the Underwriters and the Company (the fees
of which will be credited against the Underwriters' non-accountable expense
allowance if the offering is consummated as provided herein). The
Underwriters may deduct from the net proceeds of the offering payable to the
Company on the Closing Date, or the Option Closing Date, if any, the expenses
set forth herein to be paid by the Company to the Underwriters and/or to
third parties.
3.14.2 Non-Accountable Expenses. The Company further agrees that,
in addition to the expenses payable pursuant to Section 3.14.1, it will pay
to the Underwriters a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of
the Public Securities, of which $____ has been paid to date, and the Company
will pay the balance on the Closing Date and any additional monies owed
attributable to the Option Units or otherwise on the Option Closing Date by
certified or bank cashier's check or, at the election of the Underwriters, by
deduction from the proceeds of the offering contemplated herein. If the
offering contemplated by this Agreement is not consummated for any reason
whatsoever then the following provisions shall apply: The Company's
liability for payment to the Underwriters of the non-accountable expense
allowance shall be equal to the sum of the Underwriters' actual out-of-pocket
expenses (including, but not limited to, counsel fees, "road-show" and due
diligence expenses). The Underwriters shall retain such part of the
non-accountable expense allowance previously paid as shall equal such actual
out-of-pocket expenses. If the amount previously paid is insufficient to
cover such actual out-of-pocket expenses, the Company shall remain liable for
and promptly pay any other actual out-of-pocket expenses. If the amount
previously paid exceeds the amount of the actual out-of-pocket expenses, the
Underwriters shall promptly remit to the Company any such excess.
3.15 Application of Net Proceeds. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "USE OF PROCEEDS" in the Prospectus.
The Company hereby agrees that, without the express prior written consent of
the Underwriters, the Company will not apply any net proceeds from the
offering to pay any debt for borrowed funds or any debt or obligation owed to
any Insider.
3.16 Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month
following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Act) covering a period
of at least twelve consecutive months beginning after the Effective Date.
3.17 Key Person Life Insurance. The Company will maintain key person
life insurance in
15
an amount no less than _______ naming the Company as the sole beneficiary
thereof, for at least three years following the Effective Date, or such
shorter respective period that he performs management duties for the Company.
3.18 Stabilization. Neither the Company, nor, to its knowledge, any of
its employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.
3.19 Internal Controls. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are
recorded as necessary in order to permit preparation of financial statements
in accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.20 Transfer Agent. For a period of five years from the Effective
Date, the Company shall retain Continental Stock Transfer & Trust Company as
transfer agent for the Units, Common Stock and Warrants or such other
transfer agent acceptable to the Underwriters.
3.21 Sale of Securities.
3.21.1 Insiders. The Company agrees not to permit or cause a
private or public sale or private or public offering of any of its securities
(in any manner, including pursuant to Rule 144 under the Act) owned nominally
or beneficially (i) by the Insiders for a period of 36 months following the
Effective Date without obtaining the prior written consent of the
Underwriter, (ii) by the Other Insiders, for a period of 12 months following
the Effective Date without obtaining the prior written consent of VTR or of
the Other Insiders until August 1, 1995 without obtaining the prior written
consent of VTR, each as the case may be.
3.21.2 Others. The Company has caused to be duly executed a
legally binding and enforceable agreements pursuant to which all of the
officers and directors of the Company (including their family members and
affiliates) and persons (including their family members and affiliates) who
beneficially own or hold at least two percent but less than five percent of
the outstanding Common Stock on _____ agree not to sell any shares of Common
Stock owned by them (either pursuant to Rule 144 of the Regulations or
otherwise) for a period of 12 months following the Effective Date except with
the consent of VTR and, if applicable, the Pennsylvania Securities Commission.
3.22 Exercise Price of Options/Warrants. After the execution hereof,
the Company will not grant any option pursuant to the Company's 199_ Stock
Option Plan at an exercise price less than the greater of $___ per share or
the fair market value of the Common Stock on the date of the grant.
3.23 Chief Financial Officer. [reserved]
3.24 Independent Directors. [reserved]
16
3.25 Backlog Schedule. At or prior to the Closing, the Company shall
deliver a schedule setting forth the calculations necessary to derive the
numbers included in the section entitled "Backlog" in the Prospectus.
4. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy of the representations and
warranties of the Company as of the date hereof and as of each of the Closing
Date and the Option Closing Date, if any, to the accuracy of the statements
of officers of the Company made pursuant to the provisions hereof and to the
performance by the Company of its obligations hereunder and to the following
conditions:
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The Registration
Statement shall have become effective not later than 5:00 P.M., New York
time, on the date of this Agreement or such later date and time as shall be
consented to in writing by you, and, at each of the Closing Date and the
Option Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for the
purpose shall have been instituted or shall be pending or contemplated by the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Underwriters.
4.1.2 NASD Clearance. By the Closing Date, the Underwriters shall
have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of the
Securities in any jurisdiction designated by you pursuant to Section 3.3
hereof shall have been issued on either on the Closing Date or the Option
Closing Date, and no proceedings for that purpose shall have been instituted
or shall be contemplated.
4.2 Company Counsel Matters.
4.2.1 Effective Date Opinion of Counsel. On the Effective Date, the
Underwriters shall have received the favorable opinion of ▇▇▇▇▇▇ ▇▇▇▇▇, P.C.,
counsel to the Company, dated the Effective Date, addressed to the
Underwriters and in form and substance satisfactory to ▇▇▇▇▇ & Gold, LLP,
counsel to the Underwriters, to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state
of incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not
have a material adverse effect on the Company.
(ii) The Company has all requisite corporate power and
authority, and has all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental or regulatory officials
and bodies to own or lease its properties and conduct its business as
described in the Prospectus, and the Company is and has been doing business
in
17
compliance with all such authorizations, approvals, orders, licenses,
certificates and permits and all federal, state and local laws, rules and
regulations. The Company has all corporate power and authority to enter into
this Agreement and to carry out the provisions and conditions hereof, and all
consents, authorizations, approvals and orders required in connection
therewith have been obtained. No consents, approvals, authorizations or
orders of, and no filing with any court or governmental agency or body (other
than such as may be required under the Act and applicable Blue Sky laws), is
required for the valid authorization, issuance, sale and delivery of the
Securities, and the consummation of the transactions and agreements
contemplated by this Agreement, the Warrant Agreement and the Underwriters'
Purchase Option, and as contemplated by the Prospectus or if so required, all
such authorizations, approvals, consents, orders, registrations, licenses and
permits have been duly obtained and are in full force and effect and have
been disclosed to the Underwriters.
(iii) All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and
warrants to purchase shares of Common Stock constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. The
offers and sales of the outstanding Common Stock and options and warrants to
purchase shares of Common Stock were at all relevant times either registered
under the Act and the applicable state securities or Blue Sky Laws or exempt
from such registration requirements. The authorized and outstanding capital
stock of the Company is as set forth under the caption "Capitalization" in
the Prospectus.
(iv) The Securities have been duly authorized and, when issued
and paid for, will be validly issued, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal liability by
reason of being such holders. The Securities are not and will not be subject
to the preemptive rights of any holders of any security of the Company or, to
the best of such counsel's knowledge after due inquiry, similar contractual
rights granted by the Company. All corporate action required to be taken for
the authorization, issuance and sale of the Securities has been duly and
validly taken. When issued, the Underwriters' Purchase Option, the
Underwriters' Warrants and the Warrants will constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and
payment therefor, the number and type of securities of the Company called for
thereby and such Warrants, the Underwriters' Purchase Option, and the
Underwriters' Warrants, when issued, in each case, will be enforceable
against the Company in accordance with their respective terms, except (a) as
such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, (b) as enforceability
of any indemnification provision may be limited under the federal and state
securities laws, and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The certificates representing the
Securities are in due and proper form.
(v) To the best of such counsel's knowledge, after due
inquiry, except as set forth in the Prospectus, no holders of any securities
of the Company or of any options, warrants or securities of the Company
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
(vi) To the best of such counsel's knowledge, after due
inquiry, the ▇▇▇▇▇,
▇▇
the shares of Common Stock and the Warrants are eligible for quotation on the
OTC Bulletin Board.
(vii) This Agreement, the Warrant Agreement and the
Underwriters' Purchase Option have each been duly and validly authorized and,
when executed and delivered by the Company, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their respective terms, except (a) as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification
provisions may be limited under the federal and state securities laws, and
(c) that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(viii) The execution, delivery and performance by the
Company of this Agreement, the Underwriters' Purchase Option, the Warrant
Agreement, the issuance and sale of the Securities, the consummation of the
transactions contemplated hereby and thereby and the compliance by the
Company with the terms and provisions hereof and thereof, do not and will
not, with or without the giving of notice or the lapse of time, or both, (a)
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 modification of
any lien, security interest, charge or encumbrance upon any of the properties
or assets of the Company pursuant to the terms of, any material mortgage,
deed of trust, note, indenture, loan, contract, commitment or other material
agreement or instrument, to which the Company is a party or by which the
Company or any of its properties or assets may be bound, (b) result in any
violation of the provisions of the Certificate of Incorporation or the
By-Laws of the Company, (c) violate any statute or any judgment, order or
decree, rule or regulation applicable to the Company of any court, domestic
or foreign, or of any federal, state or other regulatory authority or other
governmental body having jurisdiction over the Company, its properties or
assets, or (d) have a material effect on any permit, certification,
registration, approval, consent, license or franchise of the Company.
(ix) The Registration Statement, each Preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements thereto
(other than the financial statements included therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations. The Securities and all other
securities issued or issuable by the Company conform in all respects to the
description thereof contained in the Registration Statement and the
Prospectus. The statements in the Prospectus under "Business," "Management,"
"Certain Transactions," "Risk Factors," and "Description of Securities" have
been reviewed by such counsel, and insofar as they refer to statements of
law, descriptions of statutes, licenses, rules or regulations or legal
conclusions are correct in all material respects. No statute or regulation
or legal or governmental proceeding required to be described in the
Prospectus is not described as required, nor are any contracts or documents
of a character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement not so
described or filed as required.
(x) Counsel has participated in conferences with officers and
other representatives of the Company, representatives of the independent
public accountants for the Company and representatives of the Underwriters at
which the contents of the Registration Statement, the Prospectus and related
matters were discussed and although such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and Prospectus (except
as otherwise set forth in this opinion), no facts have come to the attention
of such counsel which lead them to believe
19
that either the Registration Statement or the Prospectus nor any amendment or
supplement thereto, as of the date of such opinion, contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
(xi) The Registration Statement is effective under the Act,
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Act or applicable state securities laws.
(xii) The Company has good and marketable title to, or
valid and enforceable leasehold estates in, all items of real and personal
property (tangible and intangible) stated in the Prospectus to be owned or
leased by it, free and clear of all liens, encumbrances, claims, security
interests, defects and restrictions of any material nature whatsoever, other
than those referred to in the Prospectus and liens for taxes not yet due and
payable.
(xiii) Except as described in the Prospectus, no default
exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, deed of
trust, note, loan or credit agreement, or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the
Company may be bound or to which any of the properties or assets of the
Company is subject. The Company is not in violation of any term or provision
of its Certificate of Incorporation or By-Laws or of any franchise, license,
permit, applicable law, rule, regulation, judgment or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over
the Company or any of its properties or business, except as described in the
Prospectus.
(xiv) To the best of such counsel's knowledge, after due
inquiry, the Company owns or possesses, free and clear of all liens or
encumbrances and rights thereto or therein by third parties, other than as
described in the Prospectus, the requisite licenses or other rights to use
all Intangibles and other rights necessary to conduct its business
(including, without limitation, any such licenses or rights described in the
Prospectus as being licensed to or owned or possessed by the Company), and
there is no claim or action by any person pertaining to, or proceeding,
pending or to the best of such counsel's knowledge after due inquiry
threatened, which challenges the exclusive rights of the Company with respect
to any Intangibles used in the conduct of the its business (including without
limitation any such licenses or rights described in the Prospectus as being
owned or possessed by the Company); to the best of such counsel's knowledge
after due inquiry, the Company's current products, services and processes do
not infringe on any Intangibles held by third parties except as discussed in
the Prospectus; and the Company's Intangibles which have been registered in
the United States Patent and Trademark Office have been fully maintained and
are in full force and effect.
(xv) To the best of such counsel's knowledge, after due
inquiry, except as described in the Prospectus, the Company does not own an
interest in any corporation, partnership, joint venture, trust or other
business entity.
(xvi) To the best of such counsel's knowledge, after due
inquiry, except as
20
set forth in the Prospectus, there is no action, suit or proceeding before or
by any court of governmental agency or body, domestic or foreign, now
pending, or threatened against the Company, which might result in any
material and adverse change in the condition (financial or otherwise),
business or prospects of the Company, or might materially and adversely
affect the properties or assets thereof.
(xvii) To the best of such counsel's knowledge, after due
inquiry, neither the Company nor its officers, employees, agents or other
persons acting on their behalf has, directly or indirectly, given or agreed
to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer
or supplier, any employee or agent of a customer or supplier, any official or
employee of any governmental agency or body (domestic or foreign), any
political party or candidate for office (domestic or foreign) or any other
person who was, is or may be in a position to help or hinder the business of
the Company (or assist it in connection with any actual or proposed
transaction) which (a) might subject the Company to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (b) if not
given in the past, might have had a materially adverse effect on the assets,
business or operations of the Company as reflected in the financial
statements contained in the Registration Statement or (c) if not continued in
the future, might adversely affect the assets, business, operations or
prospects of the Company.
(xviii) To the best of such counsel's knowledge, after due
inquiry, except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in the
nature of a finder's or origination fee with respect to the sale of the
Securities hereunder or financial consulting arrangements or any other
arrangements, agreements, understandings, payments or issuances that may
affect the Underwriters' compensation, as determined by the NASD.
(xix) Based solely upon a reading of the minutes of the
Board of Directors of the Company, the outstanding options to purchase Common
Stock are as set forth on Schedule A annexed hereto.
Unless the context clearly indicates otherwise, the term "Company"
as used in this Section 4.2.1 shall include each subsidiary of the Company.
The opinion of counsel for the Company and any opinion relied upon by such
counsel for the Company shall include a statement to the effect that it may
be relied upon by counsel for the Underwriters in its opinion delivered to
the Underwriters.
4.2.2 Closing Date and Option Closing Date Opinion of Counsel.
On each of the Closing Date and the Option Closing Date, if any, the
Underwriters shall have received the favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇,
counsel to the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters and in form and substance
satisfactory to ▇▇▇▇▇ & Gold, LLP, counsel to the Underwriters, confirming as
of the Closing Date and, if applicable, the Option Closing Date, the
statements made by ▇▇▇▇▇▇ ▇▇▇▇▇, P.C. in their opinion delivered on the
Effective Date.
4.2.3 Reliance. In rendering such opinion, such counsel may rely
(i) as to matters involving the application of laws other than the laws of
the United States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably
satisfactory to the Underwriters' counsel) of other counsel reasonably
acceptable to the Underwriters' counsel, familiar
21
with the applicable laws, and (ii) as to matters of fact, to the extent they
deem proper, on certificates or other written statements of officers of
departments of various jurisdiction having custody of documents respecting
the corporate existence or good standing of the Company, provided that copies
of any such statements or certificates shall be delivered to the
Underwriters' counsel if requested. The opinion of counsel for the Company
shall include a statement to the effect that it may be relied upon by counsel
for the Underwriters in its opinion delivered to the Underwriters.
4.2.4 Secondary Market Trading Memorandum. On the Effective Date
the Underwriter and the Company shall have received the Secondary Market
Trading Memorandum.
4.3 Cold Comfort Letter. At the time this Agreement is executed
and at each of the Closing Date and the Option Closing Date, if any, you
shall have received a letter, addressed to the Underwriters and in form and
substance satisfactory in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) to you
and to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the
Underwriters, from ▇▇▇▇▇▇ + ▇▇▇▇▇▇ dated, respectively, as of the date of
this Agreement and as of the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as
to form in all material respects with the applicable accounting requirements
of the Act and the published Regulations thereunder;
(iii) Stating that, on the basis of a limited review which
included a reading of the latest available minutes of the stockholders and
board of directors and the various committees of the board of directors,
consultations with officers and other employees of the Company responsible
for financial and accounting matters and other specified procedures and
inquiries, nothing has come to their attention which would lead them to
believe that at a date not later than five days prior to the Effective Date,
Closing Date or Option Closing Date, as the case may be, there was any change
in the capital stock or long-term debt of the Company, as compared with
amounts shown in the September 30, 1994 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there were any change setting forth the amount
of such change;
(iv) [Intentionally Omitted].
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus
in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records
and work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter and found them
to be in agreement; and
(vi) [Intentionally Omitted].
22
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Underwriters shall have received a
certificate of the Company signed by the Chairman of the Board or the
President and the Secretary of the Company, dated the Closing Date or the
Option Closing Date, as the case may be, respectively, to the effect that the
Company has performed all covenants and complied with all conditions required
by this Agreement to be performed or complied with by the Company prior to
and as of the Closing Date, or the Option Closing Date, as the case may be,
and that the conditions set forth in Section 4.5 hereof have been satisfied
as of such date and that, as of Closing Date and the Option Closing Date, as
the case may be, the representations and warranties of the Company set forth
in Section 2 hereof are true and correct. In addition, the Underwriters will
have received such other and further certificates of officers of the Company
as the Underwriters may reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Underwriters shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force
and effect, (ii) that the resolutions relating to the public offering
contemplated by this Agreement are in full force and effect and have not been
modified, (iii) all correspondence between the Company or its counsel and the
Commission, (iv) all correspondence between the Company or its counsel and
the NASD concerning inclusion on Nasdaq, (v) all correspondence between the
Company or its counsel and the BSE concerning listing on the BSE, and (vi) as
to the incumbency of the officers of the Company. The documents referred to
in such certificate shall be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date
and the Option Closing Date, if any, (i) there shall have been no material
adverse change or development involving a prospective material change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus, (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company from the latest date as of which the financial condition of the
Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company, taken as a whole, (iii) the Company shall
not be in default under any provision of any instrument relating to any
outstanding indebtedness which default would have a material adverse effect
on the Company, (iv) no material amount of the assets of the Company shall
have been pledged or mortgaged, except as set forth in the Registration
Statement and Prospectus, (v) no action suit or proceeding, at law or in
equity, shall have been pending or threatened against the Company or
affecting any of its property or business before or by any court or federal
or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the
business, operations, prospects or financial condition or income of the
Company, except as set forth in the Registration Statement and Prospectus,
(vi) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated or threatened by the Commission, and (vii)
the Registration Statement and the Prospectus and any amendments or
supplements thereto contain all material statements which are required to be
stated therein in accordance with the Act and the Regulations and conform in
all
23
material respects to the requirements of the Act and the Regulations, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
4.6 Delivery of Agreements. The Company has delivered to the
Underwriters executed copies of the Underwriters' Purchase Option and the
Financial Consulting Agreement.
4.7 Opinion of Counsel for the Underwriters. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to ▇▇▇▇▇ & Gold, LLP, counsel to the Underwriters, and you shall have
received from such counsel a favorable opinion, dated the Closing Date and
the Option Closing Date, if any, with respect to such of these proceedings as
you may reasonably require. On or prior to the Effective Date, the Closing
Date and the Option Closing Date, as the case may be, counsel for the
Underwriters shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in this Section 4.7, or in order
to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
5. Indemnification.
5.1 Indemnification of the Underwriters.
5.1.1 General. Subject to the conditions set forth below, the
Company (for purposes of this Section 5, references to the "Company" shall
include ▇▇▇▇▇▇ ▇▇▇▇) agree to indemnify and hold harmless each of the
Underwriters, their directors, officers, agents and employees and each
person, if any, who controls the Underwriters ("controlling person") within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all legal or other expenses reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) to which they or any of
them may become subject under the Act, the Exchange Act or any other statute
or at common law or otherwise or under the laws of foreign countries, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in (i) any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time each may be amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of the
Company issued or issuable upon exercise of the Underwriters' Purchase
Option; or (iii) any application or other document or written communication
(in this Section 5 collectively called "application") executed by the Company
or based upon written information furnished by the Company in any
jurisdiction in order to qualify any of the Securities under the securities
laws thereof or filed with the Commission, any state securities commission or
agency, Nasdaq or any securities exchange; or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to the Underwriters by or on behalf of
the Underwriters expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment or supplement thereof,
or in any application, as the case may be. The Company agrees promptly to
notify the Underwriters of the
24
commencement of any litigation or proceedings against the Company or any of
its officers, directors or controlling persons in connection with the issue
and sale of the Securities or in connection with the Registration Statement
or Prospectus.
5.1.2 Procedure. If any action is brought against the Underwriters
or controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, the Underwriters shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of
counsel (subject to the approval of the Underwriters) and payment of actual
expenses. The Underwriters or controlling person shall have the right to
employ its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of the Underwriters or such
controlling person unless (i) the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of such
action, or (ii) the Company shall not have employed counsel to have charge of
the defense of such action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
the fees and expenses of not more than one additional firm of attorneys
selected by the Underwriters and/or controlling person shall be borne by the
Company. Notwithstanding anything to the contrary contained herein, if the
Underwriters or controlling person shall assume the defense of such action as
provided above, the Company shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company. The Underwriters, severally and not
jointly, agree to indemnify and hold harmless the Company against any and all
loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to the Underwriters, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions directly relating to the transactions effected by the Underwriters
in connection with this offering made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto
or in any application in reliance upon, and in strict conformity with,
written information furnished to the Company with respect to the Underwriters
by or on behalf of the Underwriters expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any such application. In case any action shall be
brought against the Company or any other person so indemnified based on any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have
the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the
Underwriters by the provisions of Section 5.1.2.
25
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for
indemnification pursuant hereto but it is judicially determined (by the entry
of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the
fact that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Act, the Exchange Act or otherwise may be required on
the part of any such person in circumstances for which indemnification is
provided under this Section 5, then, and in each such case, the Company and
the Underwriters shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by the Company and the Underwriters, as incurred, in such
proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial offering price appearing
thereon and the Company is responsible for the balance; provided, that, no
person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Notwithstanding the
provisions of this Section 5.3, the Underwriters shall not be required to
contribute any amount in excess of the amount by which the total price at
which the Public Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which the
Underwriters have otherwise been required to pay in respect of such losses,
liabilities, claims, damages and expenses. For purposes of this Section,
each director, officer and employee of any Underwriter, and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act
shall have the same rights to contribution as the Underwriters.
5.3.2 Contribution Procedure. Within fifteen days after receipt by
any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim
for contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not
relieve it from any liability which it may have to any other party other than
for contribution hereunder. In case any such action, suit or proceeding is
brought against any party, and such party notifies a contributing party or
its representative of the commencement thereof within the aforesaid fifteen
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any
such contributing party shall not be liable to any party seeking contribution
on account of any settlement of any claim, action or proceeding which was
effected by such party seeking contribution on account of any settlement of
any claim, action or proceeding effected by such party seeking contribution
without the written consent of such contributing party. The contribution
provisions contained in this Section are intended to supersede, to the extent
permitted by law, any right to contribution under the Act, the Exchange Act
or otherwise available.
6. [Intentionally Omitted].
7. Additional Covenants.
7.1 Attendance at Board Meetings. For a period of five years from the
Effective Date, the Underwriters shall be permitted to select a designee to
attend all meetings of the Board of Directors, but who will not be entitled
to vote at such meetings. The Company agrees to give the Underwriters
26
written notice of each such meeting and to provide to the Underwriters with
an agenda and minutes of the meeting no later than it gives such notice and
provides such items to the other directors. The Company shall reimburse the
designee of the Underwriters for their out-of-pocket expenses incurred in
connection with its attendance at the Company's Board meetings, including,
but not limited to, food, lodging, transportation.
7.2 [Intentionally Omitted].
7.3 [Intentionally Omitted].
7.4 Press Releases. The Company will not issue a press release or engage
in any other publicity until 25 days after the Effective Date without the
Underwriters' prior written consent.
7.5 Form S-8 or any Similar Form. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period
of three years from the Effective Date without the Underwriters' written
consent.
7.6 Transactional Bibles. The Company agrees that if its representatives
have not submitted to a bindery acceptable to the Underwriters all of the
closing and other documents material to the offering within 30 days of the
Effective Date, then the Company shall pay the fees and costs of the
Underwriters' agents to prepare the transactional bibles and have them bound.
7.7 Related Party Transactions. All future transactions between the
Company and its officers, directors or 5% stockholders will be on terms no
less favorable than could be obtained from unaffiliated third parties and
will be approved by a majority of the directors of the Company disinterested
in the transaction.
8. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriters and Company, including the indemnity
agreements contained in Section 5 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriters, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities
to the Underwriters until the earlier of the expiration of any applicable
statute of limitations and the seventh anniversary of the later of the
Closing Date or the Option Closing Date, if any, at which time the
representations, warranties and agreements shall terminate and be of no
further force and effect.
9. Effective Date of This Agreement and Termination Thereof.
9.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective or at the time of the initial public offering by the Underwriters
of the Public Securities, whichever is earlier. The time of the initial
public offering, for the purpose of this Section 9 shall mean the time, after
the Registration Statement becomes effective, of the release by you for
publication of the first newspaper advertisement which is subsequently
published relating to the Public Securities or the time, after the
Registration Statement becomes effective, when the Public Securities are
first released by you for offering by the
27
Underwriters or dealers by letter or telegram, whichever shall first occur.
You may prevent this Agreement from becoming effective without liability to
any other party, except as noted below, by giving the notice indicated below
in this Section 9 before the time this Agreement becomes effective. You
agree to give the undersigned notice of the commencement of the offering
described herein.
9.2 Termination. You shall have the right to terminate this Agreement at
any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will
in the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the
American Stock Exchange, The Boston Stock Exchange or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States shall have become involved in a war or major hostilities,
or (iv) if a banking moratorium has been declared by a New York State or
federal authority, or (v) if a moratorium on foreign exchange trading has
been declared which materially adversely impacts the United States securities
market, or (vi) if the Company shall have sustained a material loss by fire,
flood, accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will,
in your opinion, make it inadvisable to proceed with the delivery of the
Securities, or (vii) if ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall no longer serve the Company in
their present capacities, or (viii) if the Company has breached any of its
representations, warranties or obligations hereunder, or (ix) if the
Underwriters shall have become aware after the date hereof of such a material
adverse change in the condition (financial or otherwise), business, or
prospects of the Company, or such adverse material change in general market
conditions as in the Underwriters' judgment would make it impracticable to
proceed with the offering, sale and/or delivery of the Securities or to
enforce contracts made by the Underwriters for the sale of the Securities.
9.3 Notice. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, the
Company shall be notified on the same day as such election is made by you by
telephone or telecopy, confirmed by letter.
9.4 Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay
the expenses related to the transactions contemplated herein shall be
governed by Section 3.14 hereof.
9.5 Indemnification. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way effected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
10. Miscellaneous.
10.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed
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If to the Underwriters:
VTR Securities Corp.
Copy to:
▇▇▇▇▇ & Gold, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Gold, Esq.
If to the Company:
The Havana Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Copy to:
▇▇▇▇▇▇ ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
10.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
10.3 Amendment. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
10.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with
this Agreement) constitute the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.5 Binding Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 5 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Agreement or any provisions
herein contained.
10.6 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New
York, without giving effect to conflicts of law. The Company hereby agrees
that any action, proceeding or claim against it arising out of,
29
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any
objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum. Any such process or summons to be served upon the
Company may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 10 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the Company in any
action, proceeding or claim. The Company agrees that the prevailing
party(ies) in any such action shall be entitled to recover from the other
party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
10.7 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto.
10.8 Waiver, Etc. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this
Agreement. No waiver of any breach, non-compliance or non-fulfillment of any
of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver
of any other or subsequent breach, non-compliance or non-fulfillment.
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If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
THE HAVANA GROUP, INC.
By:
------------------------------------
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇ CO., LTD.
By:
------------------------------------
Name:
Title:
Accepted as of the date first
above written.
New York, New York
VTR CAPITAL, INC.
By:
------------------------------
Name:
Title:
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