Exhibit 1
OH&S DRAFT
4/9/97
[Form of Underwriting Agreement - Subject to Additional Review]
2,200,000 Shares of Common Stock
INTERNATIONAL ISOTOPES, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1997
XXXXX SECURITIES CO., INC.
As Representative of the
Several Underwriters listed on Schedule A hereto
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
International Isotopes, Inc., a Texas corporation (the "Company") and the
stockholders of the Company named in Schedule B hereto (collectively, the
"Sellers" and individually, a "Seller") each confirm their agreement with Xxxxx
Securities Co., Inc. ("Xxxxx") and each of the underwriters named in Schedule A
hereto (collectively, the "Underwriters," which term shall also include any
underwriter substituted as hereinafter provided in Section 12), for whom Xxxxx
is acting as representative (in such capacity, Xxxxx shall hereinafter be
referred to as "you" or the "Representative"), with respect to the sale by the
Company and the purchase by the Underwriters, acting severally and not jointly,
of the respective numbers of shares ("Shares") of the Company's common stock,
$.01 par value per share ("Common Stock"), set forth in Schedule A hereto. Such
Shares are hereinafter referred to as the "Firm Securities."
Upon your request, as provided in Section 3(b), the Company and the
Sellers, acting jointly and not severally, shall also sell to the Underwriters,
up to an additional 225,000 shares of Common Stock for the purpose of covering
over-allotments, if any (the "Option Securities").
Of the Option Securities, (i) __________ shall be sold by the Company and the
balance shall be sold by the Sellers, acting severally and not jointly, in the
respective amounts which bear the same proportion to the total number of Option
Securities to be sold by such Sellers as the number of Option Securities set
forth on Schedule B hereto opposite the name of each such Seller bears to the
total number of Option Securities set forth on Schedule B and (ii) the
Underwriters, acting severally and not jointly, shall purchase the respective
number of Option Securities which bears the same proportion to the total number
of Option Securities to be purchased by the Underwriters as the number of Firm
Securities to be purchased by each Underwriter bears to the total number of Firm
Securities. The Company also proposes to issue and sell to you warrants (the
"Representative's Warrants") pursuant to the Representative's Warrant Agreement
(the "Representative's Warrant Agreement") for the purchase of an additional
220,000 shares of Common Stock. The shares of Common Stock issuable upon
exercise of the Representative's Warrants are hereinafter referred to as the
"Representative's Securities." The Firm Securities, the Option Securities, the
Representative's Warrants and the Representative's Securities (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters as of the date
hereof, and as of the Closing Date (hereinafter defined) and the Option Closing
Date (hereinafter defined), if any, as follows:
a. The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. 333-_________), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Securities under the Securities Act of 1933, as amended (the "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 (the "Regulations") of the Commission under the Act. The Company
will promptly file a further amendment to said registration statement in the
form heretofore delivered to the Underwriters and will not file any other
amendment thereto to which the Underwriters shall have objected in writing after
having been furnished with a copy thereof. 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 (including, but not limited to those
documents or information incorporated by reference therein) and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430(A) of the Regulations)), is hereinafter called the "Registration Statement",
and the form of prospectus in the form first filed with the Commission pursuant
to Rule 424(b) of the Regulations is hereinafter called the "Prospectus." For
purposes hereof, "Rules and Regulations" mean the rules and regulations adopted
by the Commission under either the Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as applicable.
b. Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or Prospectus or any part of any thereof and no
proceedings for a stop order suspending the
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effectiveness of the Registration Statement or any of the Company's securities
have been instituted or are pending or threatened. Each of the Preliminary
Prospectus, the Registration Statement and Prospectus at the time of filing
thereof conformed with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectus, the Registration Statement
or Prospectus at the time of filing thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that this representation and
warranty does not apply to statements made in reliance upon and in 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, Registration Statement or Prospectus.
c. When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined herein) and each
Option Closing Date (as defined herein), if any, and during such longer period
as the Prospectus may be required to be delivered in connection with sales by
the Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform in all material
respects to the requirements of the Act and the Rules and Regulations; neither
the Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, 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, provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
strict conformity with information furnished to the Company in writing by or on
behalf of any Underwriter expressly for use in the Preliminary Prospectus,
Registration Statement or Prospectus or any amendment thereof or supplement
thereto.
d. Each of the Company and Gazelle Realty, Inc. (the "Subsidiary")
has been duly organized and is validly existing as a corporation in good
standing under the laws of the state of its incorporation. Except as set forth
in the Prospectus, neither the Company nor the Subsidiary owns an interest in
any corporation, partnership, trust, joint venture or other business entity.
Each of the Company and the Subsidiary is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing. The Company owns, directly or
indirectly, one hundred percent (100%) of the outstanding capital stock of the
Subsidiary, and all of such shares have been validly issued, are fully paid and
non-assessable, were not issued in violation of any preemptive rights, and,
except as set forth in the Prospectus, are owned free and clear of any liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever. Each of the Company and the
Subsidiary has all requisite power and authority (corporate and other), and has
obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; each of the Company and the
Subsidiary is and has been doing business in compliance with all such
authorizations, approvals,
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orders, licenses, certificates, franchises and permits and all applicable
federal, state, local and foreign laws, rules and regulations; and neither the
Company nor the Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the earnings,
position, prospects, value, operation, properties, business or results of
operations of the Company or the Subsidiary. The disclosures in the Registration
Statement concerning the effects of federal, state, local, and foreign laws,
rules and regulations on the Company's and the Subsidiary' businesses as
currently conducted and as contemplated are correct in all material respects and
do not omit to state a material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which they were made.
e. The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Capital Stock" and will have the adjusted capitalization set
forth therein on the Closing Date and each Option Closing Date, if any, based
upon the assumptions set forth therein, and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement, the Representative's Warrant Agreement and as described in
the Prospectus. The Securities and all other securities issued or issuable by
the Company conform or, when issued and paid for, will conform, in all respects
to all statements with respect thereto contained in the Registration Statement
and the Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable
and 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 Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and will conform to the
description thereof contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate action required
to be taken for the authorization, issue and sale of the Securities has been
duly and validly taken; and the certificates representing the Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities to be sold by the Company hereunder, the Underwriters
or the Representative, as the case may be, will acquire good and marketable
title to such Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever.
f. The consolidated financial statements of the Company together
with the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present the
financial position, income, changes in cash flow, changes in stockholders'
equity and the results of operations of the Company and the Subsidiary at the
respective dates and for the respective periods to which they apply and such
financial statements have been prepared in conformity with generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved and such financial
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statements as are audited have been examined by KPMG Peat Marwick LLP who are
independent public accountants within the meaning of the Act and the Rules and
Regulations, as indicated in their reports filed therewith. There has been no
adverse change or development involving a material prospective change in the
condition, financial or otherwise, or in the earnings, position, prospects,
value, operation, properties, business, or results of operations of the Company,
whether or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the Prospectus
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. Financial
information (including, without limitation, any pro forma financial information)
set forth in the Prospectus under the headings "Summary Financial Information,"
"Capitalization," "Selected Financial Data," and "Plan of Operations," fairly
present, on the basis stated in the Prospectus, the information set forth
therein, and have been derived from or compiled on a basis consistent with that
of the audited financial statements included in the Prospectus; and, in the case
of pro forma financial information, if any, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to
therein. The amounts shown as accrued for current and deferred income and other
taxes in such financial statements are sufficient for the payment of all accrued
and unpaid federal, state, local and foreign income taxes, interest, penalties,
assessments or deficiencies applicable to the Company and the Subsidiary,
whether disputed or not, for the applicable period then ended and periods prior
thereto; adequate allowance for doubtful accounts has been provided for
unindemnified losses due to the operations of the Company and the Subsidiary;
and the statements of income do not contain any items of special or nonrecurring
income not earned in the ordinary course of business, except as specified in the
notes thereto.
g. Each of the Company and the Subsidiary (i) has paid all federal,
state, local, and foreign taxes for which it is liable, including, but not
limited to, withholding taxes and amounts payable under Chapters 21 through 24
of the Internal Revenue Code of 1986, as amended (the "Code"), and has furnished
all information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
h. No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by the Company
of the Securities, (ii) the purchase by the Underwriters of the Firm Securities
and the Option Securities from the Company and the purchase by the
Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Firm Securities and the Option Securities in connection with
the distribution contemplated hereby.
i. Each of the Company and the Subsidiary maintains insurance
policies, including, but not limited to, general liability, product and property
insurance, which insures each of the Company and the Subsidiary, and their
respective employees, against such losses and risks generally insured against by
comparable businesses. Neither the Company nor the Subsidiary (A) has failed to
give notice or present any insurance claim with respect to any matter, including
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but not limited to the Company's business, property or employees, under any
insurance policy or surety bond in a due and timely manner, (B) has any disputes
or claims against any underwriter of such insurance policies or surety bonds or
has not failed to pay any premiums due and payable thereunder, or (C) has failed
to comply with all conditions contained in such insurance policies and surety
bonds. There are no facts or circumstances under any such insurance policy or
surety bond which would relieve any insurer of its obligation to satisfy in full
any valid claim of the Company or any Subsidiary.
j. There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the Company
or the Subsidiary which (i) questions the validity of the capital stock of the
Company, this Agreement or the Representative's Warrant Agreement, or of any
action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representative's Warrant Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (iii) might materially and adversely
affect the condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties, business or
results of operations of the Company and the Subsidiary.
k. The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this Agreement and
the Representative's Warrant Agreement and to consummate the transactions
provided for in this Agreement and the Representative's Warrant Agreement; and
this Agreement and the Representative's Warrant Agreement have each been duly
and properly authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement constitutes a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, and none of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Representative's
Warrant Agreement, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, or the conduct of its business
as described in the Registration Statement, the Prospectus, and any amendments
or supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of any of the Company or the Subsidiary
pursuant to the terms of, (i) the certificate of incorporation or by-laws of any
of the Company or the Subsidiary, (ii) any license, contract, collective
bargaining agreement, indenture, mortgage, deed of trust, lease, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which any of the Company or the Subsidiary is a party
or by which any of the Company or the Subsidiary is or may be bound or to which
either of its properties or assets (tangible or intangible) is or may be
subject, or any indebtedness, or (iii) any statute, judgment, decree, order,
rule or regulation applicable to any of the Company or the Subsidiary of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body
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(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over any of the
Company or the Subsidiary or any of their respective activities or properties.
l. No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement and
the Representative's Warrant Agreement and the transactions contemplated hereby
and thereby, including without limitation, any waiver of any preemptive, first
refusal or other rights that any entity or person may have for the issue and/or
sale of any of the Securities, except such as have been or may be obtained under
the Act or may be required under state securities or Blue Sky laws in connection
with the Underwriters' purchase and distribution of the Firm Securities and the
Option Securities, and the Representative's Warrants to be sold by the Company
hereunder.
m. All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which any of the Company or the Subsidiary is a party
or by which it may be bound or to which its assets, properties or business may
be subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company or
the Subsidiary, as the case may be, enforceable against each of them, in
accordance with their respective terms. The descriptions in the Registration
Statement of agreements, contracts and other documents are accurate in all
material respects and fairly present the information required to be shown with
respect thereto by Form SB-2, and there are no contracts or other documents
which are required by the Act to be described in the Registration Statement or
filed as exhibits to the Registration Statement which are not described or filed
as required, and the exhibits which have been filed are in all material respects
complete and correct copies of the documents of which they purport to be copies.
n. Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, neither the Company nor the
Subsidiary has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into any
transaction other than in the ordinary course of business, or (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any change in the capital stock, or
any change in the debt (long or short term) or liabilities or material adverse
change in or affecting the general affairs, management, financial operations,
stockholders' equity or results of operations of the Company or the Subsidiary.
o. No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, collective bargaining
agreement, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company or the Subsidiary is a party or by
which the Company or
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the Subsidiary may be bound or to which the property or assets (tangible or
intangible) of the Company or the Subsidiary is subject or affected.
p. Each of the Company and the Subsidiary has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
the Company or the Subsidiary by the U.S. Department of Labor, or any other
governmental agency responsible for the enforcement of such federal, state,
local, or foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company or the Subsidiary pending before the National
Labor Relations Board or any lockout, strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the Company or
the Subsidiary, or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company or the
Subsidiary, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company and the Subsidiary. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company or the Subsidiary. No labor dispute with
the employees of the Company or the Subsidiary exists, or, is imminent.
q. Except as described in the Prospectus, neither the Company nor
the Subsidiary maintains, sponsors or contributes to any program or arrangement
that is an "employee pension benefit plan," an "employee welfare benefit plan,"
or a "multiemployer 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"). None of the Company nor the Subsidiary
maintains or contributes, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) 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 Code, which could subject the
Company or the Subsidiary to any tax penalty on prohibited transactions and
which has not adequately been corrected. Each ERISA Plan is in compliance with
all 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. Neither the Company nor the Subsidiary has ever
completely or partially withdrawn from a "multiemployer plan."
r. Neither the Company, the Subsidiary nor any of their respective
employees, directors, stockholders, partners, or affiliates (within the meaning
of the Rules and Regulations) of any of the foregoing has taken or will take,
directly or indirectly, any action designed to or which has constituted or which
might 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 Securities or otherwise.
s. Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held by
the Company or the Subsidiary, are in dispute so far
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as known by the Company or are in any conflict with the right of any other
person or entity. Each of the Company and the Subsidiary (i) owns or has the
right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability whatsoever to
make any payment by way of royalties, fees or otherwise to any owner or licensee
of, or other claimant to, any patent, trademark, service xxxx, trade name,
copyright, know-how, technology or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or otherwise.
t. Each of the Company and the Subsidiary owns and has the
unrestricted right to use all trade secrets, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively, herein "intellectual
property") that are material to the development, manufacture, operation and sale
of all products and services sold or proposed to be sold by the Company or the
Subsidiary, free and clear of and without violating any right, lien, or claim of
others, including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company or the Subsidiary, or their respective
employees or agents, could have developed trade secrets or items of technical
information similar or identical to those of the Company or the Subsidiary.
Neither the Company nor the Subsidiary is aware of any such development of
similar or identical trade secrets or technical information by others.
u. Each of the Company and the Subsidiary has taken reasonable
security measures to protect the secrecy, confidentiality and value of its
intellectual property in all material respects.
v. Each of the Company and the Subsidiary has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus, to be owned or leased by it free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects, or other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not yet due and payable.
w. KPMG Peat Marwick LLP, whose report is filed with the Commission
as a part of the Registration Statement, are independent certified public
accountants as required by the Act and the Rules and Regulations.
x. The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's stockholders and
holders of securities exchangeable or exercisable for or convertible into shares
of Common Stock (except the Sellers) has agreed (i) for a period of not less
than 12 months following the date of the Prospectus (the
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"Lock-up Period") not to, directly or indirectly, issue, offer, agree or offer
to sell, sell, grant any option for the purchase or sale of, assign, transfer,
pledge, hypothecate or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein without the prior written consent of
the Representative and the Company and (ii) subsequent to the Lock-up Period, to
only sell such shares of Common Stock (a) under Rule 144, (b) solely through the
Representative and (c) at a price per share exceeding the initial public
offering price. In addition, the Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which each of the Sellers have
agreed, to the extent their shares of Common Stock are not sold in the Offering,
not to, directly or indirectly, agree to offer to sell or dispose of any
beneficial interest in the Seller Shares (as defined herein) for a period of six
months from the date of the Prospectus, without the prior written consent of the
Company and the Representative and, thereafter, such shares may only be sold (a)
if effected through the Representative and (b) at a price per share greater than
the initial public offering price. The Company will cause the Transfer Agent, as
defined below, to xxxx an appropriate legend on the face of stock certificates
representing all of such securities and to place "stop transfer" orders on the
Company's stock ledgers.
y. There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, 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, the Subsidiary or any of their respective officers,
directors, stockholders, partners, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
z. The Common Stock has been approved for quotation on the Nasdaq
SmallCap Market ("Nasdaq").
aa. Neither the Company, nor the Subsidiary nor any of their
respective officers, employees, agents or any other person acting on behalf of
the Company or the Subsidiary 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 (domestic or foreign) or instrumentality of any government
(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 the Subsidiary (or assist the Company or
the Subsidiary in connection with any actual or proposed transaction) which (a)
might subject the Company or the Subsidiary, or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
or the Subsidiary, or (c) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company or the Subsidiary.
The Company's and the Subsidiary's internal accounting controls are sufficient
to cause each of the Company and the Subsidiary to comply with the Foreign
Corrupt Practices Act of 1977, as amended.
- 10 -
bb. Except as set forth in the Prospectus, no officer, director,
stockholder or partner of the Company or of the Subsidiary, or any "affiliate"
or "associate" (as these terms are defined in Rule 405 promulgated under the
Rules and Regulations) of any of the foregoing persons or entities has or has
had, either directly or indirectly, (i) an interest in any person or entity
which (A) furnishes or sells services or products which are furnished or sold or
are proposed to be furnished or sold by the Company or the Subsidiary, or (B)
purchases from or sells or furnishes to the Company or the Subsidiary any goods
or services, or (ii) a beneficiary interest in any contract or agreement to
which the Company or the Subsidiary is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing agreements, arrangements, understandings or transactions,
or proposed agreements, arrangements, understandings or transactions, between or
among the Company, and any officer, director, or 5% or greater securityholder of
the Company or the Subsidiary, or any partner, affiliate or associate of any of
the foregoing persons or entities.
cc. Any certificate signed by any officer of the Company or the
Subsidiary, and delivered to the Underwriters or to Underwriters' Counsel (as
defined herein) shall be deemed a representation and warranty by the Company to
the Underwriters as to the matters covered thereby.
dd. The minute books of each of the Company and the Subsidiary have
been made available to the Underwriters and contain a complete summary of all
meetings and actions of the directors and stockholders of each of the Company
and the Subsidiary, since the time of its incorporation, and reflect all
transactions referred to in such minutes accurately in all material respects.
ee. Except and to the extent described in the Prospectus, no holders
of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
ff. (A) Each of the Company and the Subsidiary is in compliance with
all federal, state, local or foreign laws, common law, rules, codes,
administrative orders or regulations relating to pollution or protection of
human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, laws, common law, rules, codes, administrative
orders and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws") and (B) to the best of the Company's knowledge, there are
no events or circumstances that could form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or the Subsidiary
relating to any Hazardous Materials or the violation of any Environmental Laws.
- 11 -
gg. In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business, operations
and properties of the Company and the Subsidiary, in the course of which it
identifies and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a material adverse effect on the Company and
the Subsidiary.
hh. Each of the Company and the Subsidiary confirms as of the date
hereof that it is in compliance with all provisions of Section 1 of Laws of
Florida, Chapter 92-198, An Act Relating to Disclosure of Doing Business with
Cuba, and each of the Company and the Subsidiary further agree that if it or any
affiliate commences engaging in business with the government of Cuba or with any
person or affiliate located in Cuba after the date the Registration Statement
becomes or has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date is later,
or if the information reported or incorporated by reference in the Prospectus,
if any, concerning the Company's, any Subsidiary's or any affiliate's business
with Cuba or with any person or affiliate located in Cuba changes in any
material way, the Company will provide the Department notice of such business or
change, as appropriate, in a form acceptable to the Department.
ii. The Company is not, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus under the caption "Use of Proceeds"
will not be, an "investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
jj. Each of the Company and the Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general and specific
authorizations; (ii) transactions are recorded as necessary to permit
preparations of financial statements in conformity 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
authorizations; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
2. Representations and Warranties of the Sellers. Each Seller,
severally and not jointly, represents and warrants to, and agrees with, the
several Underwriters as follows:
a. Each of the Sellers will have on the Closing Date, if any, good
and valid title to the shares of Common Stock to be sold by such Sellers
hereunder (the "Seller Shares"), free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, stockholders' agreement, voting trust,
community property right, defect in title, equitable interest or other equities
or restrictions of any kind whatsoever (including any liability for estate or
inheritance taxes and claims of any creditor, devisee, legatee or beneficiary);
other than as described in this
- 12 -
Agreement or disclosed in the Registration Statement or Prospectus, there are no
outstanding options, warrants, rights or other agreements or arrangements with
respect to any of the Seller Shares; each Seller has and will have on the
Closing Date, if any, full right, power and authority to sell, transfer and
deliver the Seller Shares hereunder; and upon delivery of the Seller Shares
against payment of the purchase price therefor as contemplated in this
Agreement, each of the Underwriters, who has purchased in good faith and without
notice of any adverse claim, will receive good and valid title to the Seller
Shares purchased by it, free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, stockholders' agreement, voting trust, community
property right, defect in title, equitable interests or other equities or
restrictions of any kind whatsoever (including any liability for estate or
inheritance taxes and claims of any creditor, devisee, legatee or beneficiary).
b. Such Seller has full legal right, power and authority to enter
into this Agreement, the Sellers' Power of Attorney with ______________ as
attorney-in-fact (the "Attorney-in-Fact") in the form heretofore furnished to
you (the "Power of Attorney") and the Letter of Transmittal and Custody
Agreement with ___________________ as custodian (the "Custodian") in the form
heretofore furnished to you (the "Custody Agreement"). Each of this Agreement,
the Power of Attorney and the Custody Agreement has been duly executed and
delivered by such Seller, and (assuming this Agreement is a binding agreement of
yours) constitutes the valid and binding agreement of such Seller, enforceable
against such Seller in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditor's rights and the application of equitable
principles relating to the availability of remedies, and except as rights to
indemnity or contribution may be limited by federal or state securities law and
the public policy underlying such laws); the Attorney-in-Fact, acting alone, is
authorized to execute and deliver this Agreement and the certificates referred
to in Sections 3 and 9 hereof on behalf of such Seller, to authorize the
delivery of those Shares to be sold by such Seller under this Agreement and to
duly endorse (in blank or otherwise) the certificate or certificates
representing such Shares or a stock power or powers with respect thereto, to
accept payment therefor, and otherwise to act on behalf of such Seller in
connection with this Agreement.
c. None of the execution, delivery or performance of this Agreement,
the Power of Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated, will conflict with or result in a
breach of, or default under, any indenture, mortgage, deed of trust, voting
trust agreement, stockholders' agreement, note agreement, or other agreement or
instrument to which such Seller is a party or by which such Seller is or may be
bound or to which any of its property is or may be subject, or to the best of
such Seller's knowledge, any statute, judgment, decree, order, rule or
regulation applicable to such Seller of any government, arbitrator, court,
regulatory body or administrative agency or other governmental agency or body,
domestic or foreign, having jurisdiction over such Seller or any of its
activities or properties.
d. At the date hereof such Seller has, and at the time of delivery
of the Shares to be sold by such Seller to the several Underwriters, such Seller
will have, full right, power and authority to sell, assign, transfer and deliver
the Shares to be sold by such Seller hereunder.
- 13 -
At the date hereof such Seller is, and at the time of delivery of the Shares to
be sold by such Seller, such Seller will be, the lawful owner of and has and
will have, good and valid title to such Shares free and clear of any liens,
charges, pledges, equities, encumbrances, security interests, claims,
restrictions on transfer or other defects in title. Upon delivery of and payment
for the Shares to be sold by such Seller hereunder, each of the Underwriters who
has purchased the Seller Shares in good faith and without notice of any adverse
claim, will receive good and valid title to such shares, free and clear of any
liens, charges, pledges, equities, encumbrances, security interests, claims,
restrictions on transfer or other defects in title. Except as described in the
Registration Statement and the Prospectus (or, if there is no Prospectus, the
most recent Preliminary Prospectus) or created hereby, there are no outstanding
options, warrants, rights, or other agreements or arrangements requiring such
Seller at any time to transfer any Common Stock to be sold hereunder by such
Seller.
e. At the time when the Registration Statement becomes or became
effective, and at all times subsequent thereto up to and including the Closing
Date and the Option Closing Date, the Registration Statement and any amendments
thereto and will not contain any untrue statement of a material fact regarding
such Seller or omit to state a material fact regarding such Seller required to
be stated therein or necessary in order to make the statements therein regarding
such Seller not misleading, and the Prospectus (and any supplements thereto)
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) will not contain any untrue statement of a material fact regarding
such Seller or omit to state a material fact regarding such Seller required to
be stated therein or necessary in order to make the statements therein regarding
such Seller, in light of the circumstances under which they were made, not
misleading, it being understood that, as of the date hereof, the statements
relating to such Seller under the section of the Prospectus entitled "Principal
and Selling Stockholders," in the case of all Sellers, are the only statements
provided for inclusion in the Prospectus.
f. Such Seller has not taken, directly or indirectly, any action
designed to stabilize or manipulate the price of any security of the Company, or
which has constituted or which might in the future reasonably be expected to
cause or result in stabilization or manipulation of the price of any security of
the Company, to facilitate the sale or resale of the Shares or otherwise, in
violation of the Rules and Regulations.
g. There is not pending or, to the best of such Seller's knowledge,
threatened against such Seller any action, suit or proceeding which (A)
questions the validity of this Agreement, the Power of Attorney, the Custody
Agreement or of any action taken or to be taken by such Seller pursuant to or in
connection with this Agreement, the Power of Attorney, or the Custody Agreement
or (B) is required to be disclosed in the Registration Statement which is not so
disclosed.
h. On the effective date of the Prospectus, certificates in
negotiable form for the Shares to be sold by each of the Sellers under this
Agreement, together with a stock power or powers duly endorsed in blank will
have been placed in custody with the Custodian for the purpose of effecting
delivery hereunder and thereunder.
- 14 -
i. Except as set forth in the Prospectus, such Seller does not have
any registration rights or other similar rights with respect to any securities
of the Company or the Subsidiary; and, except as set forth in the Prospectus,
such Seller does not have any right of first refusal or other similar right to
purchase any securities of the Company upon the issuance or sale thereof by the
Company or upon the sale thereof by any other stockholder of the Company.
j. Such Seller has not since the filing of the initial Registration
Statement (A) sold, bid for, purchased, attempted to induce any person to
purchase, or paid anyone any compensation for soliciting purchases of, Common
Stock, or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any securities of the Company (except for the
sale of the Seller Shares to the Underwriters under this Agreement and except as
otherwise permitted by law).
k. Any certificate signed by or on behalf of such Seller and
delivered to the Underwriters shall be deemed a representation and warranty by
such Seller to the Underwriters as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities.
a. On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$__________ [92% of the public offering price] per Share, that number of Firm
Securities set forth in Schedule A opposite the name of such Underwriter,
subject to such adjustment as the Representative in its sole discretion shall
make to eliminate any sales or purchases of fractional shares, plus any
additional number of Firm Securities which such Underwriter may become obligated
to purchase pursuant to the provisions of Section 12 hereof.
b. In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company and the Sellers, severally and not
jointly, hereby grant an option to the Underwriters, severally and not jointly,
to purchase all or any part of an additional 330,000 shares of Common Stock at a
price of $ ____ [92% of the public offering price] per Share. The option granted
hereby will expire 45 days after (i) the date the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under the Rules
and Regulations, or (ii) the date of this Agreement if the Company has elected
to rely upon Rule 430A under the Rules and Regulations, and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company and the Sellers setting forth the number of Option Securities as to
which the several Underwriters are then exercising the option and the time and
date of payment and delivery for any such Option Securities. Any such time and
date of delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than five (5) full business days after
the exercise of said option, nor in any event prior to the Closing Date, as
hereinafter defined, unless otherwise agreed upon by the Representative, the
Company and the Sellers. Nothing herein contained shall obligate the
Underwriters to make any over-allotments. No Option Securities shall be
delivered
- 15 -
unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided. If the option is exercised
in whole or in part from time to time as provided above, the Company shall sell
to the Underwriters _____ of the Option Securities as to which the option shall
have been exercised and each of the Sellers, shall sell to the Underwriters that
proportion of the balance of such Option Securities which is the same as the
proportion that the total number of Option Securities set forth on Schedule B
hereto opposite the name of each such Seller bears to the total number of Option
Securities set forth on Schedule B, and each Underwriter, severally and not
jointly, shall purchase that number of Option Securities as to which the option
shall have been exercised which bears the same proportion to the total number of
such Option Securities as to which the option shall have been exercised as the
number of Firm Securities to be purchased by such Underwriter bears to the total
number of Firm Securities (plus any additional number of Option Securities which
such Underwriter may become obligated to purchase pursuant to Section 12), all
subject to such adjustments as the Representative in its sole discretion shall
make to eliminate any sales or purchases of fractional shares.
c. Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of the Representative at
00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as shall be agreed
upon by the Representative and the Company. Such delivery and payment shall be
made at 10:00 a.m. (New York City time) on ______________, 1997 or at such other
time and date as shall be agreed upon by the Representative and the Company, but
not less than three (3) nor more than five (5) full business days after the
effective date of the Registration Statement (such time and date of payment and
delivery being herein called the "Closing Date"). In addition, in the event that
any or all of the Option Securities are purchased by the Underwriters, payment
of the purchase price for, and delivery of certificates for, such Option
Securities shall be made at the above mentioned office of the Representative or
at such other place as shall be agreed upon by the Representative and the
Company on each Option Closing Date as specified in the notice from the
Representative to the Company and the Sellers. Delivery of the certificates for
the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not jointly, of
the purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company and each of the Sellers for the Firm Securities and the
respective number of Option Securities, if any, to be sold by them, by New York
Clearing House funds. Certificates for the Firm Securities and the Option
Securities, if any, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered in such
names as the Underwriters may request in writing at least two (2) business days
prior to the Closing Date or the relevant Option Closing Date, as the case may
be. The certificates for the Firm Securities and the Option Securities, if any,
shall be made available to the Representative at such office or such other place
as the Representative may designate for inspection, checking and packaging no
later than 9:30 a.m. on the last business day prior to the Closing Date or the
relevant Option Closing Date, as the case may be.
d. On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants at a purchase price of $.0001 per
warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of 220,000 shares of Common Stock. The Representative's Warrants shall
be exercisable for a period of four (4) years commencing one
- 16 -
(1) year from the effective date of the Registration Statement at a price
equaling one hundred twenty percent (120%) of the initial public offering price
of the Shares. The Representative's Warrant Agreement and form of Warrant
Certificate shall be substantially in the form filed as Exhibit [___] to the
Registration Statement. Payment for the Representative's Warrants shall be made
on the Closing Date.
4. Public Offering of the Shares. As soon after the Registration Statement
becomes effective as the Representative deems advisable, the Underwriters shall
make a public offering of the Shares (other than to residents of or in any
jurisdiction in which qualification of the Shares is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Representative may from time to time increase or decrease the public
offering price after distribution of the Shares has been completed to such
extent as the Representative, in its sole discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
5. Covenants and Agreements of the Company and the Sellers. The Company
and (but only with respect to and to the extent provided with respect to them in
Sections 5(f), 5(l), 5(t) and 5(v) covenants and agrees with each of the
Underwriters as follows:
a. The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the Shares by the Underwriters of
which the Representative shall not previously have been advised and furnished
with a copy, or to which the Representative shall have objected or which is not
in compliance with the Act, the Exchange Act or the Rules and Regulations.
b. As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative and confirm the notice in writing,
(i) when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission, and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission authority shall enter a
stop order or suspend such qualification at any time, the Company will make
every effort to obtain promptly the lifting of such order.
- 17 -
c. The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
d. The Company will give the Representative notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the
Representative or Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP ("Underwriters' Counsel")
shall object.
e. The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees 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 reasonably be required by
the laws of such jurisdiction to continue such qualification.
f. During the time when a prospectus is required to be delivered
under the Act, the Company and each of the Sellers shall use all reasonable
efforts to comply with all requirements imposed upon it by the Act and the
Exchange Act, as now and hereafter amended and by the Rules and Regulations, as
from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the provisions hereof
and the Prospectus, or any amendments or supplements thereto. If at any time
when a prospectus relating to the Securities is required to be delivered under
the Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or Underwriters' Counsel, 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 the 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 Representative
and each of the Sellers promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section
- 18 -
10 of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
g. As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period beginning on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months after the effective date of
the Registration Statement.
h. During a period of seven years after the date hereof, the Company
will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
i. concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in the
form furnished to the Company's stockholders and certified by the
Company's principal financial or accounting officer;
ii. concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate thereon of independent certified
public accountants;
iii. as soon as they are available, copies of all reports (financial
or other) mailed to stockholders;
iv. as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD
or any securities exchange;
v. every press release and every material news item or article of
interest to the financial community in respect of the Company, or its
affairs which was released or prepared by or on behalf of the Company; and
vi. any additional information of a public nature concerning the
Company (and any future subsidiary) or its businesses which the
Representative may request.
During such seven-year period, if the Company has an active subsidiary,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the
- 19 -
Company and its subsidiary are consolidated, and will be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
i. The Company will maintain a Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, a Registrar (which may
be the same entity as the Transfer Agent) for the Common Stock.
j. The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may request.
k. On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true copies of duly executed,
legally binding and enforceable agreements pursuant to which for the Lock-up
Period, each of the Company's stockholders and holders of securities
exchangeable or exercisable for or convertible into shares of Common Stock
(except the Sellers) agrees that it or he or she (i) will not directly or
indirectly, issue, offer, offer to sell, sell, grant an option for the purchase
or sale of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein without
the prior consent of the Representative and the Company (collectively, the
"Lock-up Agreements") and (ii) subsequent to the Lock-up Period, will only sell
such shares of Common Stock (a) under Rule 144, (b) solely through the
Representative and (c) at a price per share exceeding the initial public
offering price. In addition, the Company shall provide the Representative with
true copies of duly executed, legally binding and enforceable agreements
pursuant to which each of the Sellers have agreed to, the extent their shares of
Common Stock are not sold in the offering, not to, directly or indirectly, agree
or offer to sell or dispose of any beneficial interest in the Seller Shares for
a period of six months from the date of the Prospectus, without the prior
written consent of the Company and the Representative and thereafter, such
shares may only be sold (a) if effected through the Representative and (b) at a
price per share greater than the initial public offering price. During the
24-month period commencing with the effective date of the Registration
Statement, the Company shall not, without the prior written consent of the
Representative, sell, contract or offer to sell, issue, transfer, assign,
pledge, distribute, or otherwise dispose of, directly or indirectly, no more
than 600,000 shares of Common Stock or any options, rights or warrants with
respect to such shares of Common Stock. Such 600,000 shares shall be issued at
prices no less than the greater of the market value of the shares on the date of
grant or the initial public offering price of the Shares. Notwithstanding the
foregoing, the Company may (i) issue securities in an underwritten public
offering on behalf of the Company, (ii) authorize and issue a class or classes
of Preferred Stock, including Convertible Preferred Stock, (iii) issue debt with
warrants attached and (iv) issue securities in connection with acquisitions,
mergers and other reorganizations. On or before the Closing Date, the
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Company shall deliver instructions to the Transfer Agent authorizing it to place
appropriate legends on the certificates representing the securities subject to
the Lock-up Agreements and to place appropriate stop transfer orders on the
Company's ledgers.
l. None of the Company, the Sellers, the Subsidiary, nor any of
their respective officers, directors, stockholders, nor any of its affiliates
(within the meaning of the Rules and Regulations) will take, directly or
indirectly, any action designed to, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company.
m. The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.
n. The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time, under the Act,
the Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
o. The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in their letters to be
furnished pursuant to Sections 7(l) and 7(m) hereof.
p. The Company shall cause the Common Stock to be quoted on Nasdaq
and for a period of seven (7) years from the date hereof, use its best efforts
to maintain the Nasdaq quotation of the Common Stock to the extent outstanding.
q. For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Representative's request and at the
Company's sole expense, (i) daily consolidated transfer sheets relating to the
Common Stock (ii) the list of holders of all of the Company's securities and
(iii) a Blue Sky "Trading Survey" for secondary sales of the Company's
securities prepared by counsel to the Company.
r. As soon as practicable, (i) but in no event more than 5 business
days before the effective date of the Registration Statement, file a Form 8-A
with the Commission providing for the registration under the Exchange Act of the
Securities and (ii) but in no event more than 30 days from the effective date of
the Registration Statement, take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Descriptions and Xxxxx'x OTC Manual
and to continue such inclusion for a period of not less than seven (7) years.
- 21 -
s. The Company hereby agrees that it will not, without the prior
written consent of the Representative, for a period of twenty-four (24) months
from the effective date of the Registration Statement, adopt, propose to adopt
or otherwise permit to exist any employee, officer, director, consultant or
compensation plan or similar arrangement permitting (i) the grant, issue, sale
or entry into any agreement to grant, issue or sell any option, warrant or other
contract right covering more than 600,000 shares of Common Stock at an exercise
price that is less than the greater of the market price on the date of grant or
sale or the initial public offering price per share (except that options or
warrants issued to key officers of the Company may be issued at exercise prices
not less than 85% of the initial public offering price of the shares); and (ii)
the maximum number of shares of Common Stock or other securities of the company
purchasable at any time pursuant to options or warrants issued by the Company to
exceed the aggregate of 600,000 shares reserved for future issuance under the
Company's 1997 Stock Option Plan; and (iii) the payment for such securities with
any form of consideration other than cash, or (iv) the existence of stock
appreciation rights, phantom options or similar arrangements.
t. Until the completion of the distribution of the Securities, the
Company and the Sellers shall not without the prior written consent of the
Representative and Underwriters' Counsel, issue, directly or indirectly, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering contemplated hereby, other than
trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations.
u. For a period equal to the lesser of (i) seven (7) years from the
date hereof, and (ii) the sale to the public of the Representative's Securities,
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
under the Act of the Representative's Securities.
v. Each of the Sellers, without hereby making any representations or
warranties with respect to the contents thereof, consents to the use of each
Preliminary Prospectus, the Prospectus and any amendment or supplement thereto
by the Underwriters and all dealers to whom the Securities may be sold, both in
connection with the offering or sale of the Securities and for such period of
time thereafter as the Prospectus, as amended or supplemented, is required by
law to be delivered.
6. Payment of Expenses.
a. The Company hereby agrees to pay on each of the Closing Date and the
Option Closing Date (to the extent not paid at the Closing Date) all expenses
and fees (other than fees of Underwriters' Counsel, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement and the Representative's Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Agreement Among
- 22 -
Underwriters, the Selected Dealer Agreements, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities including, but not limited to, (x) the purchase by the Underwriters
of the Firm Securities and the Option Securities and the purchase by the
Representative of the Representative's Warrants from the Company, (y) the
consummation by the Company of any of its obligations under this Agreement and
the Representative's Warrant Agreement, and (z) resale of the Firm Securities
and the Option Securities by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith (such counsel fees not to exceed $15,000 if
the Shares are listed on the American Stock Exchange or $30,000 if the Shares
have been accepted for quotation on Nasdaq), (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show" (excluding solely the travel and lodging expenses of personnel of the
Representative), information meetings and presentations, bound volumes and
prospectus memorabilia and "tomb-stone" advertisement expenses, (vi) costs and
expenses in connection with due diligence investigations, including but not
limited to the fees of any independent counsel, expert or consultant retained,
(vii) fees and expenses of the transfer agent and registrar, (viii) applications
for assignments of a rating of the Securities by qualified rating agencies, (ix)
the fees payable to the Commission and the NASD, and (x) the fees and expenses
incurred in connection with the quotation of the Securities on the Nasdaq and
any other exchange.
b. If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 7 or Section 13, the Company shall reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of Underwriters' Counsel, less any amounts
already paid pursuant to Section 6(c) hereof.
c. The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to the
Representative on the Closing Date by certified or bank cashier's check or, at
the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to two
percent (2%) of the gross proceeds received by the Company from the sale of the
Firm Securities, $50,000 of which has been paid to date. In the event the
Representative elects to exercise the over-allotment option described in Section
3(b) hereof, the Company agrees to pay to the Representative on the Option
Closing Date (by certified or bank cashier's check or, at the Representative's
election, by deduction from the proceeds of the offering) a non-accountable
expense allowance equal to two percent (2%) of the gross proceeds received by
the Company and the Sellers from the sale of the Option Securities.
7. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company and the Sellers herein as of the
date hereof and as of the Closing Date and each
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Option Closing Date, if any, as if they had been made on and as of the Closing
Date or each Option Closing Date, as the case may be; the accuracy on and as of
the Closing Date or Option Closing Date, if any, of the statements of the
officers of the Company and the Sellers made pursuant to the provisions hereof;
and the performance by the Company and the Sellers on and as of the Closing Date
and each Option Closing Date, if any, of his or its covenants and obligations
hereunder and to the following further conditions:
a. The Registration Statement shall have become effective not later
than 12:00 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 the Representative, and, at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that 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 Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
b. Neither the Representative nor the Sellers shall have advised the
Company that the Registration Statement, or any amendment thereto, contains an
untrue statement of fact which, in the Representative's or such Seller's
opinion, is material, or omits to state a fact which, in the Representative's or
such Seller's opinion, is material and is required to be stated therein or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or that the Prospectus, or any supplement
thereto, contains an untrue statement of fact which, in the Representative's or
such Seller's opinion, is material, or omits to state a fact which, in the
Representative's or such Seller's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
c. On or prior to each of the Closing Date and the Option Closing
Date, if any, the Representative shall have received from Underwriters' Counsel
such opinion or opinions with respect to the organization of the Company, the
validity of the Securities, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
d. At the Closing Date, the Underwriters shall have received the
favorable opinion of Xxxxxxx Xxxxxx & Green, P.C., counsel to the Company and
the Subsidiary, dated the Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel, to the effect that:
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i. Each of the Company and the Subsidiary (A) has been duly
organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction, (B) is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) has all requisite
corporate power and authority, and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, to own or lease
its properties and conduct its business as described in the Prospectus;
each of the Company and the Subsidiary is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; and, none of the Company nor the
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially adversely affect the business, operations, condition,
financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operations
of the Company or the Subsidiary;
ii. the Company owns, directly or indirectly, one hundred percent
(100%) of the outstanding capital stock of the Subsidiary and all such
shares have been validly issued, are fully paid and non-assessable, were
not in violation of any preemptive rights and are owned free and clear of
any liens, charges, claims, encumbrances, pledges, security interest,
defaults or other restrictions or equities of any kind whatsoever; except
as described in the Prospectus, none of the Company nor the Subsidiary
owns an interest in any other corporation, partnership, joint venture,
trust or other business entity;
iii. the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "CAPITALIZATION", and the Company is not a party
to or bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and the Representative's Warrant
Agreement and as described in the Prospectus. The Securities and all other
securities issued or issuable by the Company conform in all material
respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. 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. The Securities to be sold by the Company hereunder and under
the Representative's Warrant Agreement are not and will not be subject to
any preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and
conform to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely
- 25 -
as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and validly
taken; and the certificates representing the Securities are in due and
proper form. The Representative's Warrants 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. Upon the issuance and delivery pursuant to this Agreement of
the Firm Securities and the Option Securities and the Representative's
Warrants to be sold by the Company, the Underwriters and the
Representative, respectively, will acquire good and marketable title to
the Firm Securities and the Option Securities and the Representative's
Warrants free and clear of any pledge, lien, charge, claim, encumbrance,
pledge, security interest, or other restriction or equity of any kind
whatsoever. No transfer tax is payable by or on behalf of the Underwriters
in connection with (A) the issuance by the Company of the Securities, (B)
the purchase by the Underwriters and the Representative of the Firm
Securities and the Option Securities and the Representative's Securities,
respectively, from the Company, (C) the consummation by the Company of any
of its obligations under this Agreement or the Representative's Warrant
Agreement, or (D) resales of the Firm Securities and the Option Securities
in connection with the distribution contemplated hereby;
iv. the Registration Statement is effective under the Act, and, if
applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A, and no stop order suspending the use of
the Preliminary Prospectus, the Registration Statement or Prospectus or
any part of any thereof or suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or, to the best of such counsel's
knowledge, threatened or contemplated under the Act;
v. each of the Preliminary Prospectus, the Registration Statement,
and the Prospectus and any amendments or supplements thereto (other than
the financial statements and other financial and statistical data 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 the Rules and
Regulations;
vi. to the best of such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in part, by
reference therein) and the Prospectus and filed as exhibits thereto, and
the exhibits which have been filed are correct copies of the documents of
which they purport to be copies; (B) the descriptions in the Registration
Statement and the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company or the Subsidiary is a
party or by which it is bound, including any document to which the Company
or the Subsidiary is a party or by which it is bound, incorporated by
reference into the Prospectus and any supplement or amendment thereto, are
accurate in all material respects and fairly represent the information
required to be shown by Form SB-2; (C) there is not pending or threatened
against the Company or the Subsidiary any action, arbitration, suit,
proceeding, inquiry,
- 26 -
investigation, litigation, governmental or other proceeding (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties
or business of the Company or the Subsidiary which (x) is required to be
disclosed in the Registration Statement which is not so disclosed (and
such proceedings as are summarized in the Registration Statement are
accurately summarized in all material respects) or (y) questions the
validity of the capital stock of the Company or this Agreement or the
Representative's Warrant Agreement, or of any action taken or to be taken
by the Company pursuant to or in connection with any of the foregoing; (D)
no statute or regulation or legal or governmental proceeding required to
be described in the Prospectus is not described as required; and (E) there
is no action, suit or proceeding pending, or threatened, against or
affecting the Company or the Subsidiary before any court or arbitrator or
governmental body, agency or official (or any basis thereof known to such
counsel) in which there is a reasonable possibility of an adverse decision
which may result in a material adverse change in the condition, financial
or otherwise, or the earnings, position, prospects, stockholders' equity,
value, operation, properties, business or results of operations of the
Company or the Subsidiary, which could adversely affect the present or
prospective ability of the Company to perform its obligations under this
Agreement or the Representative's Warrant Agreement or which in any manner
draws into question the validity or enforceability of this Agreement or
the Representative's Warrant Agreement;
vii. the Company has full legal right, power and authority to enter
into each of this Agreement and the Representative's Warrant Agreement,
and to consummate the transactions provided for therein; and each of this
Agreement and the Representative's Warrant Agreement has been duly
authorized, executed and delivered by the Company. Each of this Agreement
and the Representative's Warrant Agreement, assuming due authorization,
execution and delivery by each other party thereto constitutes a legal,
valid and binding agreement of the Company enforceable against the Company
in accordance with its terms (except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law), and none of the Company's
execution or delivery of this Agreement and the Representative's Warrant
Agreement, its performance hereunder or thereunder, its consummation of
the transactions contemplated herein or therein, or the conduct of its
business as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will conflict
with or results or will result in any breach or violation of any of the
terms or provisions of, or constitutes or will constitute a default under,
or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company or the Subsidiary pursuant to the terms of, (A)
the certificate of incorporation or by-laws of the Company or the
Subsidiary, (B) any license, contract, collective bargaining agreement,
indenture, mortgage, deed of trust, lease, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the
- 27 -
Company or the Subsidiary is a party or by which it is or may be bound or
to which any of its properties or assets (tangible or intangible) is or
may be subject, or any indebtedness, or (C) any statute, judgment, decree,
order, rule or regulation applicable to the Company or the Subsidiary of
any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company or the Subsidiary or any of their
respective activities or properties;
viii. no consent, approval, authorization or order, and no filing
with, any court, regulatory body, government agency or other body (other
than such as may be required under Blue Sky laws, as to which no opinion
need be rendered) is required in connection with the issuance of the Firm
Securities and the Option Securities pursuant to the Prospectus, the
issuance of the Representative's Warrants, and the Registration Statement,
the performance of this Agreement and the Representative's Warrant
Agreement, and the transactions contemplated hereby and thereby;
ix. the properties and business of each of the Company and the
Subsidiary conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus; and each of
the Company and the Subsidiary has good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, in each
case free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus and liens for
taxes not yet due and payable;
x. neither the Company nor the Subsidiary is in breach of, or in
default under, any term or provision of any license, contract, collective
bargaining agreement, indenture, mortgage, installment sale agreement,
deed of trust, lease, voting trust agreement, stockholders' agreement,
partnership agreement, 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 or the Subsidiary
is a party or by which the Company or the Subsidiary may be bound or to
which the property or assets (tangible or intangible) of the Company or
the Subsidiary is subject or affected; and neither the Company nor the
Subsidiary is in violation of any term or provision of its Articles of
Incorporation or By-Laws or in violation of any franchise, license,
permit, judgment, decree, order, statute, rule or regulation;
xi. the statements in the Prospectus under "THE COMPANY,"
"BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES ELIGIBLE FOR
FUTURE SALE" 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;
xii. the Securities have been accepted for quotation on Nasdaq;
- 28 -
xiii. the persons listed under the caption "PRINCIPAL STOCKHOLDERS"
in the Prospectus are the respective "beneficial owners" (as such phrase
is defined in regulation 13d-3 under the Exchange Act) of the securities
set forth opposite their respective names thereunder as and to the extent
set forth therein;
xiv. except as described in the Prospectus, no person, corporation,
trust, partnership, association or other entity has the right to include
and/or register any securities of the Company in the Registration
Statement, require the Company to file any registration statement or, if
filed, to include any security in such registration statement;
xv. 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 arrangement or any other
arrangements, agreements, understandings, payments or issuances that may
affect the Underwriters' compensation, as determined by the NASD;
xvi. assuming due execution by the parties thereto other than the
Company, the Lockup Agreements are legal, valid and binding obligations of
the parties thereto, enforceable against the party and any subsequent
holder of the securities subject thereto in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and
the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by
applicable law);
xvii. none of the Company or the Subsidiary shall be subject to the
requirements of or shall be deemed an "Investment Company," pursuant to
and as defined under the Investment Company Act.
Such counsel shall state that such counsel has participated in conferences
with officers and other representatives of the Company and the Subsidiary, and
representatives of the independent public accountants for the Company and the
Subsidiary, at which conferences such counsel made inquiries of such officers,
representatives and accountants and discussed the contents of the Preliminary
Prospectus, the Registration Statement, the Prospectus, and related matters 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
Preliminary Prospectus, the Registration Statement and Prospectus, on the basis
of the foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or 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 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 Preliminary
Prospectus, the Registration Statement or the Prospectus).
- 29 -
In rendering such opinion, such counsel may rely (A) 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 satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and the Subsidiary
and certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and the Subsidiary, provided that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel if requested. The opinion of such counsel for the Company
and the Subsidiary shall state that the opinion of any such other counsel is in
form satisfactory to such counsel and that the Representative and they are
justified in relying thereon. Any opinion of counsel for the Company and the
Subsidiary shall not state that it is to be governed or qualified by, or that it
is otherwise subject to, any treatise, written policy or other document relating
to legal opinions, including, without limitation, the Legal Opinion Accord of
the ABA Section of Business Law (1991) or any comparable state accord.
e. At the Closing Date, the Underwriters shall have received the
favorable opinion of ________________________, intellectual property counsel to
the Company, dated the Closing Date, addressed to the Underwriters and in the
form attached hereto as Exhibit A.
f. At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Xxxxxxx Xxxxxx & Green, P.C., counsel to the
Company and the Subsidiary, and __________________, intellectual property
counsel to the Company, dated the Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming as of Option Closing Date the statements made by Xxxxxxx Xxxxxx &
Green, P.C. and _______________, in their respective opinions delivered on the
Closing Date.
g. At each Option closing Date, if any, the Underwriters shall have
received the favorable opinion of _______________, special counsel to the
Sellers, dated the Option Closing Date, addressed to the Underwriters, and in
form and substance reasonably satisfactory to Underwriters' Counsel, as to such
matters as the Representative or Underwriter's Counsel may request.
In rendering such opinions, such counsel may rely (A) 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 opinions, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel, acceptable to the Underwriters' Counsel, familiar
with the applicable laws and (B) as to matters of fact, to the extent they deem
proper, in certificates and written statements of the Sellers whom they
represent and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Sellers whom they represent;
provided, that copies of any such statements or certificates shall be delivered
to Underwriters'
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Counsel. The opinions shall state that the opinion of any such other counsel is
in form satisfactory to such counsel and that the Underwriters are justified in
relying thereon.
h. On or prior to each of the Closing Date and the Option Closing
Date, if any, Underwriters' Counsel 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 subsection (c)
of this Section 7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company and the Sellers herein contained.
i. Prior to each of the Closing Date and each Option Closing Date,
if any, (i) there shall have been no adverse change nor development involving a
prospective change in the condition, financial or otherwise, prospects,
stockholders' equity or the business activities of the Company or the
Subsidiary, whether or not in the ordinary course of business, 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 or the Subsidiary, from the
latest date as of which the financial condition of the Company and the
Subsidiary is set forth in the Registration Statement and Prospectus which is
adverse to the Company or the Subsidiary; (iii) neither the Company nor the
Subsidiary shall be in default under any provision of any instrument relating to
any outstanding indebtedness; (iv) neither the Company nor the Subsidiary shall
have issued any securities (other than the Securities) or declared or paid any
dividend or made any distribution in respect of its capital stock of any class
and there has not been any change in the capital stock or any change in the debt
(long or short term) or liabilities or obligations of the Company or the
Subsidiary (contingent or otherwise); (v) no material amount of the assets of
the Company or the Subsidiary shall have been pledged or mortgaged, except as
set forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or the Subsidiary, or
affecting any of its properties or business before or by any court or federal,
state or foreign commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may adversely affect the business,
operations, prospects or financial condition or income of the Company, or the
Subsidiary, except as set forth in the Registration Statement and Prospectus;
and (vii) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
j. At each of the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
i. The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date
or the Option Closing Date, as the case may be, and the Company has
complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may be;
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ii. No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best of each of
such person's knowledge, after due inquiry, are contemplated or threatened
under the Act;
iii. The Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes
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 and neither the Preliminary Prospectus or any supplement
thereto included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; and
iv. Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) neither the
Company nor the Subsidiary has incurred up to and including the Closing
Date or the Option Closing Date, as the case may be, other than in the
ordinary course of its business, any material liabilities or obligations,
direct or contingent; (b) neither the Company nor the Subsidiary has paid
or declared any dividends or other distributions on its capital stock; (c)
neither the Company nor the Subsidiary has entered into any transactions
not in the ordinary course of business; (d) there has not been any change
in the capital stock or long-term debt or any increase in the short-term
borrowings (other than any increase in the short-term borrowings in the
ordinary course of business) of the Company or the Subsidiary; (e) neither
the Company nor the Subsidiary has sustained any loss or damage to its
property or assets, whether or not insured; (f) there is no litigation
which is pending or threatened (or circumstances giving rise to same)
against the Company or any affiliated party of any of the foregoing which
is required to be set forth in an amended or supplemented Prospectus which
has not been set forth; and (g) there has occurred no event required to be
set forth in an amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this subsection
(j) are to such documents as amended and supplemented at the date of such
certificate.
k. By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
l. At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory (including the non-material nature of the changes or
decreases, if any, referred to in clause (iii) below) in all respects to the
Underwriters and Underwriters' Counsel, from KPMG Peat Marwick LLP:
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i. confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
ii. stating that it is their opinion that the financial statements
and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations
thereunder and that the Representative may rely upon their opinion with
respect to the financial statements and supporting schedules included in
the Registration Statement;
iii. stating that, on the basis of a limited review which included a
reading of the latest available unaudited consolidated interim financial
statements of the Company and the Subsidiary, a reading of the latest
available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company,
consultations with officers and other employees of the Company and the
Subsidiary, 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 (A) the unaudited consolidated
financial statements and supporting schedules of the Company and the
Subsidiary included in the Registration Statement do not comply as to form
in all material respects with the applicable accounting requirements of
the Act and the Rules and Regulations or are not fairly presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited consolidated
financial statements of the Company and the Subsidiary included in the
Registration Statement, or (B) at a specified date not more than five (5)
days prior to the effective date of the Registration Statement, there has
been any change in the capital stock or long-term debt of the Company or
the Subsidiary or any decrease in the stockholders' equity or net current
assets or net assets of the Company or the Subsidiary as compared with
amounts shown in the March 31, 1997 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting
forth the amount of such change or decrease, and (C) during the period
from March 31, 1997 to a specified date not more than five (5) days prior
to the effective date of the Registration Statement, there was any
decrease in net revenues, net earnings or increase in net earnings per
common share of the Company or the Subsidiary, in each case as compared
with the corresponding period beginning March 31, 1996, other than as set
forth in or contemplated by the Registration Statement, or, if there was
any such decrease, setting forth the amount of such decrease;
iv. setting forth, at a date not later than five (5) days prior to
the date of the Registration Statement, the amount of liabilities of the
Company and the Subsidiary (including a break-down of commercial paper and
notes payable to banks);
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 and the Subsidiary 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, including work sheets, of the Company and the
Subsidiary
- 33 -
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. statements as to such other matters incident to the transaction
contemplated hereby as the Representative may request.
m. At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from KPMG Peat Marwick LLP a letter, dated as
of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to subsection (j) of this Section, except that the specified date referred to
shall be a date not more than five days prior to the Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of subsection (l) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Representative and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
n. At each Option Closing Date, if any, the Representatives shall
have received a certificate of each of the Sellers dated as of such date, to the
effect that (i) the representations and warranties of such Seller contained
herein are true and correct in all material respects as if made on and as of the
Option Closing Date, if any, and (ii) such Seller has complied in all material
respects with all covenants and agreements and satisfied in all material
respects all conditions on its or his part to be performed or satisfied under
this Agreement or the Letter of Transmittal and Custody Agreement relating to
such Seller on or before the option Closing Date, if any. For purposes of each
such certificate, references to the Registration Statement and the Prospectus in
such representations, warranties, covenants and agreements shall mean the
Registration Statement and Prospectus as amended or supplemented to the date of
such certificate.
o. On each of the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Firm Securities and Option
Securities.
p. No order suspending the sale of the Firm Securities and Option
Securities in any jurisdiction designated by the Representative pursuant to
subsection (e) of Section 5 hereof shall have been issued on either the Closing
Date or the Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
q. On or before the Closing Date, the Company shall have executed
and delivered to the Representative, (i) the Representative's Warrant Agreement
substantially in the form filed as Exhibit [___] to the Registration Statement
in final form and substance satisfactory to the
- 34 -
Representative, and (ii) the Representative's Warrants in such denominations and
to such designees as shall have been provided to the Company.
r. On or before the Closing Date, the Firm Securities and Option
Securities shall have been duly approved for quotation on Nasdaq, subject to
official notice of issuance.
s. On or before the Closing Date, there shall have been delivered to
the Representative all of the Lock-up Agreements, in form and substance
satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
8. Indemnification.
a. The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 8 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 12 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriter or such controlling person 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
(A) any untrue statement or alleged untrue statement of a material fact
contained (i) in any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time 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 Securities; or (iii) in any application or other document
or written communication (in this Section 8 collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, Nasdaq or any other securities exchange; (B) the omission
or alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were made) or (C)
any breach of any representation, warranty, covenant or agreement of the Company
contained herein or in any certificate by or on behalf of the Company, the
Subsidiary and/or any of their respective officers delivered pursuant hereto,
unless, in the case of clause (A) or (B) above, such statement or omission was
made in reliance upon and in strict conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary
- 35 -
Prospectus, the Registration Statement or Prospectus, or any amendment thereof
or supplement thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
b. Each of the Sellers agrees severally, but not jointly, to
indemnify and hold harmless each of the Underwriters and each person, if any,
who controls an Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act to the same extent as the indemnity from the
Company to the Underwriters under Section 8(a) but only with respect to (A)
statements or omissions, if any, in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or in any
application (as such term is defined in Section 8(a) above), in each case, made
in reliance upon and in conformity with written information furnished to the
Company with respect to such Seller by or on behalf of such Seller for use in
such Preliminary Prospectus, the Registration Statement or the Prospectus, or
any amendment or supplement thereto, or in any such application or (B) any
breach of any representation, warranty, covenant or agreement of such Seller
contained herein or in any certificate by or on behalf of such Seller delivered
pursuant hereto.
c. Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, each of the Sellers and each
other person, if any, who controls the Company or any Seller within the meaning
of the Act, to the same extent as the foregoing indemnity from the Company and
each of the Sellers, respectively, to the Underwriters under Section 8(a) or
8(b), but only with respect to statements or omissions, if any, made in any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to any Underwriter by such Underwriter expressly for use in
such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriters in connection with
this Offering. The Company and each of the Sellers acknowledge that the
statements with respect to the public offering of the Firm Securities and the
Option Securities set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters for inclusion in the Prospectus.
d. Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 8, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or
- 36 -
parties of the commencement thereof, the indemnifying party or parties will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties 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 such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the 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 one or all of the
indemnifying parties (in which case the indemnifying parties 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 such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 8 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle, compromise
or consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
e. In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this Section 8, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 8 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Firm Securities and the Option Securities or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each of the contributing parties, on the
one hand, and the party to
- 37 -
be indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company or
any of the Sellers is a contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company or such Seller
on the one hand, and the Underwriters, on the other, shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Firm
Securities and the Option Securities (before deducting expenses) bear to the
total underwriting discounts received by the Underwriters hereunder, in each
case as set forth in the table on the Cover Page of the Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, by a Seller, or by the Underwriters, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d) the Underwriters shall
not be required to contribute any amount in excess of the underwriting discount
applicable to the Firm Securities and the Option Securities purchased by the
Underwriters hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who has signed the Registration
Statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to this subparagraph (d). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect to
which a claim for contribution may be made against another party or parties
under this subparagraph (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
9. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 8 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, any
Seller, the Company, any controlling person of any Underwriter or the Company,
and shall survive termination of this Agreement or the issuance and delivery of
the Securities to the Underwriters and the Representative, as the case may be.
- 38 -
10. Effective Date.
a. This Agreement shall become effective at 10:00 a.m., New York
City time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 6, 8 and 11 of this
Agreement shall at all times be effective. For purposes of this Section 10, the
Firm Securities and the Option Securities to be purchased hereunder shall be
deemed to have been so released upon the earlier of dispatch by the
Representative of telegrams to securities dealers releasing such shares for
offering or the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the Firm
Securities and the Option Securities.
11. Termination.
a. Subject to subsection (b) of this Section 11, the Representative
shall have the right to terminate this Agreement, (i) if any domestic or
international event or act or occurrence has materially adversely disrupted, or
in the Representative's opinion will in the immediate future materially
adversely disrupt, the financial markets; or (ii) if any material adverse change
in the financial markets shall have occurred; or (iii) if trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the NASD, the
Boston Stock Exchange, the Commission or any other governmental authority having
jurisdiction over such matters; or (iv) if trading of any of the securities of
the Company shall have been suspended, or any of the securities of the Company
shall have been delisted, on any exchange or in any over-the-counter market; or
(v) if the United States shall have become involved in a war or major
hostilities, or if there shall have been an escalation in an existing war or
major hostilities or a national emergency shall have been declared in the United
States; or (vi) if a banking moratorium has been declared by a state or federal
authority; or (vii) if a moratorium in foreign exchange trading has been
declared; or (viii) if the Company shall have sustained a loss material or
substantial to the Company 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 the Representative's opinion, make it
inadvisable to proceed with the offering, sale and/or delivery of the
Securities; or (ix) if there shall have been such a material adverse change in
the conditions or prospects of the Company, or such material adverse change in
the general market, political or economic conditions, in the United States or
elsewhere, that, in each case, in the Representative's judgment, would make it
inadvisable to proceed with the offering, sale and/or delivery of the Securities
or (x) if any of Xxx Xxx Xxxxxx or Xxxx Xxxxxx shall no longer serve the Company
in their present capacity.
b. If this Agreement is terminated by the Representative in
accordance with the provisions of Section 11(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 6(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted to the Representative, by reason of any failure on the part of the
Company to perform any undertaking
- 39 -
or satisfy any condition of this Agreement by it to be performed or satisfied
(including, without limitation, pursuant to Section 7 or Section 13) then, the
Company shall promptly reimburse and indemnify the Representative for all of its
actual out-of-pocket expenses, including the fees and disbursements of counsel
for the Underwriters (less amounts previously paid pursuant to Section 6(c)
above). In addition, the Company shall remain liable for all Blue Sky counsel
fees and disbursements, expenses and filing fees (such counsel fees not to
exceed $15,000 if the shares are listed on the American Stock Exchange or
$30,000 if the shares have been accepted for quotation on Nasdaq).
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement (including, without limitation,
pursuant to Sections 7, 11, 12 and 13 hereof), and whether or not this Agreement
is otherwise carried out, the provisions of Section 7 and Section 8 shall not be
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
12. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 7, Section 11 or Section 13
hereof) to purchase the Securities which it or they are obligated to purchase on
such date under this Agreement (the "Defaulted Securities"), the Representative
shall have the right, within 24 hours thereafter, to make arrangement for one or
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters (or, if such
default shall occur with respect to any Option Securities to be purchased
on an Option Closing Date, the Underwriters may at the Representative's
option, by notice from the Representative to the Company, terminate the
Underwriters' obligation to purchase Option Securities from the Company on
such date).
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
13. Default by the Company and/or any of the Sellers. If the Company shall
fail at the Closing Date or at any Option Closing Date, as applicable, to sell
and deliver the number of
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Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate without any liability on the part of any
non-defaulting party other than pursuant to Section 6, Section 8 and Section 11
hereof. If any of the Sellers shall fail at any Option Closing Date, if any, to
sell and deliver the number of Option Securities which it or he is obligated to
sell hereunder on such date, the Underwriters may at the Representative's option
terminate the Underwriters' obligation to purchase Option Securities from each
of the Sellers and the Company on such date. No action taken pursuant to this
Section shall relieve the Company or any of the Sellers from liability, if any,
in respect of such default.
14. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at Xxxxx Securities Co., Inc., 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxx X. X'Xxxxx, Xx. with a copy to Xxxxxx, Xxxxxxxxxx &
Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxx
X. Xxxxxx, Esq. Notices to the Company shall be directed to the Company at 0000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, Attention: Xxx Xxx Xxxxxx,
Chairman and Chief Executive Officer, with a copy to Xxxxxxx Xxxxxx & Green,
P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000- 0077, Attention: Xxxxxx Xxxxxx,
Esq. Notices to the Sellers shall be directed to ___________________ at
_______________________, Attention: ______________________.
15. Parties. This Agreement shall inure solely to the benefit of and shall
be binding upon the Underwriters, the Company, the Sellers and the controlling
persons, directors and officers referred to in Section 8 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. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
16. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
18. Entire Agreement; Amendments. This Agreement and the Representative's
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior written or oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may not be amended
except in a writing, signed by the Representative, the Sellers and the Company.
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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 among
us.
Very truly yours,
INTERNATIONAL ISOTOPES, INC.
By:
-------------------------------
Name:
Title:
SELLERS:
----------------------------------
----------------------------------
----------------------------------
Confirmed and accepted as of
the date first above written.
XXXXX SECURITIES CO., INC.
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:
--------------------------------
Xxxxxx X. X'Xxxxx, Xx.
Senior Vice President
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SCHEDULE A
Number of Shares
Name of Underwriters to be Purchased
-------------------- ---------------
Xxxxx Securities Co., Inc. . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . 2,200,000
=========
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SCHEDULE B
Number of Option
Name of Seller Shares to be Sold
-------------- -----------------
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