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Exhibit 1.1
EURO TECH HOLDINGS COMPANY LIMITED
UNDERWRITING AGREEMENT
New York, New York
, 1997
May Xxxxx Group, Inc., as Representative of
the Several Underwriters as Listed in Schedule A
00 Xxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, Euro Tech Holdings Company Limited, a
____________ corporation organized under the laws of the British Virgin Islands
(the "Company"), hereby confirms its agreement with May Xxxxx Group, Inc., as
representative of the several underwriters listed in Schedule A ("May Xxxxx",
"you" or the "Underwriters") with respect to the sale by the Company to the
Underwriters, acting severally and not jointly, of the respective number of
shares of the common stock ("Shares") of the Company, par value $.01 per share
("Common Stock") and redeemable common stock purchase warrants ("Public
Warrant") each to purchase one share of Common Stock, as set forth in Schedule A
hereto. The aggregate 600,000 Shares and 600,000 Public Warrants will be
separately tradable upon issuance and are sometimes herein referred to as the
"Firm Securities".
1. INTRODUCTION. Each Public Warrant is exercisable commencing
on _________, 1999 [two years from the Effective Date, as hereafter defined]
until ___________, 2003 [six years from the Effective Date], unless previously
redeemed by the Company, at an initial exercise price of $ ____ [110% of the
public offering price] per share of Common Stock provided that the Public
Warrants shall be exercisable from _______, 1998 through _______, 1999,
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only if May Xxxxx has consented in writing to all of the Public Warrants being
exercisable. The Public Warrants may be redeemed by the Company at a redemption
price of $.10 per Public Warrant at any time during the period that the Public
Warrants are exercisable on thirty (30) days prior written notice, provided that
the closing bid price of the Common Stock equals or exceeds $____ [170% of the
initial public offering price per share] for any twenty (20) consecutive trading
day period provided that notice of redemption is mailed not later than 10 days
after the end of such period and sets forth a redemption date at least 30 days
thereafter, all in accordance with the terms and conditions of the Warrant
Agreement between the Company and American Stock Transfer & Trust Company
("Warrant Agreement").
Upon your request, as provided in this Agreement, the Company shall
also issue and sell to you up to an additional 90,000 Shares and/or 90,000
Public Warrants for the purpose of covering over-allotments in the sale of the
Firm Securities (the "Over-allotment Option"). Such additional securities are
hereinafter referred to as the "Option Securities." The Firm Securities and the
Option Securities are hereinafter sometimes referred to as the "Securities." The
Company also proposes to issue and sell to you, pursuant to the terms of the
warrant agreement, dated ___________, 1997 between you and the Company (the
"Underwriters' Warrant Agreement"), warrants (the "Underwriters' Warrants") to
purchase up to 60,000 Shares and/or 60,000 Public Warrants. The Underwriters'
Warrants shall be exercisable during the five year period commencing one (1)
year from the date of the Prospectus (as defined in Section 2(a) hereof) at a
price of $______ [165% of the public offering price per Share] per Share and
$_____ [ 165% of the public offering price per Public Warrant] per Public
Warrant, subject to adjustment in certain events to protect against dilution.
The Securities issuable upon exercise of the Underwriters' Warrants are
hereinafter sometimes referred to as the "Underwriters' Securities." The
Securities, the Underwriters' Warrants and the Underwriters' Securities are more
fully described in the Registration Statement and the Prospectus referred to
below.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Underwriters as of the date hereof that:
(a) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (the
"Registration Statement"), and an amendment or amendments
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thereto, on Form F-1 (No. 333-16277), including any related preliminary
prospectus (the "Preliminary Prospectus"), for the registration of the
Securities and the Underwriters' 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
promulgated under the Act. Before the registration becomes effective, the
Company will not file any amendment to such registration statement to which you
shall have reasonably objected 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
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 (or included in
the Registration Statement, if no filing under Rule 424 is required), is
hereinafter called the "Prospectus."
(b) On the date upon which the Registration Statement
is declared effective by the Commission (the "Effective Date") and at all times
subsequent thereto up to Closing Date I and Closing Date II, if any (as such
terms are defined in Section 3(d) hereof), the Registration Statement and the
Prospectus will comply in all material respects with the applicable provisions
of the Act and the 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. The representation and
warranty made in this Section 2(b) does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company by the Underwriters expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto.
(c) This Agreement, the Warrant Agreement, the
Underwriters' Warrant Agreement and the Financial Advisory and Investment
Banking Agreement (as defined in Section 5(s) hereof), have been duly and
validly authorized by the Company, and this
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Agreement constitutes, and the Public Warrant Agreement, the Underwriters'
Warrant Agreement and the Financial Advisory and Investment Banking Agreement,
when executed and delivered pursuant to this Agreement, will (assuming due
execution by the Underwriters) each constitute a valid and binding agreement of
the Company, enforceable against the Company in accordance with its respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification, contribution or exculpation provision may be limited under
applicable Federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The Securities and the
Underwriters' Warrants to be issued and sold by the Company pursuant to this
Agreement, the Underwriters' Securities issuable upon exercise of the
Underwriters' Warrants and payment therefor, have been duly authorized and, when
issued and paid for, will be validly issued, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal liability by reason
of being such holders; the Securities, the Underwriters' Warrants and the
Underwriters' Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to be taken for
the authorization, issuance and sale of the Securities, the Underwriters'
Warrants and the Underwriters' Securities has been duly and validly taken. The
Underwriters' Warrants constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms, to issue and sell, upon exercise in
accordance with the terms thereof, the number and type of the Company's
securities called for thereby; except (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification, contribution or exculpation provision may be limited under
applicable Federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(d) All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; the issuances and sales of all such securities complied in all
material respects with applicable
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Federal and state securities laws; 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.
(e) Except as set forth in the Registration Statement
and the Prospectus, the Company and each of its Subsidiaries (collectively,
"Subsidiaries" and individually a 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, respectively,
free and clear of all liens, encumbrances, claims, security interests, defects
and restrictions of any material nature whatsoever, other than those referred to
in the Prospectus and liens for taxes not yet due and payable. The Company has
no direct or indirect Subsidiaries except as described in the Prospectus and
Euro Tech (Far East) Ltd., which will be wholly owned by the Company on Closing
Date I.
(f) There is no action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding pending or to the knowledge
of the Company threatened, against or involving the properties or business of
the Company or any Subsidiary or which if adversely determined could reasonably
be expected to materially and adversely affect the financial position, or
prospects, or business of the Company and Subsidiaries, taken as a whole, except
as referred to in the Prospectus.
(g) All contracts and other documents required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement have been described in the Registration
Statement or the Prospectus or filed with the Commission as Exhibits to the
Registration Statement, as required.
(h) The financial statements of the Company and
Subsidiaries, together with the related notes, included in the Registration
Statement and Prospectus fairly present the financial positions and the results
of operations of the Company and Subsidiaries, at the dates and for the periods
to which they apply; and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved. There has
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been no material adverse change in financial conditions or results of operations
of the Company or any Subsidiary, or to the knowledge of the Company, any
development involving a prospective change in the condition or prospects of the
Company or any Subsidiary, financial or otherwise, since the date of the
financial statements included in the Prospectus, except as disclosed therein.
(i) Xxxxxx Xxxxxxxx & Co., whose reports are filed
with the Commission as a part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.
(j) Except as otherwise set forth in the Prospectus,
the Company does not own, directly or indirectly, an interest in any
corporation, partnership, joint venture, trust or other business entity. Each of
the Company and each Subsidiary is duly qualified and licensed and in good
standing as foreign corporation in each jurisdiction in which its ownership of
property or business operations require such qualification or licensing, except
where the failure to be so qualified or licensed would not have a material
adverse affect on the Company or such Subsidiary. Each of the Company and each
Subsidiary is duly and validly organized and is in good standing in its
jurisdiction of incorporation and has all requisite corporate power and
authority, and all necessary material authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies, to own or lease its respective properties and conduct its
respective business as described in the Prospectus. Each of the Company and each
Subsidiary is, and has been, doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates and permits and with
all applicable Federal, state and local laws, rules and regulations, including
but not limited to laws and regulations relating to environmental matters and
employee health and safety matters, and none of the aforementioned
authorizations, approvals, orders, licenses, certificates or permits have been
suspended or revoked, nor are there any proceedings pending or to the knowledge
of the Company threatened which could result in a suspension or revocation
thereof. The Company has all requisite corporate power and authority to enter
into this Agreement, the Warrant Agreement, the Underwriters' Warrant Agreement
and the Financial Advisory and Investment Banking Agreement and to carry out the
provisions and conditions hereof and thereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required for
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the issuance of the Securities and the Underwriters' Securities, pursuant to
this Agreement, the Warrant Agreement, and the Underwriters' Warrant Agreement,
and as contemplated by the Prospectus, except with respect to applicable Federal
and state securities laws.
(k) The outstanding debt, the property and the
business of the Company and its Subsidiaries conforms in all material respects
to the descriptions thereof contained in the Registration Statement and
Prospectus.
(l) The Securities, the Underwriters' Warrants, the
Underwriters' Securities and any other securities issued or to be issued by the
Company on or before the Closing Dates (as defined in Section 3(d) hereof)
described herein conform, or will conform when issued, in all material respects
to all statements with respect thereto contained in the Registration Statement
and the Prospectus.
(m) Except as set forth in the Prospectus, no
material default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage, deed of
trust, note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company or a Subsidiary is a party or by which the
Company may be bound or to which any of the property or assets of the Company or
a Subsidiary are subject which default would reasonably be expected to have a
materially adverse effect on the financial condition or business of the Company
and the Subsidiaries taken as a whole.
(n) Neither the Company nor any Subsidiary is in
violation of any term or provision of its respective Certificate (Memorandum) of
Incorporation or By-Laws. Neither the execution and delivery of this Agreement,
nor the issuance and sale of the shares of Common Stock, the Public Warrants,
the Underwriters' Warrants and the Underwriters' Securities, nor the
consummation of any of the transactions contemplated herein, nor the compliance
by the Company with the terms and provisions hereof has materially conflicted
with or will materially conflict with, or has resulted in or will result in a
material breach of, any of the terms and provisions of, or has constituted or
will constitute a material default under, or has resulted in or will result in
the creation or imposition of any lien, charge or encumbrance upon the property
or assets of the Company or any Subsidiary pursuant to the terms
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of any indenture, mortgage, deed of trust, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company or any Subsidiary is a
party, or by which the Company or any Subsidiary is or may be bound, or to which
any of the property or assets of the Company or any Subsidiary is subject; nor
will such action result in any material violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company or any Subsidiary or
any contract or agreement, or any statute or any order, rule or regulation
applicable to the Company or any Subsidiary or any other regulatory authority or
other governmental body having jurisdiction over the Company or Subsidiary.
(o) Except as disclosed in the Prospectus, all taxes
which are due from the Company or any Subsidiary have been paid in full, unless
being contested in good faith by the Company or and such Subsidiary as
applicable, and Neither the Company nor any Subsidiary has any tax deficiency or
claim outstanding, proposed or assessed against them.
(p) Subsequent to the respective dates as of which
information is given in the most recently circulated Preliminary Prospectus
included as a part of the Registration Statement, and except as may otherwise be
indicated or contemplated herein or therein, neither the Company nor any
Subsidiary has (i) issued any securities, (ii) declared or paid any dividend or
made any other distribution on or in respect to its capital stock; (iii)
incurred any material liability or obligation, direct or contingent, for
borrowed money; or (iv) entered into any transaction other than in the ordinary
course of business.
(q) To the Company's knowledge, the Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus or part thereof.
(r) On the Effective Date, (i) the authorization of
capital stock of the Company is as set forth in the Registration Statement, and
(ii) not more than an aggregate of 1,550,000 shares of Common Stock shall be
issued and outstanding excluding: (A) 600,000 shares of Common Stock and the
600,000 shares of Common Stock issuable upon the exercise of the Public
Warrants; (B) up to an additional 90,000 shares of Common Stock issuable upon
the exercise of the Over-allotment Option or the 90,000 shares issuable upon the
exercise of the Public Warrants issuable
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upon the exercise of the Over-allotment Option; (C) up to an additional 60,000
shares issuable upon exercise of the Underwriters' Warrants or the 60,000 shares
issuable upon exercise of the Public Warrants issuable upon the exercise of the
Underwriters' Warrants (which warrants are identical to the Public Warrants) (D)
up to 1,000,000 shares issuable upon the exercise of outstanding Warrants, and
(E) up to 1,550,000 shares issuable upon the exercise of options outstanding, or
which may be granted under the Company's 1996 Stock Option Plan and to
management as management options as described in the Prospectus ("Management
Options"). Other than the shares of Common Stock referred to in the immediately
preceding sentence, no other shares of capital stock or securities convertible
into capital stock shall be outstanding or reserved for issuance at the
completion of the proposed public offering without the consent of the
Underwriters.
(s) Except for the registration rights granted under
the Underwriters' Warrant Agreement, to the Selling Stockholders named in the
Registration Statement or as disclosed in the Prospectus, no holders of any
securities of the Company or of any options, warrants or convertible or
exchangeable securities of the Company exercisable for or convertible or
exchangeable for 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.
(t) Assuming that there will be two "market makers"
for the Common Stock, at least 300 beneficial owners of the Common Stock and a
sufficient "public float" of the Shares, and that the Company's registration of
the Common Stock pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") becomes effective (all as contemplated by the requirements of the National
Association of Securities Dealers, Inc.), the Common Stock is eligible for
quotation on the Nasdaq Stock Market ("Nasdaq"). The Company has filed a
registration statement with the Commission pursuant to Section 12(g) of the
Exchange Act, and has used its best efforts to have same declared effective by
the Commission on an accelerated basis on the Effective Date.
(u) Except as described in the Prospectus, to the
Company's knowledge, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, commitments, payments or issuances of securities
with respect to the Company that may affect the Underwriters'
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compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(v) Neither the Company, any Subsidiary, nor to the
knowledge of the Company, any of their respective employees or officers or
directors, agents or any other person acting on behalf of the Company or any
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, supplier, or official or governmental agency 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 any Subsidiary (or assist it in
connection with any actual or proposed transaction) which (i) could reasonably
be expected to subject the Company or any Subsidiary to any material damage or
penalty in any civil, criminal or governmental litigation or proceeding, (ii) if
not given in the past, could reasonably be expected to have had a materially
adverse effect on the assets, business or operations of the Company or any
Subsidiary as reflected in any of the financial statements contained in the
Prospectus, or (iii) if not continued in the future, could reasonably be
expected to materially adversely affect the assets, business, operations or
prospects of the Company or any Subsidiary.
(w) The Company and each Subsidiary owns or possesses
the requisite licenses or rights to use all trademarks, service marks, service
names, trade names, patents and patent applications, copyrights, methods,
protocols, techniques, technologies, procedures and other rights (collectively
the "Intangibles") described as owned or used by the Company or such Subsidiary
in the Registration Statement. There is no claim, action or proceeding by any
person pending or, to the Company's knowledge, threatened, which pertains to or
challenges the rights of the Company or such Subsidiary with respect to any
Intangibles used in the conduct of the business of the Company or such
Subsidiary, except as described in the Prospectus. To the Company's knowledge,
current products, services and processes of the Company and each Subsidiary do
not infringe on any Intangibles held by any third party.
(x) Except as set forth in the Registration
Statement, neither the Company nor any Subsidiary is under any obligation to pay
royalties or fees of any kind whatsoever to any
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third party with respect to Intangibles it has developed, uses, employs or
intends to use or employ.
(y) The Company and each Subsidiary has generally
enjoyed satisfactory employer/employee relationships with its respective
employees and is in material compliance in all material respects with all
applicable laws and regulations respecting the employment of their respective
employees and employment practices, terms and conditions of employment and wages
and hours relating thereto. To the Company's knowledge, there are no pending or
threatened investigations involving the Company or any Subsidiary by the U.S.
Department of Labor or corresponding foreign agency, or any other governmental
agency responsible for the enforcement of such Federal, state or local laws and
regulations. To the Company's knowledge, there is no unfair labor practice
charge or complaint against the Company or any Subsidiary pending before the
National Labor Relations Board or corresponding foreign agency or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or any Subsidiary, or any predecessor entity, and none
has occurred. No representation question exists respecting the employees of the
Company or any Subsidiary. No collective bargaining agreement or modification
thereof is currently in effect or being negotiated by the Company and its
respective employees. No grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of the Company or any
Subsidiary.
(z). Neither the Company, any Subsidiary, nor to the
Company's knowledge, any of their respective officers or directors or any of
their respective employees or stockholders, have taken, directly or indirectly,
any action designed to or which has constituted or which could reasonably be
expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
(aa). Neither the Company nor any Subsidiary is
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Neither the Company nor any Subsidiary maintains or
contributes or at any time in the past, maintained or contributed to a defined
benefit plan, as defined in Section 3(35) of ERISA.
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(ab). Except as set forth in the Prospectus under
"MANAGEMENT" or "CERTAIN TRANSACTIONS," neither the Company nor any Subsidiary
is a party to any agreement with any officer, director or stockholder of the
Company or any affiliate or associate of any such person or entity which is
required to be disclosed in the Prospectus pursuant to Regulation SK. Except as
set forth in the Prospectus, to the Company's knowledge, no officer, director or
stockholder of the Company or any Subsidiary or any "affiliate" or "associate"
(as these terms are defined in Rule 405 promulgated under the Regulations) of
any such person or entity, the Company or any Subsidiary, 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 any Subsidiary, or (B)
purchases from or sells or furnishes to the Company or any Subsidiary any goods
or services, or (ii) a beneficial interest in any contract or agreement to which
the Company or any Subsidiary is a party or by which it may be bound or
affected.
(ac). The minute books of the Company and each
Subsidiary have been made available to counsel to the Underwriters and each
contains a complete summary of all meetings and actions by unanimous consent of
directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
(ad). The statements in the Prospectus under "RISK
FACTORS," "BUSINESS," "CERTAIN TRANSACTIONS," "MANAGEMENT" and "DESCRIPTION OF
SECURITIES," insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions are correct in all
material aspects.
(ae). The Company has all requisite corporate power
and authority to enter into and to carry out the provisions and conditions
hereof, and all consents, authorizations, approvals and orders required in
connection therewith have been obtained. Neither the execution and delivery of
this Agreement, nor the consummation of any of the transactions contemplated
herein, nor the compliance by the Company with the terms and provisions hereof
has materially conflicted with or will materially conflict with,
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or has resulted in or will result in a material breach of, any of the terms and
conditions or provisions of, or has constituted or will constitute a material
default under, or has resulted in or will result in the creation or imposition
of any lien, charge or encumbrance upon the property or assets of the Company or
any Subsidiary pursuant to the terms of any indenture, mortgage, deed of trust,
note, loan or credit agreement or any other agreement or instrument evidencing
an obligation for borrowed money, or any other agreement or instrument to which
the Company or any Subsidiary is a party, or by which the Company or any
Subsidiary is or may be bound, or to which any of the property or assets of the
Company or any Subsidiary is subject; nor will such action result in any
material violation of the provisions of the respective Certificates of
Incorporation or the By-Laws of the Company or any Subsidiary or any contract or
agreement, or any statute or any order, rule or regulation applicable to the
Company or any Subsidiary or any other regulatory authority or other
governmental body having jurisdiction over the Company or any Subsidiary.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND
UNDERWRITERS' WARRANTS.
(a) On the basis of the representations and
warranties herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters 600,000 Shares of Common
Stock and 600,000 Public Warrants, and the Underwriters agree to purchase such
Securities from the Company on a firm commitment basis at a purchase price of
$4.50 per Share and $.135 per Public Warrant, to be sold by the Underwriters at
an initial public offering price of $5.00 per Share and $.15 per Public Warrant.
(b) In addition, upon not less than two (2) days'
notice from the Underwriters to the Company, for a period of forty-five (45)
days from the date of the Prospectus, the Company agrees to sell to the
Underwriters at a purchase price of $4.50 per Share and/or $.135 per Public
Warrant, all or any part of the Option Securities, to be sold by the
Underwriters hereunder at an initial public offering price of $5.00 per Share or
$.15 per Public Warrant. Delivery of the Option Securities shall be made
concurrently with tender of payment therefor. Option Securities may be purchased
by the Underwriters only for the purpose of covering over-allotments in the sale
of the Firm Securities, and
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the Underwriters shall have no obligation to make any over-allotments. No Option
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) On Closing Date I (defined below in Section
3(d)), the Company shall issue and sell to the Underwriters the Underwriters'
Warrants, which warrants shall entitle the holders thereof to purchase up to
60,000 Shares and/or 60,000 Public Warrants. The total purchase price of the
Underwriters' Warrants shall be $5. The Underwriters' Warrants shall be
exercisable in whole or in part for up to an additional 60,000 Shares and/or
60,000 Public Warrants for a period of five (5) years commencing one (1) year
from the date of the Prospectus at a price of $___ per Share and $.___ per
Public Warrant [(165% of the IPO price of the Securities)]. The Underwriters'
Warrant Agreement and form of Underwriters' Warrant Certificate shall be
substantially in the form filed as Exhibit ___ to the Registration Statement.
(d) Payment for the Underwriters' Warrants shall be
made on Closing Date I. Payment for the Firm Securities and the Option
Securities shall be made on each of Closing Date I and Closing Date II,
respectively, at the Underwriters' election by certified or bank cashier's check
in New York Clearing House funds, payable to the order of the Company, or by
wire transfer, at the offices of one of the Underwriters, or at such other place
as agreed upon by the Underwriters and the Company, upon delivery of
certificates (in form and substance reasonably satisfactory to the Underwriters)
representing the Securities or by confirmation of electronic transfer of the
Securities to the Underwriters for the accounts of the Underwriters. Delivery
and payment for the Firm Securities shall be made at 10:00 A.M. New York time,
on or before the fifth business day following the Effective Date or at such
earlier time as the Underwriters shall determine, or at such other time as shall
be agreed upon by the Underwriters and the Company. The hour and date of
delivery and payment for the Firm Securities are called "Closing Date I." The
Firm Securities shall be registered in such name or names and in such authorized
denominations as the Underwriters may request in writing at least two (2) full
business days prior to Closing Date I. The Company will permit the Underwriters
to examine and package any certificates representing the Firm Securities for
delivery, at least one (1) full business day prior to Closing Date I. Delivery
for each of the Option Securities as provided above shall be made within the two
(2) business day period after notice of exercise to the Company, and against
payment therefor, as provided above. The hour and date of such delivery and
payment made subsequent to
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Closing Date I for Option Securities is referred to as "Closing Date II" and
Closing Date I and Closing Date II are collectively referred to as Closing Date
I. The Option Securities shall be registered in such name or names and in such
denominations as the Underwriters may request in writing at the time of exercise
of the Over-allotment Option.
(e). The Company shall not be obligated to sell or
deliver any Firm Securities except upon tender of payment by the Underwriters
for all the Firm Securities.
4. PUBLIC OFFERING. The Underwriters are to make a public
offering of the Firm Securities and such of the Option Securities as they may
determine. The Securities are to be initially offered to the public at the
offering price set forth on the cover page of the Prospectus (such price being
hereinafter called the "Public Offering Price"). The Underwriters may, at their
own expense, enter into one or more agreements as the Underwriters, in their
sole discretion, deem advisable with one or more broker-dealers who shall act as
dealers or co-underwriters in connection with such public offering.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees
that it will:
(a) Use its best efforts to cause the Registration
Statement to become effective and will notify the Underwriters immediately, and
confirm the notice in writing, (i) when the Registration Statement and any
post-effective amendment thereto becomes effective, (ii) of the issuance by the
Commission of any stop order or of the initiation, or the threatening, of any
proceeding for that purpose, (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of the
Securities and the Underwriters' Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, and (iv) of the receipt of any comments from the Commission. If
the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
(b) File the Prospectus (in form and substance
reasonably satisfactory to the Underwriters) or transmit the Prospectus by a
means reasonably calculated to result in filing
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with the Commission in accordance with Rule 424, if the Prospectus is required
to be so filed.
(c) During the time when a prospectus is required to
be delivered under the Act, use its reasonable best efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Regulations, as from time to time in force, so
far as necessary to permit the continuance of sales of or dealings in the
Securities and the Underwriters' Securities in accordance with the provisions
hereof and the Prospectus. If at any time when a prospectus relating to the
Securities or the Underwriters' 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 counsel for the Underwriters, the Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act.
(d) Deliver to the Underwriters, without charge, such
number of copies of each Preliminary Prospectus and the Prospectus as the
Underwriters may reasonably request and, as soon as the Registration Statement
or any amendment or supplement thereto becomes effective, deliver to the
Underwriters two (2) signed copies of the Registration Statement, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and signed copies of all
consents of certified experts.
(e) Endeavor in good faith, in cooperation with the
Underwriters, and Gersten, Savage, Xxxxxxxxx & Xxxxxx, LLP at or prior to the
time the Registration Statement becomes effective, to qualify the Securities and
the Underwriters' Securities for offering and sale under the securities laws of
such jurisdictions as the Underwriters may reasonably designate, provided that
no such qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the
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Underwriters agree that such action is not at the time necessary or advisable,
use its reasonable best 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.
(f) Make generally available to its security holders
as soon as practicable, but not later than the first day of the fifteenth full
calendar month following the Effective Date, an earnings statement (which need
not be certified by independent public or independent certified public
accountants unless required by the Act or the Regulations, but which shall
satisfy the provisions of Section 11(a) of the Act) covering a period of at
least twelve (12) consecutive months beginning after the Effective Date.
(g) For a period of five (5) years from the Effective
Date, furnish to the Underwriters copies of such financial statements and other
periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities, and promptly furnish to
each Underwriter (i) a copy of each periodic report the Company shall file with
the Commission, (ii) a copy of every press release and every news item and
article with respect to the Company or its affairs, which was released by the
Company, (iii) a copy of each Form 8-K or Schedule 13D, 13G, 14D-1 or 13E-4
received or prepared by the Company, and (iv) such additional documents and
information with respect to the Company or any future Subsidiaries or affiliates
of the Company as the Underwriters may from time to time reasonably request.
(h) Apply the net proceeds from the offering received
by it in a manner consistent in all material respects with the caption "USE OF
PROCEEDS" in the Prospectus.
(i) Deliver to the Underwriters, prior to filing, any
amendment or supplement to the Registration Statement or Prospectus proposed to
be filed after the Effective Date and not file any such amendment or supplement
to which the Underwriters shall reasonably object, after being furnished such
copy, in writing with reasonable specificity as to the nature and extent of any
objection.
(j) Furnish to the Underwriters as early as
practicable prior to Closing Date I, but not 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
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the Effective Date) which have been read by the Company's independent
accountants as stated in their letter to be furnished to the Underwriters
pursuant to Section 7(g) hereof.
(k) For a period of three (3) years from Closing Date
I, provide the Underwriters, upon their request, at the Company's sole expense,
(i) with access to daily consolidated financial transfer sheets relating to the
Common Stock and designate American Stock Transfer & Trust Company as transfer
agent for the Company's securities or such other transfer agent mutually
agreeable to the Company and the Underwriters and (ii) to cause the Company's
depository to fax a "special security position report" to each Underwriter on a
daily basis.
(l) For a period of three (3) years after Closing
Date I, nominate and use its best efforts to engage a designee of the
Underwriters as a nonvoting advisor to the Company's Board of Directors (the
"Advisor") or in lieu thereof to designate an individual for election as a
director, in which case the Company shall use its best efforts to have such
individual elected as a director. The designee may be a director, officer,
partner, employee or affiliate of one or both of the Underwriters and the
Underwriters shall designate such person in writing to the Board. In the event
the Underwriters shall not have designated such individual at the time of any
meeting of the Board or such person is unavailable to serve, the Company shall
notify the Underwriters of each meeting of the Board. An individual, if any,
designated by the Underwriters shall receive all notices and other
correspondence and communications sent by the Company to members of the Board.
Such Advisor or director, as the case may be shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings
including, but not limited to, food, lodging, and transportation. In addition,
such Advisor or Director shall be entitle to the same cash compensation as the
Company gives to other non-employee directors for acting in such capacity. The
Company further agrees that, during said three (3) year period, it shall
schedule no less than four (4) formal and "in person" meetings of its Board of
Directors in each such year at which meetings such Advisor shall be permitted to
attend as set forth herein; said meetings shall be held quarterly each year and
thirty (30) days advance notice of such meetings shall be given to the Advisor.
Further, during such three (3) year period, the Company shall give notice to the
Underwriters with respect to any proposed acquisitions, mergers, reorganizations
or other similar transactions.
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The Company agrees to indemnify and hold
harmless both of the Underwriters and such Advisor against any and all claims,
actions, damages, costs and expenses, and judgments arising solely out of the
attendance and participation of the Advisor at any such meeting described
herein. In the event the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, it agrees, if
possible, to include the Advisor as an insured under such policy.
(m) Until the sooner of (i) seven (7) years from the
date hereof, or (ii) the sale to the public of the Underwriters' Securities, not
take any action or actions which may prevent or disqualify the Company's use of
Form F-1 (or another appropriate form) for the registration under the Act of the
Underwriters' Securities and the shares of Common Stock underlying the Public
Warrants.
(n) For a period of five (5) years from the Effective
Date, use its best efforts to maintain the quotation of the Securities by Nasdaq
.
(o) Supply each Underwriter with two (2), and
Gersten, Savage, Xxxxxxxxx & Xxxxxx, counsel to the Underwriters, with three (3)
bound volumes of the underwriting materials within a reasonable time after the
latest Closing Date.
(p) For a period of two (2) years from the Effective
Date, not issue any other shares of Common Stock or Preferred Stock or
securities convertible into or exercisable for Common Stock or Preferred Stock
without the prior written consent of the Underwriters. Notwithstanding the
foregoing, the Company may issue securities upon (A) the exercise of any
warrants outstanding on the date hereof pursuant to the terms thereof or options
granted or to be granted pursuant to the Company's 1996 Stock Options Plan and
Management Options, and (B) the exercise of the Underwriters' Warrant.
(q) So long as the Securities or the Underwriters'
Securities are registered under the Exchange Act, hold an annual meeting of
stockholders for the election of directors within 180 days after the end of each
of the Company's fiscal years and, within 150 days after the end of each of the
Company's fiscal years, provide the Company's stockholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial
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statements shall be those required by Rule 14a-3 under the Exchange Act and
shall be included in an annual report pursuant to the requirements of such Rule.
(r) Engage a financial public relations firm
reasonably satisfactory to the Underwriters as soon as possible after Closing
Date I, and continuously engage such firm, or an acceptable substitute firm for
at least the period ending twenty four (24) months after Closing Date I.
(s) Enter into the Underwriters' Warrant Agreement
and the Financial Advisory and Investment Banking Agreement (the "Consulting
Agreement") in substantially the form filed as Exhibits ___ and ___,
respectively, to the Registration Statement.
(t) As soon as possible after Closing Date I, take
all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions or other equivalent manual and to maintain its listing
therein for a period of five (5) years from the Effective Date.
(u) Cause all of the Company's officers and directors
and stockholders, to enter into written agreements (the "Lock-up Agreements")
that, for a period of 24 months from the Effective Date, they will not, without
the consent of the Underwriters, (i) publicly sell any securities of the Company
owned directly or indirectly by them or owned beneficially by them (as defined
in the Exchange Act), or (ii) otherwise sell, or transfer such securities unless
the transferee agrees in writing to be bound by an identical lock-up.
(v) Use its best efforts to obtain key-man life
insurance in the amount of $1,000,000 per policy on the lives of such executive
officers of the Company as the Underwriters shall request, with the Company
named as beneficiary of such policies.
(w) Use its best efforts to qualify its Common Stock
and Public Warrants for quotation on the NASDAQ Small Cap system.
(x) For a period of two years from the Effective
Date, the Company shall not issue any of its securities in any offering pursuant
to Regulation S under the 1933 Act, without the prior written consent of the
Underwriters.
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(y) Grant to the Underwriters a preferential right on
the terms and subject to the conditions set forth in this Section, for a period
of three (3) years from the Effective Date, to purchase for its account, or to
sell for the account of the Company or its present affiliates or Subsidiaries or
any of its stockholders listed in the Prospectus under the caption "PRINCIPAL
STOCKHOLDERS" (the "Principal Stockholders"), any securities of the Company, on
terms not more favorable to the Company or such present or future Subsidiary or
affiliate or the Principal Stockholders than they can secure elsewhere, to
purchase or sell any such securities. If the Underwriters fail to notify the
Company in writing of their intention to act as underwriter or placement agents
or otherwise participate or introduce a third party to participate in such
offering within fifteen (15) days after receipt of a notice containing such
proposal, then the Underwriters shall have no further claim or right with
respect to the proposal contained in such notice. If, thereafter, such proposal
is materially modified, the Company, and each present or future affiliate or
Subsidiary or its Principal Stockholders shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided hereinabove with respect to the original proposal; (ii) If the
Underwriters act as underwriters or placement agents with respect to such
offering or introduce a third party (other than an underwriter) which
participates in such offering, then the Underwriters shall receive, as
compensation for services rendered, ten (10%) percent of the aggregate
consideration received by the Company through the Underwriters or the party
introduced by the Underwriters and warrant to purchase an amount of securities
equal to ten (10%) percent of the aggregate consideration received by the
Company through the Underwriters or the party introduced by the Underwriters and
warrant to purchase an amount of securities equal to ten (10%) percent of the
securities sold by the Company in such offering through the Underwriters or the
party introduced by the Underwriters at an exercise price per security equal to
the offering price of such securities. If the Underwriters introduce another
underwriter who acts as underwriter with respect to such offering, then the
Underwriters shall be entitled to receive two and one-half (2-1/2%) percent of
the aggregate consideration received by the Company through such underwriter and
warrant to purchase an amount of securities equal to two and one-half (2-1/2%)
percent of the securities sold by the Company in such offering through such
underwriter; (iii) If the Underwriters are offered the right of first refusal
and agree to perform such functions, but fail to perform, the Underwriters will
not be entitled to any such compensation, and waive their right of first refusal
with respect to future offerings unless such failure to perform is
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caused by the Company; (iv) If the Underwriters do not perform any of the
functions set forth in (ii) above and (iii) does not apply to such transaction,
the Underwriters shall be entitled to receive an aggregate of two and one-half
(2-1/2%) percent of the aggregate consideration received by the Company and
warrants to purchase an amount of securities equal to two and one-half (2-1/2%)
percent of the securities sold by the Company in such offering at an exercise
price per security equal to the offering price of such securities.
(z) Neither the Company nor any representative of the
Company has made or shall make any written or oral representation in connection
with the Offering and sale of the Securities or the Underwriters' Warrant which
is not contained in the Prospectus, which is otherwise inconsistent with or in
contravention of anything contained in the Prospectus, or which shall constitute
a violation of the Act, the Rules and Regulations, the Exchange Act or the rules
and regulations promulgated under the Exchange Act.
(aa) For so long as any Public Warrant is
outstanding, the Company shall, at its own expense: (i) use its reasonable best
efforts to cause post-effective amendments to the Registration Statement, or new
registration statements relating to the Public Warrants and the Common Stock
underlying the Public Warrants to become effective in compliance with the Act
and without any lapse of time between the effectiveness of the Registration
Statement and of any such post-effective amendment or new registration
statement; provided, however, that the Company shall have no obligation to
maintain the effectiveness of such Registration Statement or file a new
Registration Statement, or to keep available a prospectus at any time at which
such registration or prospectus is not then required; (ii) cause a copy of each
Prospectus, as then amended, to be delivered to each holder of record of a
Public Warrant; (iii) furnish to the Underwriters and dealers as many copies of
each such Prospectus as the Underwriters or dealers may reasonably request; and
(iv) maintain the "blue sky" qualification or registration of the Public
Warrants and the Common Stock underlying the Public Warrants, or have a
currently available exemption therefrom, in each jurisdiction in which the
Securities were so qualified or registered for purposes of the Offering.
6. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay all expenses
(other than fees of counsel to the Underwriters) in connection
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with the offering, including but not limited to, (i) the preparation, printing,
filing and mailing (including the payment of postage and overnight delivery with
respect to such mailing) of the Registration Statement and the Prospectus and
the printing and mailing of this Agreement and related documents, including the
cost of all copies thereof and of the Preliminary Prospectus and of the
Prospectus and any amendments or supplements thereto supplied to the
Underwriters in quantities as hereinabove stated, (ii) the printing, engraving,
issuance and delivery of the shares of Common Stock, the Public Warrants, and
the Underwriters' Warrants, including any transfer or other taxes payable
thereon, (iii) the qualification of the Securities, the Underwriters' Warrants
and the Underwriters' 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," and "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and the fees and disbursements of counsel for the Underwriters
relating to Blue Sky matters (which fees shall be payable by the Company in the
sum of $35,000 of which $10,000 has been paid), (iv) advertising costs and
expenses including but not limited to the reasonable costs and expenses in
connection with the "road show," information meetings and presentations, bound
volumes and "tombstones" in publications selected by the Underwriters and
prospectus memorabilia, (v) costs and expenses in connection with due diligence
investigations, including but not limited to the reasonable fees of any
independent counsel or consultant retained, phone calls relating to due
diligence investigations, and all reasonable travel and lodging expenses
incurred by you and/or counsel to the Underwriters in connection with visits to,
and examination of, the Company's premises, (vi) fees and expenses of the
transfer agent and warrant agent, (vii) application and listing fees for
inclusion in Xxxxx'x OTC Manual or Standard and Poor's Corporation Descriptions
or other equivalent manuals, and (viii) the fees payable to the NASD and Nasdaq.
The $35,000 payment to counsel for the Underwriters shall not include fees of
special counsel if same is required to be incurred in a merit review state which
may require local counsel. In this connection, Blue Sky applications shall be
made in such states and jurisdictions as shall be requested by the Underwriters.
Payments with regard to items (i), (iii), (iv) and (v) shall be made on each of
Closing Date I and Closing Date II.
(b) The Company shall pay to the Underwriters an aggregate
non-accountable expense allowance, in addition to the expenses payable pursuant
to Section 6(a), equal to three (3%) percent of the gross proceeds received by
the Company from
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the sale of the Securities. In the event the Offering is terminated by the
Underwriters, the Underwriters shall be reimbursed only for its actual,
accountable out-of-pocket expenses.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy in all material aspects of the
representations and warranties of the Company as of the date hereof and as of
each of the Closing Dates, to the accuracy in all material respects of the
statements of officers of the Company made pursuant to the provisions hereof and
to the performance by the Company of its obligations hereunder in all material
respects and to the following conditions:
(a) The Registration Statement shall have become
effective not later than 5:00 p.m., New York time, on the date of this Agreement
or such later date and time as shall be consented to in writing by you, and, at
each of the Closing Dates, 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
Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx & Xxxxxx, LLP, counsel to the
Underwriters.
(b) At Closing Date I, the Underwriters shall have
received the favorable opinions of Gusrae, Xxxxxx & Bruno, LLP, United States
counsel to the Company, Xxxxx-Xxxxxx, Raworth & XxXxxxxx, British Virgin Islands
counsel to the Company, Hastings, & Co., Hong Kong counsel to the Company, and
Jingtian Associates, People's Republic of China counsel to the Company, dated
Closing Date I, addressed to the Underwriters and in form and substance
satisfactory to Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx & Xxxxxx, LLP, counsel to
the Underwriters, in substantially the forms attached as Exhibits A, B, C and D
hereto.
(c) On or prior to each of Closing Date I and Closing
Date II, counsel for the Underwriters shall have been furnished such documents,
certificates and opinions as it may reasonably require for the purpose of
enabling it to review or pass upon the matters referred to in Section 7(b), or
in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
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(d) Prior to each of Closing Date I and Closing Date
II, (i) there shall have been no material adverse change, or development
involving a material adverse prospective change, in the conditions or prospects
of the business activities, financial or otherwise, of the Company from the
latest dates as of which such conditions are set forth in the Registration
Statement and Prospectus; (ii) there shall have been no transaction, not in the
ordinary course of business, entered into by the Company from the latest date as
of which their respective financial conditions are set forth in the Registration
Statement and Prospectus which is materially adverse to the Company; (iii) the
Company shall not be in default under any provision of any instrument relating
to any outstanding indebtedness; (iv) no amount of the assets of the Company
shall have been pledged or mortgaged, except as set forth in the Registration
Statement and Prospectus; (v) no action, suit or proceeding, at law or in
equity, shall be pending or threatened against the Company before or by any
court or Federal or state commission, board or other administrative agency
wherein an unfavorable result, decision, ruling or finding would adversely
affect the business, prospects, operations, or financial condition or income of
the Company, except as set forth in the Registration Statement and Prospectus
and except where such a result is deemed remote by counsel to the Company with
respect to such action or proceeding; (vi) no stop order shall have been issued
under the Act and no proceedings with respect thereto shall have been initiated
or threatened by the Commission; (vii) the market for securities in general or
political, financial or economic conditions shall not have materially adversely
changed from those reasonably foreseeable as of the date hereof as to render it
impracticable in the Underwriters' reasonable judgment to make a public offering
of the Securities, and there has not been a material adverse change in market
levels for securities in general or financial or economic conditions which
render it inadvisable in the Underwriters' judgment to proceed; and (viii) there
shall not have commenced or occurred a war or Act of God or other calamity which
would have a material adverse effect on, or result in a material loss to, the
Company.
The Company agrees and acknowledges that the
Underwriters shall be the sole determining parties as to the presence of any
such conditions, events, occurrences and provisions set forth in this Section
7(d).
(e) At each of Closing Date I and Closing Date II,
the Underwriters shall have received a certificate of the Company signed by the
President and the Secretary of the Company,
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dated Closing Date I and Closing Date II, respectively, to the effect that the
conditions set forth in section 7(d)(i) through (vi) above have been satisfied
and that, as of Closing Date I and Closing Date II, respectively, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct.
(f) By the Effective Date, the Underwriters shall
have received clearance from the NASD as to the amount of compensation allowable
or payable to the Underwriters, as described in the Registration Statement.
(g) At the time this Agreement is executed, and at
each of Closing Date I and Closing Date II, the Underwriters shall have received
a letter, addressed to the Underwriters and in form and substance reasonably
satisfactory in all respects (including the nonmaterial nature of the changes or
decreases, if any, referred to in clause (3) below) to the Underwriters and to
Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx & Xxxxxx, LLP, counsel for the
Underwriters, from Xxxxxx Xxxxxxxx & Co., dated as of the date of this Agreement
and as of each of Closing Date I and Closing Date II:
(i) confirming that they are independent accountants with respect to
the Company within the meaning of the Act and the applicable Regulations;
(ii) stating that in its opinion the financial statements of the
Company included in the Registration Statement and Prospectus comply as to form
in all material respects with the applicable accounting requirements of the Act
and the published Regulations thereunder;
(iii) stating that, they have read the fiscal year all of the minutes
of meetings of the shareholders and the Board of Directors of the Company and
its Subsidiaries as set forth in the minute books through (not more than 5 days
before date of letter), officials of the Company having advised us that the
minutes of all such meetings through that date were set forth therein and have
carried out other procedures to (not more than 5 days before date of letter) to
(day prior to date of letter), inclusive:
(A) With respect to the six-month periods ended June 30, 1996
and 1995, they have:
(1) performed the procedures specified by the
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American Institute of Certified Public Accountants for a review of interim
financial information on the unaudited condensed consolidated balance sheet at
June 30, 1996, and the unaudited condensed consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the six-month
periods ended June 30, 1996 and 1995, included in the Registration Statement
("Interim Financials"), and
(2) inquired of certain officials of the Company who
have responsibility for financial and accounting matters as to whether the
Interim Financials comply as to form in all material respects with applicable
accounting requirements of the Act and the related published rules and
regulations.
(B) With respect to latest interim period ending as of
[12/31/96; to be a date not later than 30 days prior to the Effective Date],
("Latest Interim Financials") they have:
(1) read the unaudited consolidated financial
statements for such periods of both 1995 and 1996 furnished to us by the
Company, officials of the Company having advised us that no such financial
statements as of and date or for any period subsequent to [12/31/96] were
available; and
(2) inquired of certain officials of the Company who
have responsibility for financial and accounting matters as to whether the
Latest Interim Financials are stated on a basis substantially consistent with
that of the audited consolidated financial statements in the Registration
Statement.
(C) Nothing came to their attention as a result of the
foregoing procedures that caused them to believe that:
(1) any material modifications should be made to the
Interim Financials, for them to be in conformity with generally accepted
accounting principles;
(2) the Interim Financials do not comply as to form
in all material respects with the applicable accounting requirements of the Act
and the related published rules and regulations; or
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(3) (I) at [12/31/96], there was any change in the
capital stock, increase in long-term debt, increase in net current liabilities
or increase in stockholders' deficit of the consolidated companies as compared
with the amounts in the 1996 balance sheet forming a part of the Interim
Financials; or (II) for the period from [12/1/96] to [12/31/96], there was any
decrease, as compared with the corresponding period in the preceding year, in
consolidated net sales or any increase in consolidated net loss, except in all
instances for changes, increases, or decreases which the Registration Statement
discloses have occurred or may occur [except as follows:]
(D) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus
[pages to be attached procedures performed stated and results stated as to each
item]in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including worksheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(iv) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriters may reasonably request.
(h) All proceedings taken in connection with the
authorization, issuance or sale of the Securities, the Underwriters' Warrants
and the Underwriters' Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Underwriters and to Gersten, Savage,
Xxxxxxxxx & Xxxxxx, LLP counsel to the Underwriters.
(i) On each of Closing Date I and Closing Date II,
there shall have been duly tendered to you for your account the appropriate
number of Securities and individually for each Underwriter's own account the
Underwriters' Warrants.
(j) No order suspending the sale of the Securities in
any jurisdiction designated by you pursuant to
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Section 5(e) hereof shall have been issued on either Closing Date I or Closing
Date II, and no proceedings for that purpose shall have been instituted or, to
the knowledge of the Underwriters or the Company, shall be contemplated.
(k) Prior to each of Closing Date I and Closing Date
II there shall not have been received or provided by the Company's independent
public accountants or attorneys, qualifications to the effect of either
difficulties in furnishing certifications as to material items including,
without limitation, information contained within the footnotes to the financial
statements, or as affecting matters incident to the issuance and sale of the
Securities or as to corporate proceedings or other matters.
(l) On or prior to Closing Date I, the Underwriters'
Warrant Agreement and the Financial Advisory and Investment Banking Agreement
shall have been executed and delivered by the Company, and the Lock-Up
Agreements shall have been executed and delivered by all of the Company's
officers, directors and five percent stockholders.
Any certificate signed by any officer of the Company
and delivered to the Underwriters or to counsel to the Underwriters shall be
deemed a representation and warranty by the Company to the Underwriters as to
the statements made therein. If any condition to the Underwriters' obligations
hereunder to be fulfilled prior to or at any Closing Date is not so fulfilled,
the Underwriters may terminate this Agreement or, if the Underwriters so elect,
may waive any such conditions which have not been fulfilled or extend the time
for their fulfillment.
8. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless
each of the Underwriters, and each controlling person, if any, who controls each
of the Underwriters (within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act), against any and all liabilities, claims, lawsuits,
including any and all awards and/or judgments to which it may become subject
under the Act, the Exchange Act or any other Federal or state statute, at common
law or otherwise, insofar as said liabilities, claims and lawsuits (including
awards and/or judgments) arise out of or are in connection with the Registration
Statement,
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Prospectus and related Exhibits filed under the Act, except for any liabilities,
claims and lawsuits (including awards and/or judgments), arising out of acts or
omissions of the Underwriters. In addition, the Company shall also indemnify and
hold harmless the Underwriters against any and all costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing liabilities,
claims and lawsuits to which the indemnity applies.
The Underwriters shall give the Company prompt notice
of any such liability, claim or lawsuit which the Underwriters contend is the
subject matter of the Company's indemnification, and the Company thereupon shall
be granted the right to take any and all necessary and proper action, at its
sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise and dispose of such liability, claim
or lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
The Underwriters shall indemnify and hold harmless
the Company, and each controlling person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any and all liabilities, claims, lawsuits, including any and all
awards and/or judgments to which it may become subject under the Act, the
Exchange Act or any other Federal or state statute, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including awards and/or
judgments) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact required to be stated or necessary to make the
statement therein, not misleading, which statement or omission was made in
reliance upon information furnished in writing to the Company by or on behalf of
the Underwriters for inclusion in the Registration Statement or Prospectus or
any amendment or supplement thereto. In addition, the Underwriters shall also
indemnify and hold harmless the Company against any and all costs and expenses,
including reasonable counsel fees, incurred or relating to the foregoing.
The Company shall give to the Underwriters prompt
notice of any such liability, claim or lawsuit which the Company contends is the
subject matter of the Underwriters'
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indemnification and the Underwriters thereupon shall be granted the right to
take any and all necessary and proper action, at their sole cost and expense,
with respect to such liability, claim and lawsuit, including the right to
settle, compromise or dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities.
(b) In order to provide for just and equitable
contribution under the Act in any case in which (i) any person entitled to
indemnification under this Section 8 makes claim for indemnification pursuant
hereto but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section 8
provides for indemnification in such case, or (ii) contribution under the Act
may be required on the part of any such person in circumstances for which
indemnification is provided under this Section 8, then, and in each such case,
the Company and each of the Underwriters shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after any
contribution from others) in such proportion taking into consideration the
relative benefits received by each party from the offering covered by the
Prospectus (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was assessed, the
opportunity to correct and prevent any statement or omission and other equitable
considerations appropriate under the circumstances; provided, however, that
notwithstanding the above in no event shall the Underwriters, in the aggregate,
be required to contribute any amount in excess of 10% of the initial public
offering price of the Securities; and provided, that, in any such case, no
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party
to this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will,
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if a claim for contribution in respect thereof is to be made against another
party (the "contributing party"), notify the contributing party of the
commencement thereof, but the omission so to notify the contributing party will
not relieve it from any liability which it may have to any other party other
than for contribution hereunder. In case any such action, suit or proceeding is
brought against any party, and such party notifies a contributing party or his
or its representative of the commencement thereof within the aforesaid fifteen
(15) days, the contributing party will be entitled to participate therein with
the notifying party and any other contributing party similarly notified. Any
such contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Section 8 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
Except as the context otherwise requires, all representations,
warranties and agreements contained in this Agreement shall be deemed to be
representations, warranties and agreements at the Closing Dates, and such
representations, warranties and agreements of the Underwriters and the Company,
including 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 of the Underwriters, the Company or any controlling person,
and shall survive termination of this Agreement or the issuance and delivery of
the Securities to the Underwriters until the earlier of the expiration of any
applicable statute of limitations and the seventh anniversary of Closing Date
II, at which time the representations, warranties and agreements shall terminate
and be of no further force and effect.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION HEREOF.
(a) This Agreement shall become effective at 9:30
a.m., New York time, on the first full business day following the day on which
the Registration Statement becomes effective or at the time of the initial
public offering by the Underwriters of the
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Securities, whichever is earlier. The time of the initial public offering, for
the purpose of this Section 10, shall mean the time, after the Registration
Statement becomes effective, of the release by the Underwriters for publication
of the first newspaper advertisement which is subsequently published relating to
the Securities or the time, after the Registration Statement becomes effective,
when the Securities are first released by the Under writers for offering by the
Underwriters or dealers by letter or telegram, whichever shall first occur. The
Underwriters may prevent this Agreement from becoming effective without
liability to any other party, except as noted below, by giving the notice
indicated below in this Section 10 before the time this Agreement becomes
effective. The Underwriters agree to give the undersigned notice of the
commencement of the offering described herein.
(b) The Underwriters shall have the right, in their
sole discretion, to terminate this Agreement, including without limitation, the
obligation to purchase the Firm Securities and the obligation to purchase the
Option Securities after the exercise of the Over-Allotment Option, by notice
given to the Company prior to delivery and payment for all the Firm Securities
or the Option Securities, as the case may be, if any of the conditions
enumerated in Section 7 are not either fulfilled or waived by the Underwriters
on or before any Closing Date.
(c) If the Underwriters elect to prevent this
Agreement from becoming effective or to terminate this Agreement as provided in
this Section 10, the Company shall be notified on the same day as such election
is made by the Underwriters by telephone or telegram, confirmed by letter.
(d) Anything herein to the contrary notwithstanding,
if this Agreement shall not be carried out within the time specified herein, or
any extensions thereof granted by the Underwriters, by reason of any failure on
the part of the Company to perform any undertaking or satisfy any condition of
this Agreement by it to be performed or satisfied then, in addition to the
obligations assumed by the Company pursuant to Section 6(a) hereof, the
Underwriters shall provide the Company with a statement of the Underwriters'
accountable expenses.
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(e) In the event of litigation between the parties
arising hereunder, the prevailing party shall be entitled to costs and
reasonable attorney's fees.
(f) Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
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.
11. NOTICES. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to the
Underwriters, shall be mailed, delivered or telegraphed and confirmed to May
Xxxxx Group, Inc., 00 Xxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
President, with a copy to Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx & Xxxxxx, LLP
000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxx Xxxxxxxxx, Esq.,
and if to the Company, shall be mailed, delivered or telegraphed and confirmed
to it at 00X Xxx Xxxxx Xxxx Xxxxxx, 00 Xxxx Xxxx Xxxx Road, Hong Kong, with a
copy to Gusrae, Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention:
Xxxxxx Xxxxx, Esq.
12. PARTIES. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 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.
13. 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 conflict of laws. The parties agree to submit
themselves to the jurisdiction of the courts of the State of New York or of the
United States of America for the Southern District of New York, which shall be
the sole tribunals in which any parties may institute and maintain a legal
proceeding against the other party arising from any dispute in this Agreement.
In the event either party initiates a legal proceeding in a jurisdiction other
than in the courts of the State of New York or of the United States of America
for the Southern District of New York, the other party may assert as a complete
defense and as a basis for dismissal of such legal proceeding that
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the legal proceeding was not initiated and maintained in the courts of the State
of New York or of the United States of America for the Southern District of New
York, in accordance with the provisions of this Section 13.
14. ENTIRE AGREEMENT. This Agreement, the Warrant Agreement,
the Underwriters' Warrant Agreement and the Financial Advisory and Investment
Banking Agreement contain the entire agreement between the parties hereto in
connection with the subject matter hereof and thereof.
If the foregoing correctly sets forth the
understanding between the Underwriters and the Company, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
Very truly yours,
EURO TECH HOLDINGS COMPANY,
LIMITED
By:
Name: X.X. Xxxxx
Title: Chief Executive
Officer
Accepted as of the date
first above written.
New York, New York
MAY XXXXX GROUP, INC.
By:
Name: Xxxx May
Title:
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