APOLLO INTERNATIONAL OF DELAWARE, INC.
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, Apollo International of Delaware, Inc., a Delaware
corporation (the "Company"), hereby confirms its agreement with May Xxxxx Group,
Inc., as representative of the several underwriters listed in Schedule A ("May
Xxxxx" or "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 ("Shares") of the common stock 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 750,000 Shares and 750,000 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. The Public Warrants may be
redeemed by the Company at a redemption price of $.25 per Public Warrant at any
time after __________, 1998 [one year from the Effective Date] on thirty (30)
days prior written notice, provided that the closing bid price of the Common
Stock equals or exceeds $____ [150% of the initial public offering price] for
any twenty (20) consecutive trading day period ending within 15 days prior to
the date of the notice of redemption, 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 112,500 Shares and/or 112,500
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
75,000 Shares and/or 75,000 Public Warrants. The Underwriters' Warrants shall be
exercisable during the four year period commencing one (1) year from the date of
the Prospectus (as defined in Section 2(a) hereof) at a price of $______ per
Share and $_____ 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:
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(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement"), and an amendment or amendments thereto, on Form SB-2 (No.
333-18071), 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
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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 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
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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 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 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.
(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
which if adversely determined could reasonably be expected to materially and
adversely affect the financial position, or prospects, or business of the
Company, 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
5
with the Commission as Exhibits to the Registration Statement, as required.
(h) The financial statements of the Company, 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, 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 been no material
adverse change in financial conditions or results of operations of the Company,
or to the knowledge of the Company, any development involving a prospective
change in the condition or prospects of the Company, financial or otherwise,
since the date of the financial statements included in the Prospectus, except as
disclosed therein.
(i) Most, Xxxxxxxx & Company, LLP, 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. The Company 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. The Company
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
properties and conduct its business as described in the Prospectus. The Company
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,
6
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 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 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 is
a party or by which the Company may be bound or to which any of the property or
assets of the Company are subject which default would reasonably be expected to
have a materially adverse effect on the financial condition or business of the
Company.
7
(n) The Company is not in violation of any term or provision of
its Certificates 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 pursuant to the terms of any
indenture, mortgage, deed of trust, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party, or by which the
Company is or may be bound, or to which any of the property or assets of the
Company is subject; nor will such action result in any material violation of the
provisions of the Certificates of Incorporation or the By-Laws of the Company or
any contract or agreement, or any statute or any order, rule or regulation
applicable to the Company or any other regulatory authority or other
governmental body having jurisdiction over the Company.
(o) Except as disclosed in the Prospectus, all taxes which are
due from the Company have been paid in full, unless being contested in good
faith by the Company, and the Company does not have any tax deficiency or claim
outstanding, proposed or assessed against it.
(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, (i) the Company has not 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.
8
(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 2,811,434 shares of Common Stock shall be issued and
outstanding excluding: (A) 750,000 shares of Common Stock and the 750,000 shares
of Common Stock issuable upon the exercise of the Public Warrants; (B) up to an
additional 112,500 shares of Common Stock issuable upon the exercise of the
Over-allotment Option or the 112,500 shares issuable upon the exercise of the
Public Warrants issuable upon the exercise of the Over-allotment Option; (C) up
to an additional 75,000 shares issuable upon exercise of the Underwriters'
Warrants or the 75,000 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 500,000 shares of Common Stock
issuable upon the exercise of options granted, or to be granted, under the
Company's 1996 Employee Stock Option Plan; (E) up to 1,100,000 shares issuable
upon exercise of currently outstanding non-public warrants; and (F) up to
41,666.6666 shares issuable under the terms of a license agreement. 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 (if any), 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.
9
(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' compensation, as
determined by the National Association of Securities Dealers, Inc. ("NASD").
(v) Neither the Company, nor, to the knowledge of the Company,
any of its employees or officers or directors, agents or any other person acting
on behalf of the Company has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer, 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 assist it
in connection with any actual or proposed transaction) which (i) could
reasonably be expected to subject the Company 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 as reflected in any
of the financial statements contained in the Prospectus, or (iii) if not
continued in the future, could reasonably be expected
10
to materially adversely affect the assets, business, operations or prospects of
the Company.
(w) Except as described in the Prospectus, to the company's
knowledge, the Company owns or possesses the requisite licenses or rights to use
all trademarks, service marks, service names, trade names, patents and patent
applications, copyrights, methods, protocols, techniques, technologies,
procedures and other rights (collectively the "Intangibles") described as owned
or used by the Company 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 with respect to any
Intangibles used in the conduct of the business of the Company, except as
described in the Prospectus. To the Company's knowledge, current products,
services and processes of the Company do not infringe on any Intangibles held by
any third party; provided, however, that the possibility exists that other
persons or entities, completely independently of the Company, or employees or
agents, could have developed trade secrets or items of technical information
similar or identical to those of the Company.
(x) Except as set forth in the Registration Statement, the
Company is not under any obligation to pay royalties or fees of any kind
whatsoever to any third party with respect to Intangibles it has developed,
uses, employs or intends to use or employ.
(y) The Company has generally enjoyed satisfactory
employer/employee relationships with its employees and is in material compliance
in all material respects with all Federal, state and local 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 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 pending before the National Labor Relations Board or
corresponding foreign agency or any strike, picketing, boycott, dispute,
11
slowdown or stoppage pending or threatened against or involving the Company, or
any predecessor entity, and none has occurred. No representation question exists
respecting the employees of the Company. No collective bargaining agreement or
modification thereof is currently in effect or being negotiated by the Company
and its employees. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company.
(z). Neither the Company, nor, to the Company's knowledge, any of
its officers or directors or any of its 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). The Company does not maintain nor has it maintained,
sponsored or contributed 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"), except for the Stock Option Plan described in the Prospectus.
The Company neither presently 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. The Company has never completely or partially withdrawn from a
"multiemployer plan."
(ab). Except as set forth in the Prospectus under "MANAGEMENT" or
"CERTAIN TRANSACTIONS," the Company is not 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 SB. Except as set forth in the Prospectus, to the
Company's knowledge, no officer, director or stockholder of the Company or any
"affiliate" or "associate" (as these terms are defined in Rule 405 promulgated
under the Regulations) of any such person or entity or the Company, has or has
had, either directly or indirectly, (i) an interest in any person or entity
which (A)
12
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficial interest
in any contract or agreement to which the Company is a party or by which it may
be bound or affected.
(ac). The minute books of the Company have been made available to
counsel to the Underwriters and contain a complete summary of all director and
shareholder meetings and actions by unanimous consent of directors and actions
by written consent of stockholders holding a majority of the then issued and
outstanding shares since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
(ad). 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 herewith
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, 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 pursuant to the terms of
any indenture, mortgage, deed of trust, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party, or by which
the Company is or may be bound, or to which any of the property or assets of the
Company is subject; nor will such action result in any material violation of the
provisions of the Certificates of Incorporation or the By-Laws of the Company or
any contract or agreement, or any statute or any order, rule or regulation
applicable to the Company or any other regulatory authority or other
governmental body having jurisdiction over the Company.
13
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 750,000 Shares of Common Stock and 750,000
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
$.225 per Public Warrant, to be sold by the Underwriters at an initial public
offering price of $5.00 share and $.25 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 $.225 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 $.25 per Public Warrant. Delivery of the
Option Securities shall be made concurrently with tender of payment therefore.
Option Securities may be purchased by the Underwriters only for the purpose of
covering over-allotments in the sale of the Firm Securities, and 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 75,000 Shares
and/or 75,000 Public Warrants. The total purchase price of the Underwriters'
Warrants shall be $10. The Underwriters' Warrants shall be exercisable in whole
or in part for up to an additional 75,000 shares and/or 75,000 Public Warrants
for a period of four (4) years commencing one (1) year from the date of the
Prospectus at a price of $6.00 per Share and $.30 per Public Warrant (120% 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.
14
(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 public offering 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 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
15
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 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
16
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 Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx & Xxxxxx, LLP 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
Underwriters may reasonably designate, provided that no such qualification shall
be required in any jurisdiction where, as a result thereof, the Company (i)
would be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction; or (ii) would be subject to
qualification on "blue sky" in any state which requires a lock-up of inside
securities for a period greater than two (2) years. In each jurisdiction where
such qualification shall be effected, the Company will, unless the Underwriters
agree that such action is not at the time necessary or advisable, use its
reasonable best efforts to file and make such statements or reports at such
times
17
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
18
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 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 reasonable 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 Co. 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 entitled to the same 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
19
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.
The Company agrees to indemnify and hold harmless 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 SB-2
(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 as well
as the listing thereof on the Boston Stock Exchange ("BSE").
(o) Supply each Underwriter with two (2), and Xxxxxxx, Savage,
Kaplowitz, Xxxxxxxxxx & Xxxxxx LLP, 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 or options
outstanding on the date hereof pursuant to the terms thereof, and (B) the
exercise of the Underwriters' Warrant.
20
(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 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 holding five (5) percent or more of the outstanding shares of
Common Stock, 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.
21
(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 system and listing on the BSE.
(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.
(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 to the Company 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 a 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
22
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 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) Designate the Underwriters as the Company's exclusive Warrant
Solicitation Agents in the event of any solicitation of the exercise of the
Public Warrants, in connection with a redemption of the Public Warrants or
otherwise, and shall pay to the Underwriters a Warrant Solicitation fee of five
(5%) percent of the exercise price of all solicited Public Warrants, subject to
the rules and regulations of the NASD with regard to such fees.
(aa) 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
23
Regulations, the Exchange Act or the rules and regulations promulgated under the
Exchange Act.
(ab) 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 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'
24
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 no part of which has previously 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 the sale of the Securities, of which $25,000 has been paid as
an advance against such expense allowance. In the event that the Underwriters
terminate the offering or are unable to consummate the offering within nine (9)
months of the date hereof, the advances toward the non-accountable expense
allowance shall become accountable and shall be returnable to the Company to the
extent
25
its out-of-pocket expenses are less than the amount advanced to the
Underwriters, so that the Underwriters are reimbursed only for their 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 opinion of Xxxxxxxxx Trauig Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, P.A.,
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 form attached as
Exhibit A 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.
26
(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 material default under any provision of any instrument
relating to any outstanding indebtedness; (iv) no material amount of the assets
of the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (v) no action, suit or proceeding, at law
or in equity, shall 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 materially
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
27
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, 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 Most Xxxxxxxx & Company, LLP, 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 all of the minutes of meetings of the
shareholders and the Board of Directors of the Company as set forth in the
minute books from incorporation through [not more than 5 days before date of
letter], officials of
28
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 from ______,
1997 [not more than 30 days before date of letter] to [day prior to date of
letter] inclusive:
(A) With respect to the ten-month periods ended October 31, 1996 and 1995,
they have:
(1) performed the procedures specified by the American Institute
of Certified Public Accountants for a review of interim financial information on
the unaudited condensed consolidated balance sheet at October 31, 1996, and the
unaudited statements of operations, stockholders' equity (deficit) and cash
flows for the ten- month periods ended October 31, 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 the applicable
accounting requirements of the Act and the related published rules regulations.
(B) With respect to latest interim period ending as of a date not
later than 30 days prior to the Effective Date, 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 hat no such financial statements as of any date or for
any period subsequent to [12/31/96] were available; and
(2) Inquired of certain officials of the Company ho have
responsibility for financial and accounting matters as to whether the 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:
29
(1) any material modifications should be made to the 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
(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 October 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 nay 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 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
30
Underwriters' Warrants and the Underwriters' Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Underwriters and
to Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx & 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 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
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
31
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, 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
32
(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' 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
33
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, 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,
34
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 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
Underwriters 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.
35
(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.
(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 Xxxxxxxxx
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 0000
X.X. Xxxxxxx 00, Xxxxxx Xxxxx, Xxxxxxx 00000 with a copy to Xxxxxxxxx Xxxxxxx
Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx P.A., 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx
00000 Attention: Xxxxxxxx X. Xxxxxx, Esq.
12. Parties. This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriters, the
36
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 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,
Apollo International of
Delaware, Inc.
37
By:
Name: Xxxxx X. Xxxxxx
Title: President
Accepted as of the date
first above written.
New York, New York
May, Xxxxx Group, Inc.
By:
Name:
Title:
38
