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EXHIBIT 1.1
COMMONWEALTH ASSOCIATES
1,400,000 Shares
REGISTRY MAGIC INCORPORATED
Common Stock
UNDERWRITING AGREEMENT
----------------------
_________________, 1998
Commonwealth Associates
As Representative of the Several Underwriters
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Registry Magic Incorporated, a Florida corporation (the
"Company"), proposes to issue and sell to the underwriters named in Schedule A
(the "Underwriters") of this Underwriting Agreement (the "Agreement"), for whom
you are acting as representative (the "Representative"), an aggregate of
1,400,000 shares (the "Stock") of Common Stock, $.001 par value (such class of
stock being herein called the "Common Stock"), of the Company. In addition, the
Company grants to the Underwriters (or, at its option, the Representative,
individually) the option referred to in Section 3(b) hereof to purchase all or
any part of an aggregate of 210,000 additional shares of Common Stock, if and to
the extent that you, as Representative, shall have determined to exercise, on
behalf of the Underwriters, the right to purchase such shares of Common Stock.
Unless the context otherwise indicates, the term "Stock" shall include the
210,000 additional shares referred to above.
You have advised the Company that you and the other
Underwriters desire to purchase, severally, the Stock, and that you have been
authorized by the Underwriters to execute this agreement on their behalf. The
Company confirms the agreements made by it with respect to the purchase of the
Stock by the several Underwriters on whose behalf you are signing this
Agreement, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) A registration statement (File No. 333- ) on
Form SB-2 relating to the public offering of the Stock, including a form of
prospectus subject to completion, copies of which have heretofore been
delivered to you, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
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Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission under the Act and one or more amendments to such registration
statement may have been so filed. After the execution of this Agreement, the
Company will file with the Commission either (i) if such registration statement,
as it may have been amended, has been declared by the Commission to be effective
under the Act, a prospectus in the form most recently included in an amendment
to such registration statement (or, if no such amendment shall have been filed,
in such registration statement), with such changes or insertions as are required
by Rule 430A under the Act or permitted by Rule 424(b) under the Act and as have
been provided to and approved by the Representative prior to the execution of
this Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the Act,
an amendment to such registration statement, including a form of prospectus, a
copy of which amendment has been furnished to and approved by the Representative
prior to the execution of this Agreement. As used in this Agreement, the term
"Registration Statement" means such registration statement, as amended at the
time when it was or is declared effective, including all financial schedules and
exhibits thereto and including any information omitted therefrom pursuant to
Rule 430A under the Act and included in the Prospectus (as hereinafter defined);
the term "Preliminary Prospectus" means each prospectus subject to completion
filed with such registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration Statement
or any amendment thereto at the time it was or is declared effective); and the
term "Prospectus" means the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act, or, if no prospectus is required to be filed
pursuant to said Rule 424(b), such term means the prospectus included in the
Registration Statement; except that if such registration statement or prospectus
is amended or such prospectus is supplemented, after the effective date of such
registration statement and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term "Prospectus"
shall include the prospectus as so supplemented, or both, as the case may be.
(b) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus. When the
Registration Statement becomes effective and at all times subsequent thereto up
to and on the Closing Date (as hereinafter defined) or the Option Closing Date,
as the case may be, (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and Regulations;
and (ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make statements therein not misleading;
provided, however, that the Company makes no representations, warranties or
agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Underwriters
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus on page 2 with respect to stabilization,
under the heading "Underwriting" and the identity of counsel to the Underwriters
under the heading "Legal Matters" constitute the only information furnished in
writing by or on behalf of the several Underwriters for inclusion in the
Registration Statement and Prospectus, as the case may be.
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(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with full power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good standing
in all other jurisdictions in which the nature of its business or the character
or location of its properties requires such qualification, except where failure
to so qualify will not materially affect the Company's business, properties or
financial condition.
(d) The authorized, issued and outstanding capital stock of
the Company as of January 31, 1998 is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and non-assessable and have been issued in compliance with all
federal and state securities laws; except as set forth in the Prospectus, no
options, warrants or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company have been granted or entered into by the
Company; and the capital stock conforms to all statements relating thereto
contained in the Registration Statement and Prospectus.
(e) The Stock and the Common Stock to be issued upon exercise
of the common stock purchase warrants to be issued to the Representative (the
"Warrants") are duly authorized, and when issued, and delivered pursuant to this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights of any security holder of the
Company. Neither the filing of the Registration Statement nor the offering or
sale of the Stock as contemplated in this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock, except as described in the
Registration Statement.
(f) This Agreement, the Warrants and the Advisory Agreement
(to be delivered to you in accordance with Section 3(p) and 3(s), respectively,
hereof) have been duly and validly authorized, executed and delivered by the
Company. The Company has full power and lawful authority to authorize, issue and
sell the Stock to be sold by it hereunder on the terms and conditions set forth
herein, and no consent, approval, authorization or other order of any
governmental authority is required in connection with such authorization,
execution and delivery or with the authorization, issue and sale of the Stock or
the Warrants, except such as may be required under the Act or state securities
laws.
(g) Except as described in the Prospectus, the Company is not
in violation, breach or default of or under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or 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 respective properties or assets of the Company is subject, nor will
such action result in any violation of the provisions of the respective articles
of incorporation or the by-laws of the Company, as amended, or any statute
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or any order, rule or regulation applicable to the Company of any court or of
any regulatory authority or other governmental body having jurisdiction over the
Company.
(h) Subject to the qualifications stated in the Prospectus,
the Company has good and marketable title to all respective properties and
assets described in the Prospectus as owned by the Company, free and clear of
all liens, charges, encumbrances or restrictions, except such as are not
materially significant or important in relation to its respective business; all
of the material leases and subleases under which the Company is the lessor or
sublessor of properties or assets or under which the Company holds properties or
assets as lessee or sublessee as described in the Prospectus are in full force
and effect, and, except as described in the Prospectus, the Company is not in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no claim has been asserted by anyone
adverse to rights of the Company as lessor, sublessor, lessee or sublessee under
any of the leases or subleases mentioned above, or affecting or questioning the
right of the Company to continued possession of the leased or subleased premises
or assets under any such lease or sublease except as described or referred to in
the Prospectus; and the Company owns or leases all such properties described in
the Prospectus as are necessary to its respective operations as now conducted
and, except as otherwise stated in the Prospectus, as proposed to be conducted
as set forth in the Prospectus.
(i) BDO Xxxxxxx, LLP, who have given their reports on certain
financial statements filed and to be filed with the Commission as a part of the
Registration Statement, which are incorporated in the Prospectus, are with
respect to the Company, independent public accountants as required by the Act
and the Rules and Regulations.
(j) The financial statements, together with related notes, set
forth in the Prospectus or the Registration Statement present fairly the
financial position and results of operations and changes in cash flow of the
Company on the basis stated in the Registration Statement, at the respective
dates and for the respective periods to which they apply. Said statements and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved and the Rules and Regulations. The information set forth under the
captions "Dilution," "Capitalization" and "Selected Financial Information" in
the Prospectus fairly present, on the basis stated in the Prospectus, the
information included therein.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, the Company has not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the ordinary
course of business, which is material to the business of the Company, and there
has not been any change in the capital stock of, or any incurrence of short-term
or long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or any
development involving, so far as the Company can now reasonably foresee a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of the Company
which would be material to the business or financial conditions of the Company
and neither the Company has not become
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a party to, and neither the business nor the properties of the Company has
become the subject of, any material litigation whether or not in the ordinary
course of business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race; and no labor disputes involving the employees of the
Company exist or are imminent which might adversely affect the conduct of the
business, property or operations or the financial conditions or results of
operations of the Company.
(m) Except as disclosed in the Prospectus, the Company has
filed all necessary federal, state and foreign income and franchise tax returns
and has paid all taxes shown as due thereon; and there is no tax deficiency
which has been or to the knowledge of the Company might be asserted against the
Company.
(n) The Company has sufficient licenses, permits and other
governmental authorizations as are required for the conduct of its business or
the ownership of its properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate rights to
use all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service xxxx registrations, copyrights and
licenses necessary for the conduct of such business and none of the foregoing
are in dispute or are in conflict with the right of any other person or entity.
To the best knowledge of the Company, none of the activities or business of the
Company are in violation of, or cause the Company to violate, any law, rule,
regulation or order of the United States, any state, county or locality, or of
any agency or body of the United States or of any state, county or locality, the
violation of which would have a material adverse impact upon the condition
(financial or otherwise), businesses, properties, prospective results of
operations, or net worth of the Company.
(o) The Company has not directly or indirectly, at any time
(i) made any contributions to any candidate for political office, or failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Stock to the several Underwriters
hereunder will have been fully paid or provided for by the Company and all laws
imposing such taxes will have been fully complied with.
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(q) All contracts and other documents of the Company which
are, under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock.
(s) The Company has no subsidiaries and does not own any
equity interest in any other corporation, joint venture, partnership or other
business entity.
(t) Except as previously disclosed in writing by the Company
to the Representative, no officer, director or stockholder of the Company has
any National Association of Securities Dealers Inc. (the "NASD") affiliation.
(u) The Company is not and upon receipt of the proceeds from
the sale of the Stock will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
(v) The Company has not distributed nor will not distribute
prior to the First Closing Date any offering material in connection with the
offering and sale of the Stock other than the Prospectus, the Registration
Statement and the other materials permitted by the Act.
(w) The conditions for use of Form SB-2, as set forth in the
General Instructions thereto, have been satisfied.
(x) The Company has complied with all provisions of Section
517.075 Florida Statutes relating to doing business with the government of Cuba
or with any person or affiliate located in Cuba.
(y) The Company has not entered into any agreement pursuant to
which any person is entitled, either directly or indirectly, to compensation
from the Company for services as a finder in connection with the public offering
referred to herein.
2. PURCHASE, DELIVERY AND SALE OF THE STOCK.
(a) Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties, and agreements
herein contained, the Company agrees to issue and sell to the Underwriters, and
each such Underwriter agrees, severally and not jointly, to buy from the Company
at $ per share of Stock, at the place and time hereinafter specified, the number
of shares of Stock set forth opposite the names of the Underwriters in Schedule
A attached hereto (the "First Stock") plus any additional shares of Stock which
such Underwriters may become obligated to purchase pursuant to the provisions
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of Section 9 hereof. The First Stock shall consist of 1,400,000 shares of Stock
to be purchased from the Company.
Delivery of the First Stock against payment therefor
shall take place at the offices of Commonwealth Associates, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (or at such other place as may be designated by
agreement between you and the Company) at 10:00 a.m., New York time, on ,
1998, or at such later time and date as you may designate, such time and date
of payment and delivery for the First Stock being herein called the "First
Closing Date."
(b) In addition, subject to the terms and conditions
of this Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants, severally and not
jointly, an option to the several Underwriters (which may be exercised, at its
option, by the Representative, individually) to purchase all or any part of an
aggregate of an additional 210,000 shares of Stock, at the same price per share
of Stock, as the Underwriters shall pay for the First Stock being sold pursuant
to the provisions of subsection (a) of this Section 2 (such additional Stock
being referred to herein as the "Option Stock"). This option may be exercised
within 45 days after the effective date of the Registration Statement upon
notice by the Representative to the Company advising as to the amount of Option
Stock as to which the option is being exercised, the names and denominations in
which the certificates for such Option Stock are to be registered and the time
and date when such certificates are to be delivered. Such time and date shall be
determined by the Representative but shall not be earlier than four nor later
than ten full business days after the exercise of said option, nor in any event
prior to the First Closing Date, and such time and date is referred to herein as
the "Option Closing Date." Delivery of the Option Stock against payment therefor
shall take place at the offices of Commonwealth Associates, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000. The number of shares of Option Stock to be purchased
by each Underwriter, if any, shall bear the same percentage to the total number
of shares of Option Stock being purchased by the several Underwriters pursuant
to this subsection (b) as the number of shares of Stock such Underwriter is
purchasing bears to the total number of the First Stock being purchased pursuant
to subsection (a) of this Section 2, as adjusted, in each case by the
Representative in such manner as the Representative may deem appropriate. The
option granted hereunder may be exercised only to cover overallotments in the
sale by the Underwriters of First Stock referred to in subsection (a) above. In
the event the Company declares or pays a dividend or distribution on its Common
Stock, whether in the form of cash, shares of Common Stock or any other
consideration, prior to the Option Closing Date, such dividend or distribution
shall also be paid on the Option Stock at the Option Closing Date.
(c) The Company will make the certificates for the
Stock to be purchased by the Underwriters hereunder available to you for
checking at least two full business days prior to the First Closing Date or the
Option Closing Date (which are collectively referred to herein as the "Closing
Dates"). The certificates shall be in such names and denominations as you may
request, at least two full business days prior to the Closing Dates. Time shall
be of the essence and delivery at the time and place specified in this Agreement
is a further condition to the obligations of each Underwriter.
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Definitive certificates in negotiable form for the
Stock to be purchased by the Underwriters hereunder will be delivered by the
Company to you for the accounts of the several Underwriters against payment of
the respective purchase prices therefor by the several Underwriters, by
certified or bank cashier's checks in New York Clearing House funds, payable to
the order of the Company.
In addition, in the event the Underwriters (or the
Representative, individually) exercise the option to purchase from the Company
all or any portion of the Option Stock pursuant to the provisions of subsection
(b) above, payment for such stock shall be made to or upon the order of the
Company by certified or bank cashier's checks payable in New York Clearing House
funds at the offices of Commonwealth Associates, at the time and date of
delivery of such Stock as required by the provisions of subsection (b) above,
against receipt of the certificates for such Stock by the Representative for the
respective accounts of the several Underwriters registered in such names and in
such denominations as the Representative may request.
It is understood that you, individually and not as
Representative of the several Underwriters, may (but shall not be obligated to)
make any and all payments required pursuant to this Section 2 on behalf of any
Underwriters whose check or checks shall not have been received by the
Representative at the time of delivery of the Stock to be purchased by such
Underwriter or Underwriters. Any such payment by you shall not relieve any such
Underwriter or underwriters of any of its or their obligations hereunder. It is
also understood that you individually rather than all of the Underwriters may
(but shall not be obligated to) purchase the Option Stock referred to in
subsection (b) of this Section 2, but only to cover overallotments.
It is understood that the several Underwriters
propose to offer the Stock to be purchased hereunder to the public upon the
terms and conditions set forth in the Registration Statement, after the
Registration Statement becomes effective.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the several Underwriters that:
(a) The Company will use its best efforts to cause
the Registration Statement to become effective. If required, the Company will
file the Prospectus and any amendment or supplement thereto with the Commission
in the manner and within the time period required by Rule 424(b) under the Act.
Upon notification from the Commission that the Registration Statement has become
effective, the Company will so advise you and will not at any time, whether
before or after the effective date, file any amendment to the Registration
Statement or supplement to the Prospectus of which you shall not previously have
been advised and furnished with a copy or to which you or your counsel shall
have objected in writing or which is not in compliance with the Act and the
Rules and Regulations. At any time prior to the later of (A) the completion by
all of the Underwriters of the distribution of the Stock contemplated hereby
(but in no event more than nine months after the date on which the Registration
Statement shall have become or been declared effective) and (B) 25 days after
the date on which the Registration Statement shall have become or been declared
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effective (the "Minimum Period"), the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus which, in your opinion, may be necessary or
advisable in connection with the distribution of the Stock.
As soon as the Company is advised thereof, the
Company will advise you, and confirm the advice in writing, of the receipt of
any comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission for
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order or
threat thereof suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Stock for offering in any jurisdiction,
or of the institution of any proceedings for any of such purposes, and will use
its best efforts to prevent the issuance of any such order, and, if issued, to
obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies
of each Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriters and dealers to use the Prospectus in
connection with the sale of the Stock for such period as in the opinion of
counsel to the several Underwriters the use thereof is required to comply with
the applicable provisions of the Act and the Rules and Regulations. In case of
the happening, at any time within such period as a Prospectus is required under
this Act to be delivered in connection with sales by an underwriter of any event
of which the Company has knowledge and which materially affects the Company or
the securities of the Company, or which in the opinion of counsel for the
Company or counsel for the Underwriters should be set forth in an amendment of
the Registration Statement or a supplement to the Prospectus in order to make
the statements therein not then misleading, in light of the circumstances
existing at the time the Prospectus is required to be delivered to a purchaser
of the Stock or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the Rules and Regulations, the Company
will notify you promptly and forthwith prepare and furnish to you copies of such
amended Prospectus or of such supplement to be attached to the Prospectus, in
such quantities as you may reasonably request, in order that the Prospectus, as
so amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which they
are made, not misleading. The preparation and furnishing of any such amendment
or supplement to the Registration Statement or amended Prospectus or supplement
to be attached to the Prospectus shall be without expense to the Underwriters,
except that in case any Underwriter is required, in connection with the sale of
the Stock, to deliver a Prospectus nine months or more after the effective date
of the Registration Statement, the Company will upon request of and at the
expense of the Underwriter, amend or supplement the Registration Statement and
Prospectus and furnish the Underwriter with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
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The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder in connection with the offering
and issuance of the Stock.
(b) The Company will use its best efforts to qualify
to register the Stock for sale under the securities or "blue sky" laws of such
jurisdictions as the Representative may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent to service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Stock. The Company will,
from time to time, prepare and file such statements and reports as are or may be
required to continue such qualification in effect for so long a period as the
Underwriters may reasonably request.
(c) If the sale of the Stock provided for herein is
not consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in Section
8, including the accountable expenses of the Underwriters, including legal fees.
(d) The Company will use its best efforts to (i)
cause a registration statement under the Exchange Act to be declared effective
concurrently with the completion of this offering (and will notify the
Representative in writing immediately upon the effectiveness of such
registration statement), and (ii) if requested by the Representative, to obtain
a listing on the Pacific Stock Exchange, and to obtain and keep current a
listing in the Standard & Poors or Xxxxx'x Industrial OTC Manual.
(e) For so long as the Company is a reporting company
under either Section 12(g) or 15(d) of the Exchange Act, the Company, at its
expense, will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail, and
at its expense, will furnish to you during the period ending five (5) years from
the date hereof, (i) as soon as practicable after the end of each fiscal year, a
balance sheet of the Company and any of its subsidiaries as at the end of such
fiscal year, together with statements of income, surplus and cash flow of the
Company and any subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as practicable after the end of each of the first
three fiscal quarters of each fiscal year, consolidated summary financial
information of the Company for such quarter in reasonable detail; (iii) as soon
as they are available, a copy of all reports (financial or other) mailed to
security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with the
Commission of any securities exchange or automated quotation system on which any
class of securities of the Company is listed; and (v) such other information as
you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary
or subsidiaries, such financial statements referred to in subsection (e) above
will be on a
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consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will deliver to you at or before the
First Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the several Underwriters such number of conformed
copies of the Registration Statement, including such financial statements but
without exhibits, and of all amendments thereto, as the several Underwriters may
reasonably request. The Company will deliver to or upon the order of the several
Underwriters, from time to time until the effective date of the Registration
Statement, as many copies of any Preliminary Prospectus filed with the
Commission prior to the effective date of the Registration Statement as the
Underwriters may reasonably request. The Company will deliver to the
Underwriters on the effective date of the Registration Statement and thereafter
for so long as a Prospectus is required to be delivered under the Act, from time
to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented, as the Underwriters may from time to time reasonably
request.
(h) The Company will make generally available to its
security holders and deliver to you as soon as it is practicable to do so but in
no event later than 90 days after the end of twelve months after its current
fiscal quarter, an earnings statement (which need not be audited) covering a
period of at least twelve consecutive months beginning after the effective date
of the Registration Statement, which shall satisfy the requirements of Section
11(a) of the Act.
(i) The Company will apply the net proceeds from the
sale of the Stock for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Stock and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.
(j) The Company will, promptly upon your request,
prepare and file with the Commission any amendments or supplements to the
Registration Statement, Preliminary Prospectus or Prospectus and take any other
action, which in the reasonable opinion of Bachner, Tally, Xxxxxxx & Xxxxxx LLP,
counsel to the several Underwriters, may be reasonably necessary or advisable in
connection with the distribution of the Stock, and will use its best efforts to
cause the same to become effective as promptly as possible.
(k) The Company will reserve and keep available that
maximum number of its authorized but unissued shares of Common Stock which are
issuable upon exercise of the Warrants outstanding from time to time.
(l) For a period of 12 months from the date of the
Prospectus, no officer, director or shareholder of the Company (including
beneficial holders of 5% or more of the Company's outstanding capital stock (the
"Principal Stockholders")) will offer, sell or dispose of, directly or
indirectly, any shares of Common Stock without the prior written consent of the
Representative.
- 11 -
12
In addition, holders of registration rights will agree not to exercise such
registration rights for a period of 12 months from the date of the Prospectus.
In order to enforce this covenant, the Company shall impose stop-transfer
instructions with respect to the shares of Common Stock owned by the Principal
Stockholders until the end of each such period.
(m) During the two year period commencing on the
effective date of the Registration Statement, the Company shall, at the
Representative's option, nominate a designee of the Representative for election
to the Company's Board of Directors. If no such designee is selected by
Representative, the Representative shall have the option to appoint an observer
selected by the Representative to attend all meetings of the Company's Board of
Directors during such period.
(n) Upon completion of this offering, the Company
will make all filings required, including registration under the Exchange Act,
to obtain the listing of its Common Stock on the Nasdaq SmallCap Market, and
will effect and maintain such listing for at least five years from the date of
this Agreement.
(o) The Company and each of the Principal
Stockholders represents that it or he has not taken and agree that it or he will
not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Stock or to facilitate the
sale or resale of the Stock.
(p) On the Closing Date, and simultaneously with the
delivery of the Stock, the Company shall execute and deliver to you,
individually and not as representative of the Underwriters, the Warrants. The
Warrants will be substantially in the form of the Stock Purchase Warrant filed
as an Exhibit to the Registration Statement.
(q) During the 18 month period commencing on the date
of this Agreement the Company will not, without the prior written consent of the
Representative, grant options to purchase shares of Common Stock at a price less
than the lesser of (i) initial public offering price of the Stock or (ii) the
fair market value of the Common Stock on the date of grant. During the six month
period commencing on the date of this Agreement, the Company will not, without
the prior written consent of the Representative, grant options to any current
officer of the Company. During the three year period from the First Closing
Date, the Company will not, without the prior written consent of the
Representative offer or sell any of its Securities pursuant to Regulation S.
(r) Xxxx Xxxxxxxx will be Chief Executive Officer of
the Company on the Closing Dates. The Company has obtained key person life
insurance on the life of Xxxx Xxxxxxxx in an amount of not less than $1 million
and will use its best efforts to maintain such insurance for a minimum period of
three years from the effective date of the Registration Statement or, if such
individual's employment is terminated prior to such date, to maintain such
insurance on his successor until the expiration of such period. For a period of
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13
13 months from the First Closing Date, the compensation of the executive
officers of the Company shall not be increased from the compensation levels
disclosed in the Prospectus.
(s) On the Closing Date and simultaneously with the
delivery of the Stock the Company shall execute and deliver to you, individually
and not as representative of the Underwriters, a financial advisory and
consulting agreement with you, in the form previously delivered to the Company
by you (the "Advisory Agreement") along with payment of the fee due thereunder,
by certified or bank cashier's checks, in New York Clearing House Funds, payable
to the order of the Representative.
(t) For a period of five years from the effective
date of the Registration Statement the Company (i) at its expense, shall cause
its regularly engaged independent certified public accountants to review (but
not audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-QSB quarterly report and the mailing of quarterly
financial information to stockholders and (ii) shall maintain BDO Xxxxxxx, LLP
as the regularly engaged independent certified public accountants to the
Company, and shall not effect a change therefrom without the prior written
consent of the Representative; provided that no such consent shall be necessary
if the new independent certified public accountant to the Company is a firm
which is a member of the so called "Big Six".
(u) As promptly as practicable after the Closing
Date, the Company will prepare, at its own expense, hard cover "bound volumes"
relating to the offering, and will distribute at least four of such volumes to
the individuals designated by the Representative or counsel to the several
Underwriters.
(v) The Company shall, for a period of six years
after the date of this Agreement, submit such reports to the Secretary of the
Treasury and to stockholders, as the Secretary may require, pursuant to Section
1202 of the Internal Revenue Code, as amended, or regulations promulgated
thereunder, in order for the Company to qualify as a "small business" so that
stockholders may realize special tax treatment with respect to their investment
in the Company.
(w) The Company shall not grant any additional
registration rights to any person which are exercisable prior to 13 months after
the First Closing Date.
(x) For a period of one year after the Closing Date,
the Company shall cause the transfer agent for the Company's Common Stock, at
its own expense, to provide the Representative, if so requested, with copies of
the Company's daily transfer sheets.
(y) Prior to the Closing Date, the Company shall
engage a public relations firm, acceptable to you, and shall maintain such
public relations firm for a period of not less than one year following the
effective date of the Registration Statement.
- 13 -
14
4. CONDITIONS OF UNDERWRITERS' OBLIGATION. The obligations of
the several Underwriters to purchase and pay for the Stock which they have
respectively agreed to purchase hereunder, are subject to the accuracy (as of
the date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not later
than 10:00 A.M., New York time, on the day following the date
of this Agreement, or at such later time or on such later date
as to which you may agree in writing; on or prior to the
Closing Dates no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that or a similar purpose shall have been
instituted or shall be pending or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for
additional information shall have been complied with to the
reasonable satisfaction of Bachner, Tally, Xxxxxxx & Xxxxxx
LLP, counsel to the several Underwriters; and no stop order
shall be in effect denying or suspending effectiveness of such
qualification nor shall any stop order proceedings with
respect thereto be instituted or pending or threatened. If
required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required
by Rule 424(b) under the Act.
(b) At the First Closing Date, you shall have
received the opinion, addressed to the Underwriters, dated as
of the First Closing Date, of Atlas, Xxxxxxxx, Trop & Borkson,
P.A., counsel for the Company, in form and substance
satisfactory to counsel for the several Underwriters, to the
effect that:
(i) the Company has been duly incorporated and
is validly existing as a corporation in good standing
under the laws of the State of Florida, with full
corporate power and authority to own its properties
and conduct its business as described in the
Registration Statement and Prospectus and is duly
qualified or licensed to do business as a foreign
corporation and is in good standing in each other
jurisdiction in which the ownership or leasing of its
properties or conduct of its business requires such
qualification;
(ii) to the best knowledge of such counsel, (a)
the Company has obtained, or is in the process of
obtaining, all licenses, permits and other
governmental authorizations necessary to the conduct
of its respective business as described in the
Prospectus, (b) such licenses, permits and other
governmental authorizations obtained are in full
force and effect, and (c) the Company is in all
material respects complying therewith;
- 14 -
15
(iii) the authorized capitalization of the
Company as of January 31, 1998 is as set forth under
"Capitalization" in the Prospectus; all shares of the
Company's outstanding stock requiring authorization
for issuance by the Company's board of directors have
been duly authorized, validly issued, are fully paid
and non-assessable and conform to the description
thereof contained in the Prospectus; the outstanding
shares of Common Stock of the Company have not been
issued in violation of the preemptive rights of any
stockholder and the stockholders of the Company do
not have any preemptive rights or other rights to
subscribe for or to purchase, nor are there any
restrictions upon the voting or transfer of any of
the Stock; the Stock conforms to the description
thereof contained in the Prospectus; the Stock has
been duly authorized and, when issued and delivered
pursuant to this Agreement, will be duly and validly
issued, fully paid, non-assessable, free of
preemptive rights and no personal liability will
attach to the ownership thereof; all prior sales by
the Company of the Company's securities have been
made in compliance with or under an exemption from
registration under the Act and applicable state
securities laws and the stockholders of the Company
have no recession rights with respect to any
outstanding securities of the Company; and to the
best of such counsel's knowledge, neither the filing
of the Registration Statement nor the offering or
sale of the Stock as contemplated by this Agreement
gives rise to any registration rights or other
rights, other than those which have been waived or
satisfied for or relating to the registration of any
shares of Common Stock;
(iv) each of this Agreement, the Warrants and
the Advisory Agreement have been duly and validly
authorized, executed and delivered by the Company and
assuming due execution by each other party hereto,
constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in
accordance with its respective terms (except as such
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or
affecting enforcement of creditors' rights and the
application of equitable principles in any action,
legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law);
(v) the certificates evidencing the Stock are
in due and proper form; the Warrants will be
exercisable for shares of Common Stock of the Company
in accordance with the terms of the Warrants and at
the prices therein provided for; at all times during
the term of the Warrants the shares of Common Stock
of the Company issuable upon exercise of the Warrants
will have been duly authorized and reserved for
issuance upon such exercise and such shares, when
issued upon such exercise in
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16
accordance with the terms of the Warrants and at the
price provided for, will be duly and validly issued,
fully paid and non-assessable;
(vi) such counsel knows of no pending or
threatened legal or governmental proceedings to which
the Company is a party which could materially
adversely affect the business, property, financial
conditions or operations of the Company; or which
question the validity of the Common Stock of the
Company, the Stock, this Agreement, the Warrants or
the Advisory Agreement, or of any action taken or to
be taken by the Company pursuant to this Agreement,
the Warrants or the Advisory Agreement, and no such
proceedings are known to such counsel to be
contemplated against the Company; there are no
governmental proceedings or regulations required to
be described or referred to in the Registration
Statement which are not so described or referred to;
(vii) the Company is not in violation of or
default under, nor will the execution and delivery of
this Agreement, the Warrants or the Advisory
Agreement, and the incurrence of the obligations
herein or therein set forth and the consummation of
the transactions herein or therein contemplated,
result in a breach or violation of, or constitute a
default under the articles of incorporation or
by-laws, in the performance or observance of any
material obligations, agreement, covenant or
condition contained in any bond, debenture, note or
other evidence of indebtedness or in any contract,
indenture, mortgage, loan agreement, lease, joint
venture or other agreement or instrument to which the
Company is a party or by which the Company or its
property may be bound or in violation of any material
order, rule, regulation, writ, injunction, or decree
of any government, governmental instrumentality or
court, domestic or foreign;
(viii) the Registration Statement has become
effective under the Act, and to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been
instituted or are pending before, or threatened by,
the Commission; the Registration Statement and the
Prospectus (except for the financial statements and
other financial data contained therein, or omitted
therefrom, as to which such counsel need express no
opinion) comply as to form in all material respects
with the applicable requirements of the Act and the
Rules and Regulations;
(ix) such counsel has participated in the
preparation of the Registration Statement and the
Prospectus and nothing has come to the attention of
such counsel to cause such counsel to have reason to
believe that the Registration Statement or any
amendment thereto at the time it
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17
became effective or as of the Closing Dates contained
any untrue statement of a material fact required to
be stated therein or omitted to state any material
fact required to be stated therein or necessary to
make the statements therein not misleading or that
the Prospectus or any supplement thereto contains any
untrue statement of a material fact or omits to state
a material fact necessary in order to make statements
therein, in light of the circumstances under which
they were made, not misleading (except, in the case
of both the Registration Statement and any amendment
thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto
and other financial information and schedules
contained therein, as to which such counsel need
express no opinion);
(x) all descriptions in the Registration
Statement and the Prospectus, and any amendment or
supplement thereto, of contracts and other documents
are accurate and fairly present the information
required to be shown, and such counsel is familiar
with all contracts and other documents referred to in
the Registration Statement and the Prospectus and any
such amendment or supplement or filed as exhibits to
the Registration Statement, and such counsel does not
know of any contracts or documents of a character
required to be summarized or described therein or to
be filed as exhibits thereto which are not so
summarized, described or filed;
(xi) no authorization, approval, consent, or
license of any governmental or regulatory authority
or agency is necessary in connection with the
authorization, issuance, transfer, sale or delivery
of the Stock by the Company, in connection with the
execution, delivery and performance of this Agreement
by the Company or in connection with the taking of
any action contemplated herein, or the issuance of
the Warrants or the Common Stock underlying the
Warrants, other than registrations or qualifications
of the Stock under applicable state or foreign
securities or Blue Sky laws and registration under
the Act;
(xii) the statements in the Registration
Statement under the captions "Business", "Use of
Proceeds", "Management", and "Description of Common
Stock" have been reviewed by such counsel and insofar
as they refer to descriptions of agreements,
statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions,
are correct in all material respects; and
(xiii) At the First Closing Date, you shall have
received the opinion, addressed to the Underwriters,
dated as of the First Closing Date, of __________,
patent counsel to the Company, in form and substance
satisfactory to counsel for the Underwriters, to the
effect that:
- 17 -
18
(a) we have carefully read and
analyzed the material set forth in the prospectus
under "Risk Factors - Difficulties in Maintaining
Proprietary Rights" and "Business - Proprietary
Rights" and, in our opinion, such material accurately
and adequately discloses the Company's patent
position and did not, at the time the Registration
Statement became effective and, at the First Closing
Date, does not contain an untrue statement of a
material fact or omit to state a material fact
required to be stated therein or necessary in order
to make the statements therein, in light of the
circumstances under which they were made, not
misleading;
(b) the patent applications referred
to in the Prospectus were properly filed and the
Patent and Trademark Office has not taken substantive
action with respect thereto; there has not been any
public use or sale by the Company prior to the filing
of any of the patents or patent applications which
would affect their validity and, in such counsel's
opinion, the claims contained in the applications
represent valid patent claims and such counsel has no
reason to believe that patents will not issue with
respect thereto or that the claims, contained in the
applications conflict with the rights of others;
(c) There are no facts which would
preclude the Company from having clear title to the
United States patents and United States patent
applications owned by the Company;
(d) The Company has not received any
notice challenging the validity or enforceability of
any of the United States patents owned by, or
licensed to, the Company;
(e) The Company does not lack nor will
it be unable to obtain any rights or licenses to use
United States patents necessary to the business as
currently conducted;
(f) There are no material legal or
governmental proceedings pending or threatened with
respect to any patents of the Company; and
(g) There have been no claims asserted
against the Company relating to the potential
infringement of or conflict with any patents,
trademarks, copyrights or trade secrets of others;
such counsel has conducted a search for existing
United States and European Union patents with claims
that might cover the Company's technology
particularly as it relates to the Virtual Operator,
Conversational Voice Dialing, Conversational Personal
Assistant and Magic Calendar and, in such counsel's
opinion, the Company's technology does not infringe
any United States patents.
- 18 -
19
(iv) the Stock has been duly
authorized for quotation on the Nasdaq SmallCap
Market.
Such opinion shall also cover such matters incident
to the transactions contemplated hereby as the Representative
or counsel for the several Underwriters shall reasonably
request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials
as to matters of fact; and may rely as to all matters of law
other than the law of the United States or of Florida upon
opinions of counsel satisfactory to you, in which case the
opinion shall state that they have no reason to believe that
you and they are not entitled to so rely.
(c) All corporate proceedings and other legal matters
relating to this Agreement, the Registration Statement, the
Prospectus and other related matters shall be satisfactory to
or approved by Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel
to the several Underwriters, and you shall have received from
such counsel a signed opinion, dated as of the First Closing
Date, together with copies thereof for each of the other
Underwriters, with respect to the validity of the issuance of
the Stock, the form of the Registration Statement and
Prospectus (other than the financial statements and other
financial data contained therein), the execution of this
Agreement and other related matters as you may reasonably
require. The Company shall have furnished to counsel for the
several Underwriters such documents as they may reasonably
request for the purpose of enabling them to render such
opinion.
(d) You shall have received a letter prior to the
effective date of the Registration Statement and again on and
as of the First Closing Date from BDO Xxxxxxx, LLP,
independent public accountants for the Company, substantially
in the form approved by you, and including estimates of the
Company's revenues and results of operations for the period
ending at the end of the month immediately preceding the
effective date and results of the comparable period during the
prior fiscal year.
(e) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be
true and correct with the same effect as if made on and as of
the Closing Dates and the Company shall have performed all of
its obligations hereunder and satisfied all the conditions on
its part to be satisfied at or prior to such Closing Date,
(ii) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all statements
which are required to be stated therein in accordance with the
Act and the Rules and Regulations, and in all material
respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or
supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading, (iii) there shall have been, since the
respective dates as of which information is
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20
given, no material adverse change, or any development
involving a prospective material adverse change in the
business, properties or conditions (financial or otherwise),
results of operations, capital stock, long-term or short-term
debt or general affairs of the Company from that set forth in
the Registration Statement and the Prospectus, except changes
which the Registration Statement and Prospectus indicate might
occur after the effective date of the Registration Statement,
and the Company shall not have incurred any material
liabilities or agreement not in the ordinary course of
business other than as referred to in the Registration
Statement and Prospectus; and (iv) except as set forth in the
Prospectus, no action, suit or proceeding at law or in equity
shall be pending or threatened against the Company which would
be required to be set forth in the Registration Statement, and
no proceedings shall be pending or threatened against the
Company before or by any commission, board or administrative
agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would materially and
adversely affect the business, property, conditions (financial
or otherwise), results of operations or general affairs of the
Company, and (v) you shall have received, at the First Closing
Date, a certificate signed by each of the Chairman of the
Board or the President and the principal financial or
accounting officer of the Company, dated as of the First
Closing Date, evidencing compliance with the provisions of
this subsection (e).
(f) Upon exercise of the option provided for in
Section 2(b) hereof, the obligations of the several
Underwriters (or, at its option, the Representative,
individually) to purchase and pay for the Option Stock
referred to therein will be subject (as of the date hereof and
as of the Option Closing Date) to the following additional
conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, and no stop
order suspending the effectiveness thereof shall have
been issued and no proceedings for that purpose shall
have been instituted or shall be pending, or, to your
knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable
request on the part of the Commission for additional
information shall have been complied with to the
satisfaction of Bachner, Tally, Xxxxxxx & Xxxxxx LLP,
counsel to the several Underwriters.
(ii) At the Option Closing Date there shall
have been delivered to you as Representative the
signed opinions of Atlas, Xxxxxxxx, Trop & Borkson,
P.A., counsel for the Company, and ________________,
patent counsel to the Company, both dated as of the
Option Closing Date, in form and substance
satisfactory to Bachner, Tally, Xxxxxxx & Xxxxxx LLP,
counsel to the several Underwriters, together with
copies of such opinions for each of the other several
Underwriters, which opinions shall be substantially
the same in scope
- 20 -
21
and substance as the opinions furnished to you at the
First Closing Date pursuant to Section 4(b), except
that such opinions, where appropriate, shall cover
the Option Stock.
(iii) At the Option Closing Date there shall
have been delivered to you a certificate of the
Chairman of the Board or the President and the
principal financial or accounting officer of the
Company, dated the Option Closing Date, in form and
substance satisfactory to Bachner, Tally, Xxxxxxx &
Xxxxxx LLP, counsel to the several Underwriters,
substantially the same in scope and substance as the
certificate furnished to you at the First Closing
Date pursuant to Section 4(e).
(iv) At the Option Closing Date there shall
have been delivered to you a letter in form and
substance satisfactory to you from BDO Xxxxxxx, LLP,
dated the Option Closing Date and addressed to the
Underwriters confirming the information in their
letter referred to in Section 4(d) hereof and stating
that nothing has come to their attention during the
period from the ending date of their review referred
to in said letter to a date not more than five
business days prior to the Option Closing Date, which
would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the
Option Closing Date in connection with the sale and
issuance of the Option Stock shall be satisfactory in
form and substance to you, and you and Bachner,
Tally, Xxxxxxx & Xxxxxx LLP, counsel to the several
Underwriters, shall have been furnished with all such
documents, certificates, affidavits and opinions as
you may request in connection with this transaction
in order to evidence the accuracy and completeness of
any of the representations, warranties or statements
of the Company or its compliance with any of the
covenants or conditions contained herein.
(g) No action shall have been taken by the Commission
or the NASD the effect of which would make it improper, at any
time prior to the Closing Date, for members of the NASD to
execute transactions (as principal or agent) in the Common
Stock and no proceedings for the taking of such action shall
have been instituted or shall be pending, or, to the knowledge
of the several Underwriters or the Company, shall be
contemplated by the Commission or the NASD. The Company
represents that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or
the NASD. The Company shall advise the several Underwriters of
any NASD affiliation of any of its officers, directors,
stockholders or their affiliates.
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22
If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the several Underwriters under this Agreement may be cancelled
at, or at any time prior to, each Closing Date by the Representative. Any such
cancellation shall be without liability of the Underwriters to the Company.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to sell and deliver the Stock is subject to the
following conditions:
(a) The Registration Statement shall have become
effective not later than 10:00 A.M. New York time, on the day
following the date of this Agreement, or on such later date as
the Company and the Representative may agree to in writing.
(b) At the Closing Dates, no stop orders suspending
the effectiveness of the Registration Statement shall have
been issued under the Act or any proceedings therefor
initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided
for in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Stock on
exercise of the option provided for in Section 2(b) hereof shall be affected.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act against any losses, claims, damages or liabilities, joint
or several (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all attorneys'
fees), to which such Underwriter or such controlling person may become subject,
under the Act or otherwise, and will reimburse, as incurred, such Underwriter
and such controlling persons for any legal or other expenses reasonably incurred
in connection with investigating, defending against or appearing as a third
party witness in connection with any losses, claims, damages or liabilities,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Stock under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise out
of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment
or supplement thereto, or in any Blue Sky Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that
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23
the Company will not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Underwriters specifically for
use in the preparation of the Registration Statement or any such amendment or
supplement thereof or any such Blue Sky Application or any such preliminary
Prospectus or the Prospectus or any such amendment or supplement thereto. This
indemnity will be in addition to any liability which the Company may otherwise
have.
(b) Each Underwriter severally, but not jointly, will
indemnify and hold harmless the Company, each of the Company's directors, each
nominee (if any) for director of the Company named in the Prospectus, each of
the Company's officers who have signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of the Act, against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (i) in reliance upon and in conformity with written
information furnished to the Company by you or by any Underwriter through you
specifically for use in the preparation thereof and (ii) relates to the
transactions effected by the Underwriters in connection with the offer and sale
of the Stock contemplated hereby. This indemnity agreement will be in addition
to any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify in writing the indemnifying party
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any
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24
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
an Underwriter or a person who controls such Underwriter within the meaning of
the Act, the fees and expenses of such counsel shall be at the expense of the
indemnifying party if (i) the employment of such counsel has been specifically
authorized in writing by the indemnifying party or (ii) the named parties to any
such action (including any impleaded parties) include both such Underwriter or
such controlling person and the indemnifying party and in the judgment of the
Representative, it is advisable for the Representative or such Underwriters or
controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such Underwriter or such controlling person, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall be
designated in writing by you). No settlement of any action against an
indemnified party shall be made without the consent of the indemnifying party,
which shall not be unreasonably withheld in light of all factors of importance
to such indemnifying party.
7. CONTRIBUTION. In order to provide for just and equitable
contribution under the Act in any case in which (i) any Underwriter makes claim
for indemnification pursuant to Section 7 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 6 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in either
such case (after contribution from others) in such proportions that all such
Underwriters are responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per share appearing on the cover page of the Prospectus
bears to the public offering price appearing thereon, and the Company shall be
responsible for the remaining portion, provided, however, that (a) if such
allocation is not permitted by applicable law then the relative fault of the
Company and the Underwriters and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company, or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that (a) it would not be just
and
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25
equitable if the respective obligations of the Company and the Underwriters to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriters and their
respective controlling persons in the aggregate were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the first sentence of this Section
7, (b) that the contribution of each contributing Underwriter shall not be in
excess of its proportionate share (based on the ratio of the number of shares of
Stock purchased by such Underwriter to the number of shares of Stock purchased
by all contributing Underwriters) of the portion of such losses, claims, damages
or liabilities for which the Underwriters are responsible. 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 is not guilty of such
fraudulent misrepresentation. As used in this paragraph, the term "Underwriter"
includes any officer, director, or other person who controls an Underwriter
within the meaning of Section 15 of the Act and the word "Company" includes any
officer, director, or person who controls the Company within the meaning of
Section 15 of the Act. If the full amount of the contribution specified in this
paragraph is not permitted by law, then any Underwriter and each person who
controls any Underwriter shall be entitled to contribution from the Company, its
officers, directors and controlling persons to the full extent permitted by law.
The foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the Act other
than the Company and the Underwriters. No contribution shall be requested with
regard to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
8. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective
or the sale of the Stock to the Underwriters is consummated, the Company will
pay all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company and the Company's accountants; the costs of investigative reports
regarding the Company, its principal stockholders and/or its officers and
directors; the costs and expenses incident to the preparation, printing, filing
and distribution under the Act of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto),
Preliminary Prospectus and the Prospectus, as amended or supplemented, the fee
of the NASD in connection with the filing required by the NASD relating to the
offering of the Stock contemplated hereby; all expenses, including reasonable
fees and disbursements of counsel to the Underwriters, in connection with the
qualification of the Stock under the state securities or blue sky laws which the
Representative shall designate; the cost of printing and furnishing to the
several Underwriters copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, this Agreement, the Agreement Among Underwriters,
Selling Agreement, Underwriters' Questionnaire, Underwriters' Power of Attorney
and the Blue Sky Memorandum, any fees relating to the listing of the Common
Stock on the Nasdaq SmallCap Market or other securities exchange, the cost of
printing the certificates representing the Stock, the fees of the transfer
agent, the cost of publication of at least three "tombstones" of the offering
(at least one of which shall be in a national business
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26
newspaper and one of which shall be in a major New York newspaper and the cost
of preparing at least four hard cover "bound volumes" relating to the offering
for individuals designated by the Representative. The Company shall pay any and
all taxes (including any transfer, franchise, capital stock or other tax imposed
by any jurisdiction) on sales to the Underwriters hereunder. The Company will
also pay all cost and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus as called for
in Section 3(a) of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company
shall at the First Closing Date pay to Commonwealth Associates in its individual
rather than representative capacity (i) a non-accountable expense allowance of
$_______ (1.5% of the gross proceeds of the offering) of which $25,000 has been
paid and (ii) an advisory fee of $________ (2% of the gross proceeds of the
offering). In the event the overallotment option is exercised, the Company shall
pay to Commonwealth Associates at the Option Closing Date an additional amount
equal to 3.5% of the gross proceeds from the sale of Stock by the Company on
exercise of the overallotment option. In the event the transactions contemplated
hereby are not consummated by reason of any action by the Representative (except
if such prevention is based upon a breach by the Company of any covenant,
representation or warranty contained herein or because any other condition to
the Underwriters' obligations hereunder required to be fulfilled by the Company
is not fulfilled) the Company shall be liable for the accountable expenses of
the Underwriters including legal fees. In the event the transactions
contemplated hereby are not consummated by reason of any action of the Company
or because of a breach by the Company of any covenant, representation or
warranty herein, the Company shall be liable for the accountable expenses of the
Underwriters, including legal fees.
(c) No person is entitled either directly or
indirectly to compensation from the Company, from the Representative or from any
other person for services as a finder in connection with the proposed offering,
and the Company agrees to indemnify and hold harmless the Representative and the
other Underwriters, against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all costs of defense and investigation and all attorneys' fees), to
which the Company, the Representative or such other Underwriter or person may
become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon the claim of any
person (other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the proposed offering
by reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. SUBSTITUTION OF UNDERWRITERS. If any Underwriters shall for
any reason not permitted hereunder cancel their obligations to purchase the
First Stock hereunder, or shall fail to take up and pay for the number of First
Stock set forth opposite their respective names in Schedule A hereto upon tender
of such First Stock in accordance with the terms hereof, then:
(a) If the aggregate number of shares of First Stock
which such Underwriter or Underwriters agreed but failed to purchase does not
exceed 10% of the total
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27
number of First Stock, the other Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the First
Stock which such defaulting Underwriter or Underwriters agreed but failed to
purchase.
(b) If any Underwriter or Underwriters so default and
the agreed number of First Stock with respect to which such default or defaults
occurs is more than 10% of the total number of First Stock, the remaining
Underwriters shall have the right to take up and pay for (in such proportion as
may be agreed upon among them) the First Stock which the defaulting Underwriter
or Underwriters agreed but failed to purchase. If such remaining Underwriters do
not, at the First Closing Date, take up and pay for the First Stock which the
defaulting Underwriter or Underwriters agreed but failed to purchase, the time
for delivery of the First Stock shall be extended to the next business day to
allow the several Underwriters the privilege of substituting within twenty-four
hours (including nonbusiness hours) another underwriter or underwriters
satisfactory to the Company. If no such underwriter or underwriters shall have
been substituted as aforesaid, within such twenty-four hour period, the time of
delivery of the First Stock may, at the option of the Company, be again extended
to the next following business day, if necessary, to allow the Company the
privilege of finding within twenty-four hours (including nonbusiness hours)
another underwriter or underwriters to purchase the First Stock which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted Underwriters to
take up the First Stock of the defaulting Underwriter or Underwriters as
provided in this Section, (i) the Company or the Representative shall have the
right to postpone the time of delivery for a period of not more than seven
business days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
made necessary, and (ii) the respective numbers of First Stock to be purchased
by the remaining Underwriters or substituted Underwriters shall be taken at the
basis of the underwriting obligation for all purposes of this Agreement.
If in the event of a default by one or more Underwriters and
the remaining Underwriters shall not take up and pay for all the First Stock
agreed to be purchased by the defaulting Underwriters or substitute another
underwriter or underwriters as aforesaid, the Company shall not find or shall
not elect to seek another underwriter or underwriters for such First Stock as
aforesaid, then this Agreement shall terminate.
If, following exercise of the option provided in Section 2(b)
hereof, any Underwriter or Underwriters shall for any reason not permitted
hereunder cancel their obligations to purchase Option Stock at the Option
Closing Date, or shall fail to take up and pay for the number of Option Stock,
which they become obligated to purchase at the Option Closing Date upon tender
of such Option Stock in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Stock of the defaulting Underwriters in the manner provided in Section 9(b)
hereof. If the remaining Underwriters or substituted Underwriters shall not take
up and pay for all such Option Stock, the Underwriters shall be entitled to
purchase the number of Option Stock for
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28
which there is no default or, at their election, the option shall terminate, the
exercise thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any nondefaulting
Underwriter to the Company, provided that the provisions of this Section 9 shall
not in any event affect the liability of any defaulting Underwriter to the
Company arising out of such default.
10. EFFECTIVE DATE. The Agreement shall become effective upon
its execution except that you may, at your option, delay its effectiveness until
11:00 A.M., New York time on the first full business day following the effective
date of the Registration Statement, or at such earlier time after the effective
date of the Registration Statement as you in your discretion shall first
commence the initial public offering by the Underwriters of any of the Stock.
The time of the initial public offering shall mean the time of release by you of
the first newspaper advertisement with respect to the Stock, or the time when
the Stock is first generally offered by you to dealers by letter or telegram,
whichever shall first occur. This Agreement may be terminated by you at any time
before it becomes effective as provided above, except that Sections 3(c), 6, 7,
8, 13, 14, 15 and 16 shall remain in effect notwithstanding such termination.
11. TERMINATION.
(a) This Agreement, except for Sections 3(c), 6, 7,
8, 13, 14, 15 and 16 hereof, may be terminated at any time prior to the First
Closing Date, and the option referred to in Section 2(b) hereof, if exercised,
may be cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriters for the resale of the Stock agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree; (ii)
trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market having been
suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions having occurred; (vi) a pending or threatened legal or governmental
proceeding or action relating generally to the Company's business, or a
notification having been received by the Company of the threat of any such
proceeding or action, which could materially adversely affect the Company; (vii)
except as contemplated by the Prospectus, the Company are merged or consolidated
into or all or substantially all of the capital stock or assets of the Company
are acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs; (viii) the passage by the Congress of the United States or by
any state legislative body, or federal or state agency or other authority of any
act, measure, rule or regulation, or the adoption of any orders, rules or
regulations by any
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29
governmental body or any authoritative accounting institute or board, or any
governmental executive, which is reasonably believed likely by the
Representative to have a material impact on the business, financial conditions
or financial statements of the Company or the market for the securities offered
pursuant to the Prospectus; (ix) any adverse change in the financial or
securities markets beyond normal market fluctuations, having occurred since the
date of this Agreement, or (x) any material adverse change having occurred,
since the respective dates of which information is given in the Registration
Statement and Prospectus, in the earnings, business, prospects or general
conditions of the Company, financial or otherwise, whether or not arising in the
ordinary course of business.
(b) If you elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section 11
or in Section 10, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
12. WARRANTS. At or before the First Closing Date, the Company
will sell to Commonwealth Associates (for its own account and not as
Representative of the several Underwriters), or its designees for a
consideration of $140, and upon the terms and conditions set forth in the form
of Warrant annexed as an exhibit to the Registration Statement, Warrants to
purchase an aggregate of 140,000 shares of Common Stock of the Company. In the
event of conflict in the terms of this Agreement and the Warrants, the language
of the Warrants shall control.
13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. The respective indemnities, agreements, representations, warranties
and other statements of the Company or its Principal Stockholders where
appropriate, and the Underwriters set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriters, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Stock and the termination of this Agreement.
14. NOTICE. Any communications specifically required hereunder
to be in writing, if sent to the Underwriters, will be mailed, delivered or
telegraphed and confirmed to them at Commonwealth Associates, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 with a copy sent to Bachner, Tally, Xxxxxxx & Xxxxxx
LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at Xxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, with a copy sent to Atlas,
Xxxxxxxx, Trop & Borkson, P.A., 000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxxx 0000, Xxxx
Xxxxxxxxxx, XX 00000.
15. PARTIES IN INTEREST. The Agreement herein set forth is
made solely for the benefit of the several Underwriters, the Company and, to the
extent expressed, the Principal Stockholders, any person controlling the Company
or any of the several Underwriters, and directors of the Company, nominees for
directors (if any) named in the Prospectus, its officers who have signed the
Registration Statement, and their respective executors, administrators,
successors, and assigns and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not
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30
include any purchaser, as such purchaser, from any of the several Underwriters
of the Stock. All of the obligations of the Underwriters hereunder are several
and not joint.
16. APPLICABLE LAW. This Agreement will be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements made and to be entirely performed within New York.
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31
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company, the Selling Stockholders and the several
Underwriters in accordance with its terms.
Very truly yours,
REGISTRY MAGIC INCORPORATED
By:
------------------------------------------
Xxxx Xxxxxxxx, President and Chief
Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
For itself and as Representative COMMONWEALTH ASSOCIATES
of the several Underwriters a New York limited partnership
By: COMMONWEALTH MANAGEMENT CO., INC.
a New York corporation, its general partner
By:
----------------------------------------
Xxxxxx Xxxxxx, Vice Chairman
By:
----------------------------------------
Basil Aschuitto, Chief Operating Officer
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SCHEDULE A
NAME OF UNDERWRITER NUMBER OF SHARES OF STOCK TO BE PURCHASED
Commonwealth Associates
Total:
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