UNDERWRITING AGREEMENT
BETWEEN
AUGMENT SYSTEMS, INC.
AND
GKN SECURITIES CORP.
AND
XXXXXXX EQUITIES, INC.
DATED: ________ __, 1997
TABLE OF CONTENTS
Page
INDEX OF DEFINITIONS..............................................................................................v
1. Purchase and Sale of Securities..........................................................................1
1.1 Firm Securities.................................................................................1
1.1.1 Purchase of Firm Securities............................................................1
1.1.2 Payment and Delivery...................................................................1
1.2 Over-Allotment Option...........................................................................2
1.2.1 Option Securities......................................................................2
1.2.2 Exercise of Option.....................................................................2
1.2.3 Payment and Delivery...................................................................2
1.3 Underwriters' Purchase Option...................................................................3
1.3.1 Purchase Option........................................................................3
1.3.2 Payment and Delivery...................................................................3
2. Representations and Warranties of the Company............................................................3
2.1 Filing of Registration Statement................................................................3
2.1.1 Pursuant to the Act....................................................................3
2.1.2 Pursuant to the Exchange Act...........................................................3
2.2 No Stop Orders, Etc.............................................................................4
2.3 Disclosures in Registration Statement...........................................................4
2.3.1 Securities Act and Exchange Act Representation.........................................4
2.3.2 Disclosure of Contracts................................................................4
2.3.3 Prior Securities Transactions..........................................................5
2.4 Changes After Dates in Registration Statement...................................................5
2.4.1 No Material Adverse Change.............................................................5
2.4.2 Recent Securities Transactions, Etc....................................................5
2.5 Independent Accountants.........................................................................5
2.6 Financial Statements............................................................................5
2.7 Authorized Capital; Options; Etc................................................................6
2.8 Valid Issuance of Securities; Etc...............................................................6
2.8.1 Outstanding Securities.................................................................6
2.8.2 Securities Sold Pursuant to this Agreement.............................................6
2.9 Registration Rights of Third Parties............................................................7
2.10 Validity and Binding Effect of Agreements.......................................................7
2.11 No Conflicts, Etc...............................................................................7
2.12 No Defaults; Violations.........................................................................7
2.13 Corporate Power; Licenses; Consents.............................................................8
2.13.1 Conduct of Business....................................................................8
2.13.2 Transactions Contemplated Herein.......................................................8
2.14 Title to Property; Insurance....................................................................8
2.15 Litigation; Governmental Proceedings............................................................8
2.16 Good Standing...................................................................................8
2.17 Taxes...........................................................................................9
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Page
2.18 Employees' Options..............................................................................9
2.19 Transactions Affecting Disclosure to NASD.......................................................9
2.19.1 Finder's Fees..........................................................................9
2.19.2 Payments Within Twelve Months..........................................................9
2.19.3 Use of Proceeds........................................................................9
2.19.4 Insiders' NASD Affiliation.............................................................9
2.20 Foreign Corrupt Practices Act..................................................................10
2.21 Nasdaq Eligibility.............................................................................10
2.22 Intangibles....................................................................................10
2.23 Relations With Employees.......................................................................10
2.23.1 Employee Matters......................................................................10
2.23.2 Employee Benefit Plans................................................................11
2.24 Officers' Certificate..........................................................................11
2.25 Warrant Agreement..............................................................................11
2.26 Agreements With Insiders.......................................................................11
2.26.1 Lock-Up Agreements....................................................................11
2.26.2 Right of First Refusal and Rule 144 Sales.............................................11
2.27 Subsidiaries...................................................................................11
2.28 Unaudited Financials...........................................................................12
3. Covenants of the Company................................................................................12
3.1 Amendments to Registration Statement...........................................................12
3.2 Federal Securities Laws........................................................................12
3.2.1 Compliance............................................................................12
3.2.2 Filing of Final Prospectus............................................................12
3.2.3 Exchange Act Registration.............................................................12
3.3 Blue Sky Filing................................................................................12
3.4 Delivery to the Underwriters of Prospectuses...................................................13
3.5 Events Requiring Notice to the Underwriters....................................................13
3.6 Review of Financial Statements.................................................................13
3.7 Reserved.......................................................................................13
3.8 Secondary Market Trading and Standard & Poor's.................................................13
3.9 Nasdaq Maintenance.............................................................................14
3.10 Warrant Solicitation and Registration of Common Stock Underlying the
Warrants.......................................................................................14
3.10.1 Warrant Solicitation and Warrant Solicitation Fees....................................14
3.10.2 Registration of Common Stock..........................................................14
3.11 Reserved.......................................................................................14
3.12 Reports to the Underwriters....................................................................14
3.12.1 Periodic Reports, Etc.................................................................14
3.12.2 Transfer Sheets and Weekly Position Listings..........................................15
3.12.3 Secondary Market Trading Memorandum...................................................15
3.13 Underwriters' Purchase Option..................................................................15
3.14 Disqualification of Form SB-2..................................................................15
3.15 Payment of Expenses............................................................................15
3.15.1 General Expenses......................................................................15
3.15.2 Non-Accountable Expenses..............................................................16
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Page
3.16 Application of Net Proceeds....................................................................16
3.17 Delivery of Earnings Statements to Security Holders............................................16
3.18 Key Person Life Insurance......................................................................17
3.19 Stabilization..................................................................................17
3.20 Internal Controls..............................................................................17
3.21 Accountants and Lawyers........................................................................17
3.22 Transfer Agent.................................................................................17
3.23 Sale of Securities.............................................................................17
3.24 Exercise Price of Options......................................................................17
4. Conditions of the Underwriters' Obligations.............................................................17
4.1 Regulatory Matters.............................................................................17
4.1.1 Effectiveness of Registration Statement...............................................17
4.1.2 NASD Clearance........................................................................18
4.1.3 No Blue Sky Stop Orders...............................................................18
4.2 Company Counsel Matters........................................................................18
4.2.1 Effective Date Opinion of Counsel.....................................................18
4.2.2 Closing Date and Option Closing Date
Opinion of Counsel....................................................................22
4.2.3 Reliance..............................................................................22
4.2.4 Secondary Market Trading Memorandum...................................................23
4.3 Cold Comfort Letter............................................................................23
4.4 Officers' Certificates.........................................................................24
4.4.1 Officers' Certificate.................................................................24
4.4.2 Secretary's Certificate...............................................................24
4.5 No Material Changes............................................................................24
4.6 Delivery of Underwriters' Purchase Option......................................................25
4.7 Opinion of Counsel for the Underwriters........................................................25
5. Indemnification.........................................................................................25
5.1 Indemnification of the Underwriters............................................................25
5.1.1 General...............................................................................25
5.1.2 Procedure.............................................................................26
5.2 Indemnification of the Company.................................................................26
5.3 Contribution...................................................................................27
5.3.1 Contribution Rights...................................................................27
5.3.2 Contribution Procedure................................................................27
6. Default by an Underwriter...............................................................................28
7. Additional Covenants....................................................................................28
7.1 Attendance at Board Meetings...................................................................28
7.2 Right of First Refusal.........................................................................28
7.3 Rule 144 Sales.................................................................................28
7.4 Press Releases.................................................................................29
7.5 Form S-8 or any Similar Form...................................................................29
7.6 [Omitted]......................................................................................29
iii
Page
7.7 [Omitted]......................................................................................29
8. Representations and Agreements to Survive Delivery......................................................29
9. Effective Date of This Agreement and Termination Thereof................................................29
9.1 Effective Date.................................................................................29
9.2 Termination....................................................................................29
9.3 Notice.........................................................................................30
9.4 Expenses.......................................................................................30
9.5 Indemnification................................................................................30
10. Miscellaneous...........................................................................................30
10.1 Notices........................................................................................30
10.2 Headings.......................................................................................31
10.3 Amendment......................................................................................31
10.4 Entire Agreement...............................................................................31
10.5 Binding Effect.................................................................................31
10.6 Governing Law, Jurisdiction....................................................................31
10.7 Execution in Counterparts......................................................................32
10.8 Waiver, Etc....................................................................................32
iv
INDEX OF DEFINITIONS
Term Section
Act................................................................................................. 2.1.1
BSE.................................................................................................. 2.21
Closing Date.........................................................................................1.1.2
Code................................................................................................2.23.2
Commission...........................................................................................2.1.1
Common Stock.........................................................................................1.1.1
Company.......................................................................................Introductory
Paragraph
Effective Date.......................................................................................1.2.2
ERISA...............................................................................................2.23.2
ERISA Plans.........................................................................................2.23.2
Exchange Act.........................................................................................2.1.2
Filing Date.........................................................................................2.19.2
Firm Securities......................................................................................1.1.1
GKN...........................................................................................Introductory
Paragraph
Insiders............................................................................................2.26.1
Intangibles...........................................................................................2.22
Xxxxxxx.......................................................................................Introductory
Paragraph
NASD................................................................................................2.19.1
Nasdaq................................................................................................2.21
Option Closing Date..................................................................................1.2.2
Option Securities....................................................................................1.2.1
Over-allotment Option................................................................................1.2.1
Preliminary Prospectus...............................................................................2.1.1
Principal Stockholders.................................................................................7.2
Prospectus...........................................................................................2.1.1
Public Securities....................................................................................1.2.1
Registration Statement...............................................................................2.1.1
Regulations..........................................................................................2.1.1
SAS....................................................................................................4.3
Secondary Market Trading Memorandum.................................................................3.12.3
Securities...........................................................................................1.3.1
Transfer Agent........................................................................................3.22
Unaudited Financials..................................................................................2.28
Underwriters..................................................................................Introductory
Paragraph
Underwriters' Purchase Option........................................................................1.3.1
Underwriters' Sec rities.............................................................................1.3.1
Underwriters' Shares.................................................................................1.3.1
Underwriters' Warrants...............................................................................1.3.1
Warrant(s)...........................................................................................1.1.1
Warrant Agreement.....................................................................................2.25
v
AUGMENT SYSTEMS, INC.
1,800,000 Shares of Common Stock
and
1,800,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
New York, New York
_________ __, 0000
XXX Securities Corp.
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxx Equities, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, Augment Systems, Inc., a Delaware corporation
("Company"), hereby confirms its agreement with GKN Securities Corp. ("GKN") and
Xxxxxxx Equities, Inc. ("Xxxxxxx" and, together with GKN, being referred to
herein variously as "you" or the "Underwriters") as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Securities. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriters and the Underwriters agree to purchase from the Company 1,800,000
shares of the Company's Common Stock ("Common Stock") at a purchase price (net
of discounts and commissions) of $5.005 per share and 1,800,000 Redeemable
Common Stock Purchase Warrants ("Warrant(s)") at a purchase price of $0.1365 per
Warrant, each Warrant to purchase one share of Common Stock at an initial
purchase price of $6.60 per share commencing one year after the Effective Date
(as hereinafter defined) until the fifth anniversary of the Effective Date
(these shares of Common Stock and Warrants being referred to herein as "Firm
Securities"), with 900,000 shares of Common Stock and 900,000 Warrants being
sold to and purchased by each of GKN and Xxxxxxx.
1.1.2 Payment and Delivery. Delivery and payment for the Firm
Securities shall be made at 10:00 A.M., New York time, on or before the third
business day following the date that the Firm Securities commence trading or at
such earlier time as the Underwriters shall determine, or at such other time as
shall be agreed upon by the Underwriters and the Company at the offices
1
of GKN or at such other place as shall be agreed upon by the Underwriters and
the Company. The hour and date of delivery and payment for the Firm Securities
are called the "Closing Date." Payment for the Firm Securities shall be made on
the Closing Date at the Underwriters' election by wire transfer or by certified
or bank cashier's check(s) in New York Clearing House funds, payable to the
order of the Company upon delivery to you of certificates (in form and substance
satisfactory to the Underwriters) representing the Firm Securities for the
account of the Underwriters. The Firm Securities shall be registered in such
name or names and in such authorized denominations as the Underwriters may
request in writing at least two full business days prior to the Closing Date.
The Company will permit the Underwriters to examine and package the Firm
Securities for delivery, at least one full business day prior to the Closing
Date. The Company shall not be obligated to sell or deliver the Firm Securities
except upon tender of payment by the Underwriters for all the Firm Securities.
1.2 Over-Allotment Option.
1.2.1 Option Securities. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm
Securities, the Underwriters are hereby granted an option to purchase up to an
additional 270,000 shares of Common Stock and/or 270,000 Warrants from the
Company ("Over-allotment Option"). Such additional 270,000 shares of Common
Stock and 270,000 Warrants are hereinafter referred to as the "Option
Securities." The Firm Securities and the Option Securities are, together with
the shares of Common Stock issuable upon exercise of the Warrants, hereinafter
referred to collectively as the "Public Securities." The purchase price to be
paid for the Option Securities will be the same price per Option Security as the
price per Firm Security set forth in Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Underwriters as to all
or any part of the Option Securities at any time, from time to time, within
forty-five business days after the effective date ("Effective Date") of the
Registration Statement (as hereinafter defined). The Underwriters will not be
under any obligation to purchase any Option Securities prior to the exercise of
the Over-allotment Option. The Over-allotment Option granted hereby may be
exercised by the giving of oral notice to the Company from the Underwriters,
which must be confirmed by a letter or telecopy setting forth the number of
Option Securities to be purchased, the date and time for delivery of and payment
for the Option Securities and stating that the Option Securities referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution and sale of the Firm Securities. If such notice is given
at least two full business days prior to the Closing Date, the date set forth
therein for such delivery and payment will be the Closing Date. If such notice
is given thereafter, the date set forth therein for such delivery and payment
will not be earlier than five full business days after the date of the notice,
unless we mutually agree to an earlier date. If such delivery and payment for
the Option Securities does not occur on the Closing Date, the date and time of
the closing for such Option Securities will be as set forth in the notice
(hereinafter "Option Closing Date"). Upon exercise of the Over-allotment Option,
the Company will become obligated to convey to the Underwriters, and, subject to
the terms and conditions set forth herein, the Underwriters will become
obligated to purchase, the number of Option Securities specified in such notice.
1.2.3 Payment and Delivery. Payment for the Option Securities
will be at the Underwriters' election by wire transfer or by certified or bank
cashier's check(s) in New York Clearing House funds, payable to the order of the
Company at the offices of GKN or at such other
2
place as shall be agreed upon by the Underwriters and the Company upon delivery
to you of certificates representing such securities for the Underwriters. The
certificates representing the Option Securities to be delivered will be in such
denominations and registered in such names as the Underwriters request not less
than two full business days prior to the Closing Date or the Option Closing
Date, as the case may be, and will be made available to the Underwriters for
inspection, checking and packaging at the aforesaid office of the Company's
transfer agent or correspondent not less than one full business day prior to
such Closing Date.
1.3 Underwriters' Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue and
sell to the Underwriters (and/or their designees) on the Closing Date, for an
aggregate purchase price of $100, an option ("Underwriters' Purchase Option")
exercisable for a period of four years commencing one year from the Effective
Date, for the purchase of an aggregate of 180,000 shares of Common Stock
("Underwriters' Shares") at an initial exercise price of 165% of the initial
offering price of a share of common stock (i.e., $9.075 per share of Common
Stock) and/or 180,000 Warrants ("Underwriters' Warrants") at an initial exercise
price of 165% of the initial offering price of a Warrant (i.e. $0.2475 per
Warrant). Each of the Underwriters' Shares and the Underwriters' Warrants is
identical to the Firm Securities. The Underwriters' Purchase Option, the
Underwriters' Shares, the Underwriters' Warrants and the shares of Common Stock
issuable upon exercise of the Underwriters' Warrants are hereinafter referred to
collectively as the "Underwriters' Securities." The Public Securities and the
Underwriters' Securities are hereinafter referred to collectively as the
"Securities."
1.3.2 Payment and Delivery. Delivery and payment for the
Underwriters' Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriters, upon payment therefor, certificates for the
Underwriters' Purchase Option in the name or names and in such authorized
denominations as the Underwriters may request.
2. Representations and Warranties of the Company. The Company represents
and warrants to the Underwriters as follows:
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form SB-2 (No. 333-21401), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Securities under the Securities Act of 1933, as amended ("Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act and the rules and
regulations ("Regulations") of the Commission under the Act. Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Regulations), is hereinafter called the "Registration
Statement," and the form of the final prospectus dated the Effective Date (or,
if applicable, the form of final prospectus filed with the Commission pursuant
to Rule 424 of the Regulations), is hereinafter called the "Prospectus." The
Registration Statement has been declared effective by the Commission on the date
hereof.
3
2.1.2 Pursuant to the Exchange Act. The Company has filed with
the Commission a registration statement on Form 8-A (No. 0-000-2234) providing
for the registration under the Securities Exchange Act of 1934, as amended
("Exchange Act"), of the Common Stock and Warrants. Such registration of the
Common Stock and Warrants has been declared effective by the Commission on the
date thereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best
of the Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
2.3 Disclosures in Registration Statement.
2.3.1 Securities Act and Exchange Act Representation. At the
time the Registration Statement became effective and at all times subsequent
thereto up to and including the Closing Date and the Option Closing Date, if
any, the Registration Statement and the Prospectus and any amendment or
supplement thereto contained and will contain all material statements which are
required to be stated therein in accordance with the Act and the Regulations,
and conformed and will conform in all material respects to the requirements of
the Act and the Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, during such time period and
on such dates, contained or will contain any untrue statement of a material fact
or omitted or will omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, nor did they or will
they contain any untrue statement of a material fact nor did they or will they
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The representation and warranty made in this Section 2.3.1 does
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters expressly for use in the Registration Statement or Prospectus or
any amendment thereof or supplement thereto.
2.3.2 Disclosure of Contracts. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate and presents fairly the information required to be disclosed and there
are no contracts or other documents required to be described in the Registration
Statement or the Prospectus or to be filed with the Commission as exhibits to
the Registration Statement which have not been so described or filed. Each
contract or other instrument (however characterized or described) to which the
Company is a party or by which its property or business is or may be bound or
affected and (i) which is referred to in the Pro spectus, or (ii) is material to
the Company's business, has been duly and validly executed, is in full force and
effect in all material respects and is enforceable against the parties thereto
in accordance with its
4
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, as
enforceability of any indemnification provision may be limited under the federal
and state securities laws, and that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. None of such contracts or instruments has been assigned by the
Company, and neither the Company nor, to the best of the Company's knowledge,
any other party is in default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the lapse of time or the giving of
notice, or both, would constitute a default thereunder. None of the material
provisions of such contracts or instruments violates or will result in a
violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court having jurisdiction over the Company
or any of its assets or businesses, including, without limitation, those
relating to environmental laws and regulations.
2.3.3 Prior Securities Transactions. No securities of the
Company have been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by, or under common control
with the Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, except as otherwise specifically stated therein, (i) there has been
no material adverse change in the condition, financial or otherwise, or in the
results of operations, business or business prospects of the Company, including,
but not limited to, a material loss or interference with its business from fire,
storm, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
whether or not arising in the ordinary course of business, and (ii) there have
been no transactions entered into by the Company, other than those in the
ordinary course of business, which are material with respect to the condition,
financial or otherwise, or to the results of operations, business or business
prospects of the Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock.
2.5 Independent Accountants. BDO Xxxxxxx, LLP, whose report is
filed with the Commission as part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.
2.6 Financial Statements. The financial statements, including the
notes thereto and supporting schedules included in the Registration Statement
and Prospectus, fairly present the financial position and the results of
operations of the Company at the dates and for the periods to which they apply;
and such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved; and the supporting schedules included in the Registration Statement
present fairly the information required to be stated therein. The pro forma
financial information set forth in the Registration Statement
5
reflects all significant assumptions and adjustments relating to the business
and operations of the Company.
2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions and adjustments stated in the Registration Statement
and the Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date
there will be no options, warrants, or other rights to purchase or otherwise
acquire any authorized but unissued shares of Common Stock of the Company,
including any obligations to issue any shares pursuant to anti-dilution
provisions, or any security convertible into shares of Common Stock of the
Company, or any contracts or commitments to issue or sell shares of Common Stock
or any such options, warrants, rights or convertible securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and warrants
to purchase shares of Common Stock constitute the valid and binding obligations
of the Company, enforceable in accordance with their terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The authorized Common Stock and outstanding options and warrants
to purchase shares of Common Stock conform to all statements relating thereto
contained in the Registration Statement and the Prospectus. The offers and sales
of the outstanding Common Stock, options and warrants to purchase shares of
Common Stock and promissory notes convertible into Common Stock were at all
relevant times either registered or qualified under the Act and the applicable
state securities or Blue Sky Laws or exempt from such registration requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not and
will not be subject to personal liability by reason of being such holders; the
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted by
the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. When issued, the Underwriters' Purchase Option, the Underwriters'
Warrants and the Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and the
Underwriters' Purchase Option, the Underwriters' Warrants and the Warrants will
be enforceable against the Company in accordance with their respective terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws
6
affecting creditors' rights generally, (ii) as enforceability of any
indemnification provision may be limited under the federal and state securities
laws, and (iii) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
2.9 Registration Rights of Third Parties. Except as set forth in the
Prospectus, no holders of any securities of the Company or of any options or
warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities
in a registration statement to be filed by the Company, and none of such holders
have the right to include any of such securities in the Registration Statement.
2.10 Validity and Binding Effect of Agreements. This Agreement, the
Underwriters' Purchase Option, and the Warrant Agreement (as hereinafter
defined) have been duly and validly authorized by the Company, and constitute,
or when executed and delivered, will constitute, the valid and binding
agreements of the Company, enforceable against the Company in accordance with
their respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement, the Underwriters' Purchase Option, and the Warrant
Agreement, the consum mation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof and
thereof do not and will not, with or without the giving of notice or the lapse
of time or both, (i) result in a breach of, or conflict with any of the terms
and provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, note, loan or credit agreement or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets of the Company is
subject; (ii) result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws of the Company; (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business; or (iv) have a material adverse effect on any
permit, license, certificate, registration, approval, consent, license or
franchise concerning the Company.
2.12 No Defaults; Violations. Except as described in the Prospectus, no
default exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or instrument evidencing
an obligation for borrowed money, or any other material agreement or instrument
to which the Company is a party or by which the Company may be bound or to which
any of the properties or assets of the Company is subject. The Company is not in
violation of any term or provision of its Certificate of Incorporation or
By-Laws or in violation of any franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental
7
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business, except as described in the Prospectus.
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies to own or lease its properties and conduct its
business as described in the Prospectus, and the Company is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates and permits and all federal, state and local rules and
regulations. The disclosures in the Registration Statement concerning the
effects of federal, state and local regulation on the Company's business as
currently contemplated are correct in all material respects and do not omit to
state a material fact.
2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery, of the
Securities pursuant to this Agreement, the Warrant Agreement and the
Underwriters' Purchase Option, and as contemplated by the Prospectus, except
with respect to applicable federal and state securities laws.
2.14 Title to Property; Insurance. The Company has good and defensible
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable or arising by law.
The Company has adequately insured its properties against loss or damage by fire
or other casualty and maintains, in adequate amounts, such other insurance as is
usually maintained by companies engaged in the same or similar business.
2.15 Litigation; Governmental Proceedings. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the best of
the Company's knowledge, threatened against, or involving the properties or
business of, the Company which might materially and adversely affect the
financial position, prospects, value or the operation or the properties or the
business of the Company, or which questions the validity of the capital stock of
the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to, or in connection with, this Agreement. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal, domestic or foreign, naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, its properties or business is bound or subject.
2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the state of
its incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
8
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on its properties or business.
2.17 Taxes. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof. The Company has paid
all taxes (as hereinafter defined) shown as due on such returns that were filed
and has paid all taxes imposed on or assessed against the Company. The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements. Except as disclosed in writing
to the Underwriters, (i) no issues have been raised (and are currently pending)
by any taxing authority in connection with any of the returns or taxes asserted
as due from the Company, and (ii) no waivers of statutes of limitation with
respect to the returns or collection of taxes have been given by or requested
from the Company. The term "taxes" mean all federal, state, local, foreign, and
other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees, assessments, or charges
of any kind whatever, together with any interest and any penalties, additions to
tax, or additional amounts with respect thereto. The term "returns" means all
returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.
2.18 Employees' Options. Except as set forth on Schedule 2.18, no
shares of Common Stock are eligible for sale pursuant to Rule 701 promulgated
under the Act.
2.19 Transactions Affecting Disclosure to NASD.
2.19.1 Finder's Fees. Except as set forth on Schedule 2.19.1,
there are no claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's, consulting or origination fee with respect
to the introduction of the Company to the Underwriters or the sale of the
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
2.19.2 Payments Within Twelve Months. Except as set forth on
Schedule 2.19.2, and other than payments to the Underwriters, the Company has
not made any direct or indirect payments (in cash, securities or otherwise) to
(i) any person, as a finder's fee, investing fee or otherwise, in consideration
of such person raising capital for the Company or introducing to the Company
persons who provided capital to the Company, (ii) to any NASD member, or (iii)
to any person or entity that has any direct or indirect affiliation or
association with any NASD member within the twelve month period prior to the
date on which the Registration Statement was filed with the Commission ("Filing
Date") or thereafter.
2.19.3 Use of Proceeds. None of the net proceeds of the
offering will be paid by the Company to any participating NASD member or any
affiliate or associate of any NASD member, except as specifically authorized
herein.
2.19.4 Insiders' NASD Affiliation. Except as set forth on
Schedule 2.19.4, no officer or director of the Company or owner of any of the
Company's unregistered securities has any direct
9
or indirect affiliation or association with any NASD member. The Company will
advise the Underwriters and the NASD if any stockholder of the Company becomes,
directly or indirectly, an affiliate or associated person of an NASD member
participating in the offering.
2.20 Foreign Corrupt Practices Act. Neither the Company nor any of its
officers, directors, employees or agents or any other person acting on behalf of
the Company has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist it
in connection with any actual or proposed transaction) which (i) might subject
the Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
as reflected in any of the financial statements contained in the Prospectus or
(iii) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The internal accounting
controls and procedures of the Company are sufficient to cause the Company to
comply with the Foreign Corrupt Practices Act of 1977, as amended.
2.21 Nasdaq Eligibility. As of the Effective Date, the Public
Securities have been approved for designation upon notice of issuance on the
Nasdaq SmallCap Market ("Nasdaq").
2.22 Intangibles. The Company owns or possesses the requisite
licenses or rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") described as being licensed to or owned by it in
the Registration Statement. The Company's Intangibles which have been registered
in the United States Patent and Trademark Office have been fully maintained and
are in full force and effect. There is no claim or action by any person
pertaining to, or proceeding pending or, to the best of the Company's knowledge,
threatened and the Company has not received any notice of conflict with the
asserted rights of others which challenges the exclusive right of the Company
with respect to any Intangibles used in the conduct of the Company's business
except as described in the Prospectus. The Intangibles and the Company's current
products, services and processes do not infringe on any Intangibles held by any
third party. To the best of the Company's knowledge, no others have infringed
upon the Intangibles of the Company.
2.23 Relations With Employees.
2.23.1 Employee Matters. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all federal, state and local laws and
regulations respecting the employment of its employees and employment practices,
terms and conditions of employment and wages and hours relating thereto. To the
best of the Company's knowledge, there are no pending investigations involving
the Company by the U.S. Department of Labor, or any other governmental agency
responsible for the enforcement of such federal, state and local laws and
regulations. There is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or any predecessor entity, and none has ever occurred.
No question concerning representation exists respecting the employees of the
Company and no
10
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company,
if any.
2.23.2 Employee Benefit Plans. Other than as set forth in the
Registration Statement, the Company neither maintains, sponsors nor contributes
to, nor is it required to contribute to, any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute
to, and has at no time maintained or contributed to, a defined benefit plan, as
defined in Section 3(35) of ERISA. If the Company does maintain or contribute to
a defined benefit plan, any termination of the plan on the date hereof would not
give rise to liability under Title IV of ERISA. No ERISA Plan (or any trust
created thereunder) has engaged in a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended ("Code"), which could subject the Company to any tax penalty for
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multi-employer
plan."
2.24 Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel shall
be deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
2.25 Warrant Agreement. The Company has entered into a warrant
agreement with respect to the Warrants and the Underwriters' Warrants
substantially in the form filed as an exhibit to the Registration Statement
("Warrant Agreement") with Continental Stock Transfer & Trust Company, in form
and substance satisfactory to the Underwriters, providing for, among other
things, (i) no redemption of the Warrants without the consent of the
Underwriters and (ii) the payment of a warrant solicitation fee as contemplated
by Section 3.10 hereof.
2.26 Agreements With Insiders.
2.26.1 Lock-Up Agreements. The Company has caused to be duly
executed legally binding and enforceable agreements pursuant to which all of the
officers and directors of the Company (including their family members and
affiliates) and all holders of at least two percent (2%) of the outstanding
Common Stock of the Company or warrants or options to purchase, or other
securities convertible into, two percent (2%) or more of the outstanding Common
Stock, calculated with reference to the number of outstanding shares immediately
prior to the Effective Date, ("Insiders") agree not to sell any shares of Common
Stock or warrants or options to purchase, or other securities convertible into
Common Stock, owned by them (either pursuant to Rule 144 of the Regulations or
otherwise) for a period of 13 months following the Effective Date except with
the prior consent of GKN.
2.26.2 Right of First Refusal and Rule 144 Sales. The Company
has caused to be executed legally binding and enforceable agreements pursuant to
which each of its officers, directors and stockholders holding five percent (5%)
or more of the Company's outstanding stock has granted to GKN the rights
described in Section 7.2 of this Agreement.
2.27 Subsidiaries. The representations and warranties made by the
Company in this Agreement shall, in the event that the Company has one or more
subsidiaries (a "subsidiary(ies)")
11
also apply and be true with respect to each subsidiary, individually and taken
as a whole with the Company and all other subsidiaries, as if each
representation and warranty contained herein made specific reference to the
subsidiary each time the term "Company" was used.
2.28 Unaudited Financials. The Company has furnished to the
Underwriters as early as practicable prior to the date hereof a copy of the
latest available unaudited interim financial statements ("Unaudited Financials")
of the Company (which in no event shall be as of a date more than thirty days
prior to the Effective Date) which have been read by the Company's independent
accountants, as stated in their letter to be furnished pursuant to Section 4.3
hereof.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver
to the Underwriters, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Underwriters
shall reasonably object.
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the provisions hereof
and the Prospectus. If at any time when a Prospectus relating to the Securities
is required to be delivered under the Act any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriters, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Underwriters promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance satisfactory to the Underwriters) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years
from the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock and Warrants under the provisions of Section 12
of the Exchange Act.
3.3 Blue Sky Filing. The Company will endeavor in good faith, in
cooperation with the Underwriters, at or prior to the time the Registration
Statement becomes effective, to qualify the
12
Securities for offering and sale under the securities laws of such jurisdictions
as the Underwriters may reasonably designate, provided that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Company would be subject to service of general process or to taxation as a
foreign corporation doing business in such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Underwriters agree that such action is not at the time necessary or advisable,
use all reasonable efforts to file and make such statements or reports at such
times as are or may be required by the laws of such jurisdiction.
3.4 Delivery to the Underwriters of Prospectuses. The Company will
deliver to the Underwriters, without charge, from time to time during the period
when the Prospectus is required to be delivered under the Act or the Exchange
Act, such number of copies of each Preliminary Prospectus and the Prospectus as
the Underwriters may reasonably request and, as soon as the Registration
Statement or any amendment or supplement thereto becomes effective, deliver to
you two original executed Registration Statements, including exhibits, and all
post-effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and all original executed consents of
certified experts.
3.5 Events Requiring Notice to the Underwriters. The Company will
notify the Underwriters immediately and confirm the notice in writing (i) of the
effectiveness of the Registration Statement and any amendment thereto, (ii) of
the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose, (iii) of the issuance by any
state securities commission of any proceedings for the suspension of the
qualification of the Securities for offering or sale in any jurisdiction or of
the initiation, or the threatening, of any proceeding for that purpose, (iv) of
the mailing and delivery to the Commission for filing of any amendment or
supplement to the Registration Statement or Prospectus, (v) of the receipt of
any comments or request for any additional information from the Commission, and
(vi) of the happening of any event during the period described in Section 3.4
hereof which, in the judgment of the Company, makes any statement of a material
fact made in the Registration Statement or the Prospectus untrue or which
requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.
3.6 Review of Financial Statements. For a period of five years from the
Effective Date, the Company, at its expense, shall cause its regularly engaged
independent certified public 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
Form 10-Q quarterly reports and the mailing of quarterly financial information
to stockholders.
3.7 Reserved.
3.8 Secondary Market Trading and Standard & Poor's. The Company will
take all necessary and appropriate actions to achieve accelerated publication in
Standard and Poor's Corporation Records Corporate Descriptions (within thirty
(30) days after the Effective Date) and to maintain such publication with
updated quarterly information for a period of five years from the Effective
Date, including the payment of any necessary fees and expenses. The Company
shall take such action as may be reasonably requested by the Underwriters to
obtain a secondary
13
market trading exemption in such states as may be requested by the Underwriters,
including the payment of any necessary fees and expenses and the filing of a
Form (e.g. 25101(b)) for secondary market trading in the State of California on
the Effective Date or as soon thereafter as is permissible.
3.9 Nasdaq Maintenance. For a period of five years from the date
hereof, the Company will use its best efforts to maintain the quotation on
Nasdaq of the Common Stock and Warrants and, if the Company satisfies the
inclusion standards of the Nasdaq National Market System, apply for and maintain
quotations on the Nasdaq National Market System of such securities during such
period.
3.10 Warrant Solicitation and Registration of Common Stock
Underlying the Warrants.
3.10.1 Warrant Solicitation and Warrant Solicitation Fees. The
Company hereby engages the Underwriters, on a non-exclusive basis, as its agents
for the solicitation of the exercise of the Warrants. The Company, at its cost,
will (i) assist the Underwriters with respect to such solicitation, if requested
by the Underwriters and will (ii) provide to the Underwriters, and direct the
Company's transfer and warrant agent to provide to the Underwriters, lists of
the record and, to the extent known, beneficial owners of the Company's
Warrants. Commencing one year from the Effective Date, the Company will pay to
the Underwriters a commission of five percent of the Warrant exercise price for
each Warrant exercised, payable on the date of such exercise, on the terms
provided for in the Warrant Agreement, if allowed under the rules and
regulations of the NASD and only if the Underwriters have provided bona fide
services to the Company in connection with the exercise of Warrants and have
received written confirmation from the holder that Xxxxxxx or GKN has solicited
such exercise. In addition to soliciting, either orally or in writing, the
exercise of Warrants, such services may also include disseminating information,
either orally or in writing, to Warrantholders about the Company or the market
for the Company's securities, and the assisting in the processing of the
exercise of Warrants. The Underwriters may engage sub-agents who are members of
the NASD in its solicitation efforts, provided, however, nothing herein shall
obligate the Company to make any payment to any such sub-agent. The Company will
disclose the arrangement to pay such solicitation fees to the Underwriters in
any prospectus used by the Company in connection with the registration of the
shares of Common Stock underlying the Warrants. The Company shall not be
obligated to reimburse the Underwriters for any of their expenses incurred in
connection with such solicitation.
3.10.2 Registration of Common Stock. The Company agrees that
prior to the date that the Warrants become exercisable, it shall file with the
Commission a post-effective amendment to the Registration Statement, if
possible, or a new registration statement, to register, under the Act, and it
shall take such action as is necessary to qualify for sale, in those states in
which the Warrants were initially offered by the Company, the Common Stock
issuable upon exercise of the Warrants. In either case, the Company shall cause
the same to become effective at or prior to the date that the Warrants become
exercisable, and maintain the effectiveness of such registration statement and
keep current a prospectus thereunder and maintain such qualification until the
expiration of the Warrants in accordance with the provisions of the Warrant
Agreement.
3.11 Reserved.
14
3.12 Reports to the Underwriters.
3.12.1 Periodic Reports, Etc. For a period of five years from
the Effective Date, the Company will promptly furnish to the Underwriters copies
of such financial statements and other periodic and special reports as the
Company from time to time files with any governmental authority or furnishes
generally to holders of any class of its securities, and promptly furnish to the
Underwriters (i) a copy of each periodic report the Company shall be required to
file with the Commission, (ii) a copy of every press release and every news item
and article with respect to the Company or its affairs which was released by the
Company, (iii) copies of each Form SR, (iv) a copy of each Form 8-K or Schedules
13D, 13G, 14D-1 or 13E-4 received or prepared by the Company, (v) a copy of
monthly statements setting forth such information regarding the Company's
results of operations and financial position (including balance sheet, profit
and loss statements and data regarding outstanding purchase orders) as is
regularly prepared by management of the Company, and (vi) such additional
documents and information with respect to the Company and the affairs of any
future subsidiaries of the Company as the Underwriters may from time to time
reasonably request.
3.12.2 Transfer Sheets and Weekly Position Listings. For a
period of five years from the Closing Date, the Company will furnish to the
Underwriters at the Company's sole expense such transfer sheets and position
listings of the Company's securities as the Underwriters may request, including
the daily, weekly and monthly consolidated transfer sheets of the transfer agent
of the Company and the weekly position listings of the Depository Trust Company.
3.12.3 Secondary Market Trading Memorandum. Until such time as
the Securities are listed or quoted, as the case may be, on one of the
following: the New York Stock Exchange, the American Stock Exchange or Nasdaq
National Market, the Company shall cause the Underwriters' legal counsel to
deliver to the Underwriters on the Effective Date a written opinion detailing
those states in which Securities may be traded in non-issuer transactions under
the Blue Sky laws of the fifty states ("Secondary Market Trading Memorandum")
and to update such memorandum as reasonably requested by the Underwriters. The
Company shall pay to the Underwriters' legal counsel a one-time fee of $5,000
for such services at the Closing.
3.13 Underwriters' Purchase Option. On the Closing Date, the Company
will execute and deliver the Underwriters' Purchase Option to the Underwriters
substantially in the form filed as an exhibit to the Registration Statement.
3.14 Disqualification of Form SB-2. For a period equal to five years
from the date hereof, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form SB-2 (or other appropriate form)
for the registration of the Warrants and the Underwriters' Purchase Option and
the securities issuable upon exercise of those securities under the Act.
3.15 Payment of Expenses.
3.15.1 General Expenses. The Company hereby agrees to pay on
each of the Closing Date and the Option Closing Date, if any, to the extent not
paid at Closing Date, all expenses incident to the performance of the
obligations of the Company under this Agreement, including but not limited to
(i) the preparation, printing, filing, delivery and mailing (including the
payment of postage with respect to such mailing) of the Registration Statement,
the Prospectus and the Preliminary Prospectuses and the printing and mailing of
this Agreement and related
15
documents, including the cost of all copies thereof and any amendments thereof
or supplements thereto supplied to the Underwriters in quantities as may be
required by the Underwriters, (ii) the printing, engraving, issuance and
delivery of the shares of Common Stock, the Warrants and the Underwriters'
Purchase Option, including any transfer or other taxes payable thereon, (iii)
the qualification of the Securities under state or foreign securities or Blue
Sky laws, including the filing fees under such Blue Sky laws, the costs of
printing and mailing the "Preliminary Blue Sky Memorandum," and all amendments
and supplements thereto, fees (not to exceed $35,000) and disbursements of the
Underwriters' counsel, and fees and disbursements of local counsel, if any,
retained for such purpose, and a one-time fee of $5,000 payable to the
Underwriters' counsel for the preparation of the Secondary Market Trading
Memorandum, (iv) costs associated with applications for assignments of a rating
of the Securities by qualified rating agencies, (v) filing fees, costs and
expenses (including fees (not to exceed $5,000) and disbursements for the
Underwriters' counsel) incurred in registering the offering with the NASD, (vi)
costs of placing "tombstone" advertisements in The Wall Street Journal, The New
York Times and a third publication to be selected by the Underwriters, (vii)
fees and disbursements of the transfer and warrant agent, (viii) the Company's
expenses associated with "due diligence" meetings arranged by the Underwriters;
(ix) the preparation, binding and delivery of transaction "bibles," in number,
form and style reasonably satisfactory to the Underwriters and transaction
lucite cubes or similar commemorative items in a style and quantity as
reasonably requested by the Underwriters, (x) any listing of the Securities on
Nasdaq, and any securities exchange or any listing in Standard & Poor's, (xi)
fees and disbursements of any counsel engaged to review the Company's
intellectual property rights, and (xii) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section 3.15.1. The Underwriters may deduct
from the net proceeds of the offering payable to the Company on the Closing
Date, or the Option Closing Date, if any, the expenses set forth herein to be
paid by the Company to the Underwriters and/or to third parties.
3.15.2 Non-Accountable Expenses. The Company further agrees
that, in addition to the expenses payable pursuant to Section 3.15.1, it will
pay to the Underwriters a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Securities, of which $60,000 has been paid to date, and the Company will pay the
balance on the Closing Date and any additional monies owed attributable to the
Option Securities or otherwise on the Option Closing Date by certified or bank
cashier's check or, at the election of the Underwriters, by deduction from the
proceeds of the offering contemplated herein. If the offering contemplated by
this Agreement is not consummated for any reason whatsoever then the following
provisions shall apply: The Company's liability for payment to the Underwriters
of the non-accountable expense allowance shall be equal to the sum of the
Underwriters' actual out-of-pocket expenses (including, but not limited to,
counsel fees, "road- show" and due diligence expenses). The Underwriters shall
retain such part of the non-accountable expense allowance previously paid as
shall equal such actual out-of-pocket expenses. If the amount previously paid is
insufficient to cover such actual out-of-pocket expenses, the Company shall
remain liable for and promptly pay any other actual out-of-pocket expenses. If
the amount previously paid exceeds the amount of actual out-of-pocket expenses,
the Underwriters shall promptly remit to the Company any such excess.
3.16 Application of Net Proceeds. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "Use of Proceeds" in the Prospectus. The
Company hereby agrees that, except as so described, the
16
Company will not apply any net proceeds from the offering to pay (i) any debt
for borrowed funds, or (ii) any debt or obligation owed to any Insider.
3.17 Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.18 Key Person Life Insurance. The Company will maintain key person
life insurance in an amount no less than $1,000,000 on the life of Xxxxxx X.
Xxxx and pay the annual premiums therefor naming the Company as the sole
beneficiary thereof for at least three years following the Effective Date.
3.19 Stabilization. Neither the Company, nor, to its knowledge, any of
its employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
3.20 Internal Controls. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.21 Accountants and Lawyers. For a period of five years from the
Effective Date, the Company shall retain independent public accountants and
securities lawyers acceptable to the Underwriters. Accountants BDO Xxxxxxx, LLP
and lawyers Warner & Xxxxxxxxx LLP are acceptable to the Underwriters.
3.22 Transfer Agent. For a period of five years from the Effective
Date, the Company shall retain a transfer agent for the Common Stock and
Warrants acceptable to the Underwriters. Continental Stock Transfer & Trust
Company ("Transfer Agent") is acceptable to the Underwriters.
3.23 Sale of Securities. The Company agrees not to permit or cause a
private or public sale or private or public offering of any of its securities
(in any manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for a period of 13 months following the Effective
Date without obtaining the prior written approval of GKN.
3.24 Exercise Price of Options. The Company will not grant any option
pursuant to the Company's 1995 Stock Option Plan at an exercise price less than
85% of the fair market value of the Common Stock on the date of the grant.
17
4. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Securities, as provided herein, shall
be subject to the continuing accuracy of the representations and warranties of
the Company as of each of the Closing Date and the Option Closing Date, if any,
to the accuracy of the statements of officers of the Company made pursuant to
the provisions hereof and to the performance by the Company of its obligations
hereunder and to the following conditions:
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The
Registration Statement has been declared effective on the date of this Agreement
and, at each of the Closing Date and the Option Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for such purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Xxxxxxxx Xxxxxx & Xxxxxx, counsel to the
Underwriters.
4.1.2 NASD Clearance. By the Effective Date, the Underwriters
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of
the Securities in any jurisdiction designated by the Underwriters pursuant to
Section 3.3 hereof shall have been issued on either on the Closing Date or the
Option Closing Date, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
4.2 Company Counsel Matters.
4.2.1 Effective Date Opinion of Counsel. On the Effective
Date, the Underwriters shall have received the favorable opinion of Warner &
Xxxxxxxxx LLP, counsel to the Company, dated the Effective Date, addressed to
the Underwriters and in form and substance satisfactory to Xxxxxxxx Mollen &
Xxxxxx, counsel to the Underwriters, to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of its
state of incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which it owns or
leases any real property or the character of its operations requires such
qualification or licensing.
(ii) The Company has all requisite corporate power
and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental or regulatory
officials and bodies to own or lease its properties and conduct its business as
described in the Prospectus, and the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates and permits and all federal, state and local laws, rules and
regulations. The Company has all corporate power and authority to enter into
this Agreement, the Warrant Agreement, the Underwriters' Purchase Option and to
carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained. No consents, approvals, authorizations or orders of, and no filing
with any court or governmental agency or body (other than
18
such as may be required under the Act and applicable Blue Sky laws), is required
for the valid authorization, issuance, sale and delivery of the Securities, and
the consummation of the transactions and agreements contemplated by this
Agreement, the Warrant Agreement and the Underwriters' Purchase Option, and as
contemplated by the Prospectus or if so required, all such authorizations,
approvals, consents, orders, registrations, licenses and permits have been duly
obtained and are in full force and effect and have been disclosed to the
Underwriters.
(iii) All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or, to the best of such
counsel's knowledge after due inquiry, similar contractual rights granted by the
Company. The outstanding options and warrants to purchase shares of Common Stock
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The offers and sales of the
outstanding Common Stock, options and warrants to purchase shares of Common
Stock and promissory notes convertible into Common Stock were at all relevant
times either registered under the Act and the applicable state securities or
Blue Sky Laws or exempt from such registration requirements. The authorized and
outstanding capital stock of the Company is as set forth under the caption
"Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized and,
when issued and paid for, will be validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal liability by
reason of being such holders. The Securities are not and will not be subject to
the preemptive rights of any holders of any security of the Company or, to the
best of such counsel's knowledge after due inquiry, similar contractual rights
granted by the Company. All corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. When issued, the Underwriters' Purchase Option, the Underwriters'
Warrants and the Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and such
Warrants, the Underwriters' Purchase Option, and the Underwriters' Warrants,
when issued, in each case, will be enforceable against the Company in accordance
with their respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The certificates representing the
Securities are in due and proper form.
(v) To the best of such counsel's knowledge after
due inquiry, except as set forth in the Prospectus, no holders of any securities
of the Company or of any options, warrants or securities of the Company
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company
19
under the Act or to include any such securities in a registration statement to
be filed by the Company, including the Registration Statement.
(vi) To the best of such counsel's knowledge,
after due inquiry, the shares of Common Stock and the Warrants are eligible for
quotation on Nasdaq.
(vii) This Agreement, the Underwriters' Purchase
Option and the Warrant Agreement have each been duly and validly authorized and,
when executed and delivered by the Company, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provisions may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(viii) The execution, delivery and performance by
the Company of this Agreement, the Underwriters' Purchase Option and the Warrant
Agreement, the issuance and sale of the Securities, the consummation of the
transactions contemplated hereby and thereby and the compliance by the Company
with the terms and provisions hereof and thereof, do not and will not, with or
without the giving of notice or the lapse of time, or both, (a) conflict with,
or result in a breach of, any of the terms or provisions of, or constitute a
default under, or result in the creation or modification of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to the terms of, any material mortgage, deed of trust, note,
indenture, loan, contract, commitment or other material agreement or instrument
of which such counsel has knowledge and to which the Company is a party or by
which the Company or any of its properties or assets may be bound, (b) result in
any violation of the provisions of the Certificate of Incorporation or the
By-Laws of the Company, (c) violate any judgment, order or decree of which such
counsel has knowledge, statute, rule or regulation applicable to the Company of
any court, domestic or foreign, or of any federal, state or other regulatory
authority or other governmental body having jurisdiction over the Company, its
properties or assets, or (d) have a material adverse effect on any permit,
certification, registration, approval, consent, license or franchise of the
Company.
(ix) The Registration Statement, each Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations. The Securities and all other securities
issued or issuable by the Company conform in all respects to the description
thereof contained in the Registration Statement and the Prospectus. The
statements in the Prospectus under "Business," "Management," "Certain
Transactions," "Risk Factors," Principal Stockholders," "Description of
Securities" and "Shares Eligible for Future Sale" have been reviewed by such
counsel, and insofar as they contain descriptions of law, statutes, licenses,
rules or regulations or legal conclusions are correct in all material respects.
No statute or regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required, nor are any contracts
or documents of which such counsel has knowledge of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement not so described or filed as required.
20
(x) Counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Underwriters at which the contents of the Registration Statement, the Prospectus
and related matters were discussed and although such counsel is not passing upon
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as otherwise set forth in counsel's opinion), no facts have
come to the attention of such counsel which lead them to believe that either the
Registration Statement or the Prospectus or any amendment or supplement thereto,
as of the date of such opinion, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Registration Statement or
Prospectus).
(xi) The Registration Statement is effective under
the Act, and, to the best of such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or threatened
under the Act or applicable state securities laws.
(xii) The Company has good and defensible title to,
or valid and enforceable leasehold estates in, all items of real and personal
property (tangible and intangible) stated in the Prospectus to be owned or
leased by it, free and clear of all liens, encumbrances, claims, security
interests, defects and restrictions of any material nature whatsoever, other
than those referred to in the Prospectus and liens for taxes not yet due and
payable.
(xiii) Except as described in the Prospectus, to the
best of such counsel's knowledge, no default exists in the due performance and
observance of any term, covenant or condition of any license, contract,
indenture, mortgage, deed of trust, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which the
Company may be bound or to which any of the properties or assets of the Company
is subject, except where such defaults, either singly or in the aggregate, would
not have a material adverse effect on the Company or its operations. The Company
is not in violation of any term or provision of its Certificate of Incorporation
or By-Laws. The Company is not in violation of any judgment, order or decree of
which such counsel has knowledge, franchise, license, permit, law, rule or
regulation applicable to the Company, of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business, except where such violations, either singly or in the
aggregate, would not have a material adverse effect on the Company or its
operations.
(xiv) To the best of such counsel's knowledge after
due inquiry, the Company owns or possesses, free and clear of all liens or
encumbrances and rights thereto or therein by third parties, other than as
described in the Prospectus, the requisite licenses or other rights to use all
Intangibles and other rights necessary to conduct its business (including,
without limitation, any such licenses or rights described in the Prospectus as
being licensed to, owned or possessed by the Company), and there is no claim or
action by any person pertaining to, or proceeding, pending or, to the best of
such counsel's knowledge after due inquiry, threatened, which challenges the
exclusive rights of the Company with respect to any Intangibles used in the
21
conduct of its business (including without limitation any such licenses or
rights described in the Prospectus as being owned or possessed by the Company);
to the best of such counsel's knowledge after due inquiry, the Company's current
products, services and processes do not infringe on any Intangibles held by
third parties except as discussed in the Prospectus.
(xv) To the best of such counsel's knowledge after
due inquiry, except as described in the Prospectus, the Company does not own an
interest in any corporation, partnership, joint venture, trust or other business
entity.
(xvi) To the best of such counsel's knowledge after
due inquiry, except as set forth in the Prospectus, there is no action, suit or
proceeding before or by any court or governmental agency or body, domestic or
foreign, now pending or threatened against the Company, which might result in
any material and adverse change in the condition (financial or
otherwise), business or prospects of the Company, or which might materially and
adversely affect the properties or assets thereof.
(xvii) To the best of such counsel's knowledge after
due inquiry, neither the Company, nor its officers, employees, agents or other
persons acting on their behalf has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer or supplier, any
employee or agent of a customer or supplier, any official or employee of any
governmental agency or body (domestic or foreign), any political party or
candidate for office (domestic or foreign) or any other person who was, is or
may be in a position to help or hinder the business of the Company (or assist it
in connection with any actual or proposed transaction) which (a) might subject
the Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
as reflected in the financial statements contained in the Registration Statement
or (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
with the Foreign Corrupt Practices Act of 1977, as amended.
(xviii) To the best of such counsel's knowledge after
due inquiry, except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in the nature
of a finder's or origination fee with respect to the sale of the Securities
hereunder or financial consulting arrangements or any other arrangements,
agreements, understandings, payments or issuances that may affect the
Underwriters' compensation, as determined by the NASD.
Unless the context clearly indicates otherwise, the term
"Company" as used in this Section 4.2.1 shall include each subsidiary of the
Company. The opinion of counsel for the Company and any opinion relied upon by
such counsel for the Company shall include a statement to the effect that it may
be relied upon by counsel for the Underwriters in its opinion delivered to the
Underwriters.
4.2.2 Closing Date and Option Closing Date Opinion of Counsel.
On each of the Closing Date and the Option Closing Date, if any, the
Underwriters shall have received the favorable opinion of Warner & Xxxxxxxxx
LLP, counsel to the Company, dated the Closing Date or the Option Closing Date,
as the case may be, addressed to the Underwriters and in form and
22
substance satisfactory to Xxxxxxxx Mollen & Xxxxxx, counsel to the Underwriters,
confirming as of the Closing Date and, if applicable, the Option Closing Date,
the statements made by Warner & Xxxxxxxxx LLP in its opinion delivered on the
Effective Date.
4.2.3 Reliance. In rendering such opinion, such counsel may
rely (i) as to matters involving the application of laws other than the laws of
the United States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably satisfactory
to Underwriters' counsel) of other counsel reasonably acceptable to
Underwriters' counsel, familiar with the applicable laws, and (ii) as to matters
of fact, to the extent they deem proper, on certificates or other written
statements of officers of departments of various jurisdiction having custody of
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to Underwriters' counsel if requested. Any opinion relied upon by counsel for
the Company shall include a statement to the effect that it may be relied upon
by counsel for the Underwriters in its opinion delivered to the Underwriters.
4.2.4 Secondary Market Trading Memorandum. On the Effective
Date the Underwriters shall have received the written Secondary Market Trading
Memorandum.
4.3 Cold Comfort Letter. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Underwriters and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Xxxxxxxx
Xxxxxx & Xxxxxx, counsel for the Underwriters, from BDO Xxxxxxx, LLP, dated,
respectively, as of the date of this Agreement and as of the Closing Date and
the Option Closing Date, if any:
(i) confirming that they are independent
accountants with respect to the Company within the meaning of the Act and the
applicable Regulations;
(ii) stating that in their opinion the financial
statements of the Company included in the Registration Statement and Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published Regulations thereunder;
(iii) stating that, based on the performance of
procedures specified by the American Institute of Certified Public Accountants
for a review of the latest available unaudited interim financial statements of
the Company (as described in Statement on Auditing Standards ("SAS") No. 71 --
"Interim Financial Information"), with an indication of the date of the latest
available unaudited interim financial statements, a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that (a) the unaudited financial statements of
the Company included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the Act and
the Regulations or any material modification should be made to the unaudited
interim financial statements included in the Registration Statement for them to
be in conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial statements of
the Company included in the Registration Statement, (b) at a date not later than
five days prior to the
23
Effective Date, Closing Date or Option Closing Date, as the case may be, there
was any change in the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity of the Company as compared with amounts
shown in the December 31, 1996 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any decrease, setting forth the amount of such
decrease, and (c) during the period from December 31, 1996 to a specified date
not later than five days prior to the Effective Date, Closing Date or Option
Closing Date, as the case may be, there was any decrease in revenues, net
earnings or net earnings per share of Common Stock, in each case as compared
with the corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five
days prior to the Effective Date, the amount of liabilities of the Company
(including a break-down of commercial papers and notes payable to banks);
(v) stating that they have compared specific
dollar amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company set forth
in the Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, and work sheets, of the Company with the results obtained
from the application of specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter and found them to
be in agreement;
(vi) stating that they have not during the
immediately preceding five year period brought to the attention of the Company's
management any reportable condition related to internal structure, design or
operation as defined in SAS No. 60 -- "Communication of Internal Control
Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) statements as to such other matters incident
to the transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Underwriters shall have received a
certificate of the Company signed by the President and the Chief Financial
Officer of the Company, dated the Closing Date or the Option Closing Date, as
the case may be, respectively, to the effect that the Company has performed all
covenants and complied with all conditions required by this Agreement to be
performed or complied with by the Company prior to and as of the Closing Date,
or the Option Closing Date, as the case may be, and that the conditions set
forth in Section 4.5 hereof have been satisfied as of such date and that, as of
Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct. In addition, the Underwriters will have received such other
and further certificates of officers of the Company as the Underwriters may
reasonably request.
24
4.4.2 Secretary's Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Underwriters shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified, (iii)
all correspondence between the Company or its counsel and the Commission, (iv)
all correspondence between the Company or its counsel and the NASD concerning
inclusion of the Securities on Nasdaq, and (v) as to the incumbency of the
officers of the Company. The documents referred to in such certificate shall be
attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date
and the Option Closing Date, if any, (i) there shall have been no material
adverse change or development involving a prospective material change in the
condition or prospects or the business activities,
financial or otherwise, of the Company from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus, (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company, taken as a whole, (iii) the Company shall not
be in default under any provision of any instrument relating to any outstanding
indebtedness which default would have a material adverse effect on the Company,
(iv) no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus, (v)
no action suit or proceeding, at law or in equity, shall have been pending or
threatened against the Company or affecting any of its property or business
before or by any court or federal or state commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus, (vi) no stop order shall have been issued under the
Act and no proceedings therefor shall have been initiated or threatened by the
Commission, and (vii) the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all material statements which are
required to be stated therein in accordance with the Act and the Regulations and
conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.6 Delivery of Underwriters' Purchase Option. The Company has
delivered to the Underwriters an executed copy of the Underwriters' Purchase
Option.
4.7 Opinion of Counsel for the Underwriters. All proceedings taken
in connection with the authorization, issuance or sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to Xxxxxxxx Xxxxxx & Xxxxxx, counsel to the Underwriters, and you shall
have received from such counsel a favorable opinion, dated the Closing Date and
the Option Closing Date, if any, with respect to such of these proceedings as
you may reasonably require. On or prior to the Effective Date, the Closing Date
and the Option Closing Date, as the case may be, counsel to the Underwriters
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 4.7, or in order to evidence the accuracy,
25
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
5. Indemnification.
5.1 Indemnification of the Underwriters.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, their
respective directors, officers, agents and employees and each person, if any,
who controls an Underwriter ("controlling person") within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, whether
arising out of any action between the Underwriters and the Company or between
the Underwriters and any third-party or otherwise) to which they or any of them
may become subject under the Act, the Exchange Act or any other statute or at
common law or otherwise or under the laws of foreign countries, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in (i) any Preliminary Prospectus, the Registration Statement or
the Prospectus (as from time to time each may be amended and supplemented); (ii)
in any post-effective amendment or amendments or any new registration statement
and prospectus in which is included securities of the Company issued or issuable
upon exercise of the Underwriters' Purchase Option; or (iii) any application or
other document or written communication (in this Section 5 collectively called
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, Nasdaq or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, unless such statement
or omission was made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment or supplement thereof, or
in any application, as the case may be. The Company agrees promptly to notify
the Underwriters of the commencement of any litigation or proceedings against
the Company or any of its officers, directors or controlling persons in
connection with the issue and sale of the Securities or in connection with the
Registration Statement or Prospectus.
5.1.2 Procedure. If any action is brought against an
Underwriter or controlling person in respect of which indemnity may be sought
against the Company pursuant to Section 5.1.1, such Underwriter shall promptly
notify the Company in writing of the institution of such action and the Company
shall assume the defense of such action, including the employment and fees of
counsel (subject to the approval of the Underwriters) and payment of actual
expenses. Such Underwriter or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or controlling person unless
(i) the employment of such counsel shall have been authorized in writing by the
Company in connection with the defense of such action, or (ii) the Company shall
not have employed counsel to have charge of the defense of such action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to the Company (in which case the Company shall
26
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and expenses of
not more than one additional firm of attorneys selected by the Underwriter or
Underwriters and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if an Underwriter or
controlling person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company. The Underwriters, severally and
not jointly, agree to indemnify and hold harmless the Company against any and
all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to the several Underwriters, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions directly relating to the transactions effected by the Underwriters in
connection with this offering made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
in any application in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to an Underwriter by or on
behalf of such Underwriter expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
in any such application. In case any action shall be brought against the Company
or any other person so indemnified based on any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
any application, and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the several Underwriters by the provisions of Section
5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, as incurred, in such proportions that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3, neither Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay in respect of such losses, liabilities, claims,
damages and expenses. For purposes of this Section, each director, officer and
employee of an
27
Underwriter, and each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act shall have the same rights to contribution as
such Underwriter.
5.3.2 Contribution Procedure. Within fifteen days after
receipt by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any settlement of any claim, action or
proceeding which was effected by the party seeking contribution without the
written consent of the contributing party. The contribution provisions contained
in this Section are intended to supersede, to the extent permitted by law, any
right to contribution under the Act, the Exchange Act or otherwise available.
6. Default by an Underwriter. If either Underwriter shall default in its
obligations to purchase Securities hereunder, the non-defaulting Underwriter
may, in its discretion, arrange for itself or another party or parties to
purchase such Securities on the terms contained herein. In the event that within
one business day after such default the non-defaulting Underwriter does not
arrange for the purchase of the shares of Common Stock and Warrants as to which
such default relates, this Agreement will thereupon terminate automatically (but
only with respect to the obligations relating to the Option Securities if such
default occurs after the Closing Date) without liability on the part of the
Company (except as provided in Sections 3.15 and 5.1 hereof) or the
non-defaulting Underwriter, but nothing herein shall relieve the defaulting
Underwriter of its liability, if any, to the non-defaulting Underwriter and to
the Company for damages occasioned by its default.
7. Additional Covenants.
7.1 Attendance at Board Meetings. For a period of three years from the
Effective Date, GKN shall be permitted to select a designee to attend all
meetings of the Board of Directors, but who will not be entitled to vote at such
meetings. The Company agrees to give GKN written notice of each such meeting and
to provide GKN with an agenda and minutes of the meeting no later than it gives
such notice and provides such items to the directors. The Company shall
reimburse the designee of GKN for its out-of-pocket expenses incurred in
connection with its attendance at the Company's Board meetings, including, but
not limited to, food, lodging and transportation.
28
7.2 Rule 144 Sales. During the 18 month period following the Effective
Date, GKN shall have the right to purchase for its account or to sell for the
account of the Company's officers, directors and stockholders owning five
percent (5%) or more of the Company's outstanding stock any securities sold
pursuant to Rule 144 under the Act. Each of the officers, directors and
Principal Stockholders ("144 Sellers") will agree to consult with GKN with
regard to any such sales and will offer GKN the exclusive opportunity to
purchase or sell such securities on terms at least as favorable to the 144
Sellers as they can secure elsewhere. If GKN fails to accept in writing any such
proposal for sale by the 144 Sellers within two business days after receipt of a
notice containing such proposal, then GKN shall have no claim or right with
respect to any such sales contained in any such notice. If, thereafter, such
proposal is modified in any material respect, the 144 Sellers shall adopt the
same procedures as with respect to the original proposal.
7.3 Press Releases. The Company will not issue a press release or
engage in any other publicity until 25 days after the Effective Date without the
Underwriters' prior written consent.
7.4 Form S-8 or any Similar Form. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period of
one year from the Effective Date without the Underwriters' prior written
consent.
7.5 [Omitted].
7.6 [Omitted].
8. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriters and Company, including the indemnity agreements
contained in Section 5 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Underwriters,
the Company or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriters
until the earlier of the expiration of any applicable statute of limitations and
the seventh anniversary of the later of the Closing Date or the Option Closing
Date, if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.
9. Effective Date of This Agreement and Termination Thereof.
9.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective.
9.2 Termination. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will in
the immediate future materially disrupt, general securities
29
markets in the United States; or (ii) if trading on the New York Stock Exchange,
the American Stock Exchange, The Boston Stock Exchange or in the
over-the-counter market shall have been suspended, or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for securities
shall have been fixed, or maximum ranges for prices for securities shall have
been required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States shall have become involved in a war or major hostilities, or
(iv) if a banking moratorium has been declared by a New York State or federal
authority, or (v) if a moratorium on foreign exchange trading has been declared
which materially adversely impacts the United States securities market, or (vi)
if the Company shall have sustained a material loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act which,
whether or not such loss shall have been insured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Securities, or (vii) if Xxxxxx
X. Xxxx shall no longer serve the Company in his present capacity, or (viii) if
the Company has breached any of its representations, warranties or obligations
hereunder, or (ix) if the Underwriters shall have become aware after the date
hereof of such a material adverse change in the condition (financial or
otherwise), business, or prospects of the Company, or such adverse material
change in general market conditions, as in the Underwriters' judgment would make
it impracticable to proceed with the offering, sale and/or delivery of the
Securities or to enforce contracts made by the Underwriters for the sale of the
Securities.
9.3 Notice. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, the
Company shall be notified on the same day as such election is made by you by
telephone or telecopy, confirmed by letter.
9.4 Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.15 hereof.
9.5 Indemnification. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
10. Miscellaneous.
10.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed
If to the Underwriters:
GKN Securities Corp.
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Assistant Vice President
and
30
Xxxxxxx Equities, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, Managing Director
Copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
If to the Company:
Augment Systems, Inc.
0 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxx, President and Chief Executive Officer
Copy to:
Warner & Xxxxxxxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
10.2 Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
10.3 Amendment. This Agreement may be amended only by a written
instrument executed by each of the parties hereto.
10.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.5 Binding Effect. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 5 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
10.6 Governing Law, Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New York,
without giving effect to conflicts of law. The Company hereby agrees that any
action, proceeding or claim against it arising out of,
31
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York or the United States District Court for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
10.1 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the Company in any action, proceeding or claim. The Company
agrees that the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable attorneys' fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
10.7 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
10.8 Waiver, Etc. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
AUGMENT SYSTEMS, INC.
By:
-------------------------------
Name: Xxxxxx X. Xxxx
Title: President and Chief Executive
Officer
32
Accepted as of the date first
above written.
New York, New York
GKN SECURITIES CORP.
By:
--------------------------------
Name:
Title:
XXXXXXX EQUITIES, INC.
By:
--------------------------------
Name:
Title:
33
