UNDERWRITING AGREEMENT
________ __, 1997
X.X. Xxxxxx & Co., Inc.
as Representatives of the several Underwriters
named in Schedule I hereto
0000 Xx. Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Gentlemen:
ASHA CORPORATION, a Delaware corporation (the "Company"), confirms
its
agreement with X.X. Xxxxxx & Co., Inc. ("Xxxxxx") and each of the underwriters
named in Schedule I hereto (collectively, the "Underwriters", which term shall
also include any underwriter substituted as hereinafter provided in Section
9), for whom Xxxxxx is acting as representative (in such capacity, Xxxxxx
shall hereinafter be referred to as "you" or the "Representative"), with
respect to the sale by the Company and the purchase by the Underwriters of
______ of shares (the "Shares") of the Company's Common Stock, $___ par value
per share ("Common Stock"). Such Shares are hereinafter referred to as the
"Firm Shares."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also sell to the Underwriters up to an additional _______ Shares
[15% of the Firm Shares] for the purpose of covering over-allotments, if any.
Such _______ Shares are hereinafter referred to as the "Option Shares." The
Company also proposes to issue and sell to you warrants (the "Representative's
Warrants") pursuant to the Representative's Warrant Agreement (the
"Representative's Warrant Agreement") for the purchase of an additional
_______Shares [10% of the Firm Shares]. The Shares issuable upon exercise of
the Representative's Warrants are hereinafter referred to as the
"Representative's Securities." The Firm Shares, the Option Shares, the
Representative's Warrants and the Representative's Securities (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each
Underwriter that:
(a) A registration statement (File No.333-_____) on Form SB-2
relating
to the public offering of the Securities, including a preliminary form of
prospectus, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity in all material respects with the
requirements of the Securities Act of 1933 (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") promulgated thereunder, and has been filed with
the Commission under the Act. As used herein, "Preliminary Prospectus" shall
mean each prospectus filed pursuant to Rule 430 of the Rules and Regulations.
The registration statement (including all financial schedules and exhibits) as
amended at the time it becomes effective and the final prospectus included
therein are respectively hereinafter referred to as the "Registration
Statement" and the "Prospectus," except that (i) if the prospectus first filed
by the
Company pursuant to Rule 424(b) or Rule 430A of the Rules and Regulations or
otherwise utilized and not required to be so filed shall differ from said
prospectus as then amended, the term "Prospectus" shall mean the prospectus
first filed pursuant to Rule 424(b) or Rule 430A or so utilized from and after
the date on which it shall have been filed or utilized, and (ii) if such
registration statement or prospectus is amended or such prospectus is
supplemented after the effective date of such registration statement and prior
to the Option Closing Date (as defined in Section 2(b)), the term
"Registration Statement" shall include such registration statement as so
amended or supplemented, or both, as the case may be, and the term
"Prospectus" shall include the prospectus as so amended or supplemented, or
both, as the case may be.
(b) At the time the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date (as defined herein) and
each Option Closing Date (as defined herein), if any, and during such longer
period as the Prospectus may be required to be delivered in connection with
sales by the Underwriters or a dealer, (i) the Registration Statement and
Prospectus will in all material respects conform to the requirements of the
Act and the Rules and Regulations, and (ii) neither the Registration Statement
nor the Prospectus will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein, in light of the
circumstances in which they were made, or necessary to make the statements
therein not misleading; provided, however, that the Company makes no
representations, warranties or agreements as to information contained in or
omitted from the Registration Statement or Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf
of you or by or on behalf of the Underwriters for use in the preparation
thereof. It is understood that the statements set forth in the Prospectus
with respect to stabilization, the material set forth in the second, fourth
and thirteenth paragraphs under the heading "Underwriting" and the identity of
counsel to the Underwriters under the heading "Legal Matters" constitute the
only information furnished in writing by you, or by the Underwriters through
you, for inclusion in the Registration Statement and Prospectus, as the case
may be.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
full power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus and is duly qualified to
do business as a foreign corporation and is in good standing in all other
jurisdictions in which the nature of its business or the character or location
of its properties requires such qualification, except where failure to so
qualify will not materially affect its business, properties or financial
condition.
(d) The authorized capital stock of the Company as of the Effective
Date is set forth under "Capitalization" in the Prospectus. The shares of
issued and outstanding capital stock of the Company set forth thereunder have
been duly authorized, validly issued and are fully paid and non-assessable;
except as set forth in the Prospectus, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or agreements or other
rights to convert any obligation into, any shares of capital stock of the
Company have been granted or entered into by the Company. The Securities
conform in all material respects to all statements relating thereto contained
in the Registration Statement and Prospectus.
(e) The Securities are duly authorized and, when issued, delivered
and
paid for pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company.
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(f) This Agreement, the Representative's Warrant Agreement, the
Financial Consulting Agreement described in Subsection 3(s) (the "Financial
Consulting Agreement") and the Merger and Acquisition and Indemnification
Agreements described in Subsection 3(w) (collectively, the "M/A Agreement")
have been duly and validly authorized; this Agreement has been duly executed
and delivered by the Company and, assuming due execution by the Company with
regard to the Representative's Warrant, Financial Consulting and M/A
Agreements and by the other party or parties hereto and thereto, constitutes
and will constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally. The Company has full power and
lawful authority to authorize, issue and sell the Securities to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of anyone, including any governmental
authority, is required in connection with the authorization, issuance and sale
of the Securities or the Representative's Warrant, except such as may be
required under the Act or state or corporate securities laws, all of which
have been duly obtained.
(g) The Company is not in violation, breach or default of or under,
and the consummation of the transactions herein contemplated, and the
fulfillment of the terms of this Agreement and the agreements referred to in
Subsection 1(f) will not conflict with, or, with or without giving the notice
or the passage of time or both, result in a breach of, any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance pursuant to the terms of, any
indenture, mortgage, deed of trust, loan agreement or 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 property or assets of the Company are subject,
nor will such action result in any violation of the provisions of the
certificate of incorporation or the by-laws of the Company, or any statute or
any order, rule or regulation applicable to the Company of any court or of any
regulatory authority or other governmental body having jurisdiction over the
Company, or any judgment or order of any court or other tribunal by which the
Company may be bound; in each case where the breach or default would have a
material adverse effect on the Company.
(h) Subject to any qualifications stated in the Prospectus, the
Company has good and marketable title to all properties and assets described
in the Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, or any other rights whatsoever of any other
entity or person, except such as are not materially significant or important
in relation to its business; all of the leases and subleases under which the
Company is the lessor or sublessor of properties or assets or under which the
Company holds properties or assets as lessee or sublessee as described in the
Prospectus are in full force and effect and, except as described in the
Prospectus, the Company is not in default with respect to any of the terms or
provisions of any of such leases or subleases and, except as described in the
Prospectus, no claim has been asserted by anyone adverse to rights of the
Company as lessor, sublessor, lessee or sublessee under any of the leases or
subleases to which it is a party, or affecting or questioning the right of the
Company to continued possession of the leased or subleased premises or assets
under any such lease or sublease except as described or referred to in the
Prospectus; and the Company owns or leases all such properties described in
the Prospectus as are necessary to its operations as now conducted.
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(i) Except as set forth in the Prospectus, the Company owns or
possesses adequate rights to use all material patents, patent applications,
trademarks, xxxx registrations, copyrights and licenses necessary for the
conduct of its business and has not received any notice of conflict with the
asserted rights of others in respect thereof. All patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, franchises and other intangible properties and assets (all of the
foregoing being herein called "Intangibles") that the Company owns or has
pending, or under which it is licensed are accurately described in the
Prospectus. There is no right under any Intangible necessary to the business
of the Company as presently conducted or as the Prospectus may indicate it
contemplates conducting, except as accurately described in the Prospectus.
Except as set forth in the Prospectus, to the knowledge of the Company, it has
not infringed, is not infringing, and has not received notice of infringement
with respect to, asserted Intangibles of others, except for such infringement
or alleged infringement that has not had, or cannot be reasonably expected to
have, a material adverse effect on the financial condition, results of
operations, business, properties, assets or future prospects of the Company.
Except as accurately described in the Prospectus, to the knowledge of the
Company, there is no infringement by others of any of the Intangibles of the
Company. Except as accurately described in the Prospectus, to the knowledge
of the Company, there is no Intangible of any other entity or person which has
had or may in the future have a material adverse effect on the financial
condition, results of operations, business, properties, assets or future
prospects of the Company.
(j) To the knowledge of the Company, Xxxxxx Xxxxxxxx LLP, who have
given their report on certain financial statements filed and to be filed with
the Commission as a part of the Registration Statement which are included in
the Prospectus are, with respect to the Company independent public accountants
as required by the Act and the Rules and Regulations.
(k) The financial statements and schedules, together with related
notes, set forth in the Prospectus or the Registration Statement present
fairly the financial position and results of operations and changes in cash
flows of the Company on the basis stated in the Registration Statement, at the
respective dates and for the respective periods to which they apply. Said
statements and schedules and related notes have been prepared in accordance
with generally accepted accounting principles applied on a basis which is
consistent during the periods involved. To the knowledge of the Company, no
other financial statements are required by Form SB-2 or otherwise to be
included in the Registration Statement or the Prospectus. There has at no
time been a material adverse change in the financial condition, results of
operations, business, properties, or assets of the Company from the latest
information set forth in the Registration Statement or the Prospectus, except
as properly described in the Prospectus; and, except as set forth in the
Prospectus, there is no fact known to the Company which could reasonably be
expected to have a material and adverse effect on the future prospects of the
Company (other than political or economic matters of general applicability or
as properly described in the Prospectus).
(l) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and Prospectus, the Company has not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which is
material to the business of the Company, and there has not been any change in
the capital stock of, or any incurrence of long-term debt by, the Company or
any issuance of
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options (except for the issuance of options pursuant to the Company's
Performance Incentive Stock Option Plan), warrants or other rights to purchase
the capital stock of the Company or any adverse change or any development
involving, so far as the Company can now reasonably foresee, a prospective
adverse change in its condition (financial or other), net worth, results of
operations, business, management or properties which would be material to the
business or financial condition of the Company, and the Company has not become
party to, and neither the business nor the property of the Company has become
the subject of, any material litigation whether or not in the ordinary course
of business.
(m) Except as set forth in the Prospectus, there is not now pending
nor, to the knowledge of the Company, threatened, any action, suit or
proceeding (including those related to environmental matters, sexual
harassment, discrimination on the basis of age, sex, religion or race, or any
regulatory matters) to which the Company is a party before or by any court or
governmental agency or body, which could result in any material adverse change
in the condition (financial or other), business prospects, net worth or
properties of the Company; and no labor disputes involving the employees of
the Company exist which could be expected to materially adversely affect the
conduct of the business, property or operations or the financial condition or
earnings of the Company.
(n) Except as set forth in the Prospectus, the Company (i) has paid
all federal, state, local and foreign taxes for which it is liable to the
extent such taxes are due and payable, including, but not limited to,
withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable,
and (iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(o) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific 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.
(p) Except as set forth in the Prospectus, the Company has all
licenses, permits and other governmental authorizations currently required for
the conduct of its business or the ownership of its property as described in
the Prospectus and is in all material respects complying therewith. To the
best knowledge of the Company, none of the activities or business of the
Company is in violation of, or could cause the Company to violate, any law,
rule, regulation or order of the United States, any state, county or locality,
or of any agency or locality, the violation of which would have a material
adverse impact upon the condition (financial or otherwise), business,
property, prospective results of operations or net worth of the Company.
(q) The Company has not, directly or indirectly, at any time (i)
made
any contributions to any candidate for political office, or if made, failed to
disclose fully any such contribution made in violation of law, or (ii) made
any
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payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The
Company's internal accounting controls and procedures are sufficient to enable
the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(r) On the Closing Dates (as defined in Section 2(c)), all transfer
or
other taxes (including franchise, capital stock or other tax, other than
income taxes imposed by any jurisdiction), if any, which are required to be
paid in connection with the sale and transfer of the Securities to the
Underwriters hereunder will have been fully paid or provided for by the
Company and all laws imposing such taxes will have been fully complied with.
(s) Any contract, agreement, instrument, lease or license required
to
be described in the Registration Statement or the Prospectus has been properly
described therein. Any contract, agreement, instrument, lease, or license
required to be filed as an exhibit to the Registration Statement has been
filed with the Commission as an exhibit to the Registration Statement.
(t) The Company has not taken and will not take, directly or
indirectly, any action which might cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Securities hereunder.
(u) The Company has no subsidiaries.
(v) Except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings, oral or written, for
services in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or any other arrangements, agreements,
understandings, payments or issuances with respect to the Company or any of
its officers, directors, stockholders, partners, employees or affiliates that
may affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
(w) Neither the Commission nor, to the knowledge of the Company, the
"blue sky" or securities authority of any jurisdiction has issued an order (a
"Stop Order") suspending the effectiveness of the Registration Statement,
preventing or suspending the use of any Preliminary Prospectus, the
Prospectus, the Registration Statement, or any amendment or supplement
thereto, refusing to permit the effectiveness of the Registration Statement,
or suspending the registration or qualification of the Securities, nor, to the
knowledge of the Company, has any of such authorities instituted or threatened
to institute any proceedings with respect to a Stop Order.
(x) The Company has all requisite power and authority to execute,
deliver, and perform this Agreement. All necessary corporate proceedings of
the Company have been duly taken to authorize the execution, delivery and
performance of this Agreement by the Company. This Agreement has been duly
authorized, executed and delivered by the Company, is the legal, valid and
binding obligation of the Company, and is enforceable as to the Company in
accordance with its terms (subject to applicable bankruptcy, insolvency and
other laws affecting creditors' rights generally and except as rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws and public policy). Except as
-6-
described in the Prospectus, no consent, authorization, approval, order, lien,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority or any court or other tribunal is
required for the execution, delivery or performance of this Agreement by the
Company (except filings under the Act which have been or will be made before
the Closing Date and such consents consisting only of consents under "blue
sky" or securities laws which have been obtained at or prior to the date of
this Agreement). No consent of any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding to which the Company
is a party, or to which any of its properties or assets are subject, is
required for the execution, delivery or performance of this Agreement; and the
execution, delivery and performance of this Agreement will not violate, result
in a breach of, conflict with, or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or declare a default
under any such material contract, agreement, instrument, lease, license,
arrangement or understanding, or violate or result in a breach of any term of
the certificate of incorporation or by-laws of the Company, or violate, result
in a breach of, or conflict with, any law, rule, regulation, order, judgment,
or decree binding on the Company or to which any of its operations,
businesses, properties, or assets is subject.
(y) The Company has caused to be duly executed agreements ("Lock-up
Agreements") pursuant to which each of the Company's officers, directors and
stockholders has agreed (i) not to, directly or indirectly, offer to sell,
sell, grant any option for the sale of, assign, transfer, pledge, hypothecate
or otherwise encumber or dispose of any shares of Common Stock or securities
convertible into, exercisable or exchangeable for, or evidencing any right to
purchase or subscribe for, any shares of Common Stock (either pursuant to Rule
144 of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of 18 months following the Closing Date without
the prior written consent of the Representative (provided, however, that as to
transfers to immediate family members, trusts for such family members or
recognized charities, the transferees of which execute like Lock-up
Agreements, such consent shall not be unreasonably withheld; and, provided,
further, that, notwithstanding the foregoing restrictions and prohibitions
with respect to the disposition of shares of the Company's Common Stock, Xx.
X. Xxxxxx shall have the right to sell up to 30,000 shares of Common Stock of
the Company owned by him commencing 90 days from the Effective Date provided
that such sale or sales shall be pursuant to Rule 144 and shall be effected
through the Representative), and (ii) during the five (5) year period
following the Closing Date, to give the Representative the right to purchase
for its own account or sell for the account of such persons, any securities
sold by such persons pursuant to Rule 144. The Company has no reason to
believe that the Lock-up Agreements are not legally binding upon, and
enforceable against, the respective security holder signatories thereto. The
Company will cause the Transfer Agent to xxxx an appropriate legend on the
face of stock certificates representing all of such securities and to place
"stop transfer" orders on the Company's stock ledgers.
(z) The Common Stock has been approved for listing on the National
Association of Securities Dealers, Inc. Automated Quotation System Small Cap
Market ("NASDAQ") and approved for listing on The Pacific Stock Exchange
("PSE"), subject to notice of issuance.
(aa) Except as set forth in the Prospectus, no officer, director,
principal stockholder or partner of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the
Rules and Regulations) of any of the foregoing persons or entities has or has
had,
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either directly or indirectly, (i) an interest in any person or entity which
(A) furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or
sells or furnishes to the Company any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus
under "Certain Transactions", there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any officer,
director, principal stockholder of the Company, or any partner, affiliate or
associate of any of the foregoing persons or entities required to be set forth
in the Prospectus.
(bb) Any certificate signed by any officer of the Company and
delivered
to the Underwriters or to Underwriters' Counsel (as defined herein) shall be
deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
(cc) The minute book of the Company has been made available to the
Underwriters and contains a complete record in all material respects of all
meetings and actions of the directors and stockholders of the Company,
respectively, since the time of its incorporation, contains a complete record
of all matters discussed at all such meetings and accurately reflects all
transactions referred to in such minutes in all material respects.
(dd) Except and to the extent the same may be described in the
Prospectus, no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have
the right to include any securities issued by the Company in the Registration
Statement or in any other registration statement to be filed by the Company or
to require the Company to file a registration statement under the Act and
except as described in the Registration Statement, no person or entity holds
any price protection anti-dilution rights with respect to any securities of
the Company.
(ee) 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, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours. There are no pending investigations involving the Company by
the U.S. Department of Labor or any other governmental agency responsible for
the enforcement of such federal, state, local or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company
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 representation question exists respecting the employees of the Company and
no 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.
(ff) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") ("ERISA Plans"). The Company does not maintain or
contribute, now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA. No
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ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code, which could subject the Company to any tax penalty on 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 "multiemployer
plan."
(gg) The Company has as of the effective date of the Registration
Statement (A) entered into employment agreements with Alain X-X Xxxxxx, Xxxx
XxXxxxxxx and Xxx Xxxxx providing for annual salaries of $152,500, $90,000 and
$90,000, subject to cost of living increases, respectively, each on terms and
conditions properly described in the Prospectus, and (B) maintains "key-man"
insurance on the lives of Alain X-X Xxxxxx and Xxxx XxXxxxxxx in the face
amount of $_____________ and $_____________, respectively, which name the
Company as the sole beneficiary.
(hh) Immediately prior to the effective date of the Registration
Statement there shall be no more than an aggregate of 7,524,367 shares of
Common Stock issued and outstanding or reserved for issuance (including any
and all (A) securities with equivalent rights as the Common Stock, (B) Common
Stock or such equivalent securities, issuable upon the exercise of options,
warrants and other contract rights, and (C) securities convertible directly or
indirectly into Common Stock or such equivalent securities, and excluding the
Representative's Warrant). Of the total shares outstanding or reserved for
issuance, no more than ______ shares of Common Stock are reserved for issuance
under the employees restricted stock option plan, after giving effect to the
grant prior to the date hereof of options to purchase _____ shares thereunder.
2. Purchase, Delivery and Sale of the Shares.
(a) Subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties and agreements herein contained,
the Company agrees to issue and sell to the Underwriters, and the Underwriters
agree to buy from the Company, at $____ per Share at the place and time
hereinafter specified, the Firm Shares.
Delivery of the Firm Shares against payment therefor shall take place
at the offices of X.X. Xxxxxx & Co., Inc., 0000 Xx. Xxxx Xxxxxx, Xxxxxxxxx,
Xxx
Xxxx 00000 (or at such other place as may be designated by agreement between
you and the Company) at 10:00 a.m. New York time on ________ __, 1997, or at
such later time and date as you may designate, such time and date of payment
and delivery for the Firm Shares being herein called the "First Closing Date."
Time shall be of the essence and delivery at the time and place specified in
this subsection (a) is a further condition to the obligations of the
Underwriters hereunder.
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants an option to the
Underwriters to purchase all or any part of an aggregate of _______ additional
Shares at the same price per Share as the Underwriters shall pay for the Firm
Shares being sold pursuant to the provisions of subsection (a) of this Section
2 (such additional Shares being referred to herein as the "Option Shares").
This option may be exercised within 30 business days after the Effective Date
upon notice by you to the
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Company advising it as to the amount of Option Shares as to which the option
is being exercised, the names and denominations in which the certificates for
such Option Shares are to be registered and the time and date when such
certificates are to be delivered. Such time and date shall be determined by
you but shall not be earlier than four (4) and not later than ten (10) full
business days after the exercise of said option, nor in any event prior to the
First Closing Date, and such time and date is referred to herein as the
"Option Closing Date." Delivery of the Option Shares against payment therefor
shall take place at the offices of X.X. Xxxxxx & Co., Inc., 0000 Xx. Xxxx
Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (or at such other place as may be designated
by agreement between you and the Company). Time shall be of the essence and
delivery at the time and place specified in this subsection (b) is a further
condition to the obligations of the Underwriters hereunder.
The Option granted hereunder may be exercised only to cover over-
allotments in the sale by the Underwriters of Firm Shares referred to in
subsection (a) above.
(c) The Company will make the certificates for the Shares to be
purchased by the Underwriters hereunder available to you for inspection at
least two (2) full business days prior to the First Closing Date or the Option
Closing Date (which are collectively referred to herein as the "Closing Dates"
and individually as a "Closing Date"), as the case may be. The certificates
shall be in such names and denominations as you may request, at least two (2)
full business days prior to the relevant Closing Dates. Time shall be of the
essence and the availability of the certificates at the time and place
specified in this Agreement is a further condition to the obligations of the
Underwriters.
Definitive certificates in negotiable form for the Shares to be
purchased by the Underwriters hereunder will be delivered by the Company to
you for the account of the Underwriters against payment of the purchase price
by you, for the account of the Underwriters, at your option, by certified or
bank cashier's checks in New York Clearing House funds or by wire transfer,
payable to the order of the Company or up to three (3) designees of the
Company.
In addition, in the event the Underwriters exercise the option to
purchase from the Company all or any portion of the Option Shares pursuant to
the provisions of subsection (b) above, payment for such Option Shares shall
be made to or upon the order of the Company by you, for the account of the
Underwriters, at your option, by certified or bank cashier's checks payable in
New York Clearing House funds or by wire transfer, at the offices of X.X.
Xxxxxx & Co., Inc. at the time and date of delivery of such Option Shares as
required by the provisions of subsection (b) above, against receipt of the
certificates for such Option Shares by you, for the account of the
Underwriters, registered in such names and in such denominations as you may
request.
It is understood that the Underwriters propose to offer the Shares to
be purchased hereunder to the public upon the terms and conditions set forth
in
the Registration Statement, after the Registration Statement becomes
effective.
(d) On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants, for an aggregate purchase price of
$5.00, which warrants shall entitle the holders thereof to purchase an
aggregate of _______ shares [10% of the Firm Shares] of Common Stock. The
Representative's Warrants shall be exercisable for a period of four (4) years
commencing one (1) year from the effective date of the Registration Statement
at
-10-
a price equaling one hundred twenty percent (120%) of the initial public
offering price of the Shares. The Representative's Warrant Agreement and form
of Warrant Certificate shall be substantially in the form filed as Exhibit __
to the Registration Statement. Payment for the Representative's Warrants
shall be made on the Closing Date.
3. Covenants of the Company
The Company covenants and agrees with the Underwriters that:
(a) The Company shall use its best efforts to cause the Registration
Statement to become effective and, upon notification from the Commission that
the Registration Statement has become effective, will so advise you and will
not at any time, whether before or after the Effective Date, file any
amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously have been advised and furnished with a copy or
to which you or counsel for the Underwriters shall have objected in writing or
which is not in compliance with the Act and the Rules and Regulations. At any
time prior to the later of (i) the completion by the Underwriters of the
distribution of the Securities contemplated hereby (but in no event more than
nine (9) months after the Effective Date) and (ii) twenty-five (25) days after
the Effective Date, the Company shall prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or Prospectus which, in your reasonable opinion, may be necessary or
advisable in connection with the distribution of the Securities.
Promptly after you or the Company is advised thereof, you will advise
the Company or the Company will advise you, as the case may be, and confirm
the advice in writing, of the receipt of any comments of the Commission, of
the effectiveness of any post-effective amendment to the Registration
Statement, of the filing of any supplement to the Prospectus or any amended
Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for
additional information with respect thereto, of the issuance by the Commission
or any state or regulatory body of any stop orders or other order suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering in any jurisdiction, or the
institution of any proceedings for any of such purposes, and the Company will
use its best efforts to prevent the issuance of any such order and, if issued,
to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each Prelim-
inary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company
authorizes the Underwriters and selected dealers to use the Prospectus in
connection with the sale of the Securities for such period as in the opinion
of counsel for the Underwriters the use thereof is required to comply with
the applicable provisions of the Act and the Rules and Regulations. In case
of the happening, at any time within such period as a Prospectus is required
under the Act to be delivered in connection with sales by an underwriter or
dealer, of any event of which the Company has knowledge and which materially
affects the Company or the Securities, or which in the opinion of counsel for
the Company or counsel for the Underwriters should be set forth in an amend-
ment to the Registration Statement or a supplement to the Prospectus in order
to make the statements therein not then misleading, in light of the circum-
stances existing at the time the
-11-
Prospectus is required to be delivered to a purchaser of the Securities, or in
case it shall be necessary to amend or supplement the Prospectus to comply
with the Act or with the Rules and Regulations, the Company will notify you
promptly and forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which
they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters, except that in case the Underwriters are required, in connection
with the sale of the Securities, to deliver a Prospectus nine (9) months or
more after the Effective Date, the Company shall, upon request of and at the
expense of the Underwriters, amend or supplement the Registration Statement
and Prospectus and furnish the Underwriters with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
The Company shall comply with the Act, the Rules and Regulations and
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations promulgated thereunder in connection with the issuance and
offering of the Securities.
(b) The Company shall use its best efforts to qualify or register
the
Securities for sale under the securities or "blue sky" laws of such
jurisdictions as you may designate and shall make such applications and the
Company shall furnish such information to counsel for the Underwriters as may
be required for that purpose and to comply with such laws, provided that the
Company shall not be required to qualify as a foreign corporation or a dealer
in securities or to execute a general consent to service of process in any
jurisdiction in any action other than one arising out of the offering or sale
of the Securities. The Company shall, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long a period as you may reasonably request.
(c) If the sale of the Securities provided for herein is not
consummated due to the Company's breach of any representation or warranty or
condition contained in this Agreement, or because of the Company's actions or
failure to take such actions as are reasonably required hereunder, and the
Underwriters are prepared, and desire at their option, to perform in
accordance with the terms herein, the Company shall pay all costs and expenses
incident to the performance of the Company's obligations hereunder in
accordance with Section 8 hereof.
(d) The Company shall furnish to you as early as practicable prior
to
the Closing Date and any Option Closing Date, as the case may be, but no less
than two (2) full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company which have been read by
the Company's independent certified public accountants, as stated in their
letters to be furnished pursuant to Section 4(e) hereof.
(e) For so long as the Company is a reporting company under either
Section 12(b), Section 12(g) or Section 15(d) of the Exchange Act, the
Company, at its expense, shall furnish to its stockholders an annual report
(including financial statements audited by independent public accountants), in
reasonable detail and at its expense, will furnish to you during the period
ending five (5)
-12-
years from the date hereof, (i) as soon as practicable after the end of each
fiscal year, a balance sheet of the Company and any subsidiaries as at the end
of such fiscal year, together with statements of income, stockholders' equity
and cash flows of the Company and any subsidiaries as at the end of such
fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent public accountants; (ii) as soon
as they are available, a copy of all quarterly financial statements; (iii) as
soon as they are available, a copy of all reports (financial or other) mailed
to security holders; (iv) as soon as they are available, a copy of all non-
confidential reports and financial statements furnished to or filed with the
Commission; and (v) such other information as you may from time to time
reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company shall deliver to you at or before the First Closing
Date two (2) signed copies of the Registration Statement including all
financial statements and exhibits filed therewith and of all amendments
thereto. The Company shall deliver to or upon your order, from time to time
until the Effective Date, as many copies of any Preliminary Prospectus filed
with the Commission prior to the Effective Date as the Underwriters may
reasonably request. The Company will deliver to you on the Effective Date and
thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as the Underwriters may from time to time
reasonably request.
(h) The Company shall make generally available to its security
holders
and deliver to you as soon as it is practicable to do so, but in no event
later than 90 days after the end of 12 months after the end of its current
fiscal quarter, an earnings statement (which need not be audited) covering a
period of at least 12 consecutive months beginning after the Effective Date
which shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company shall, promptly upon your request, prepare and file
with the Commission any amendments or supplements to the Registration
Statement, preliminary Prospectus or Prospectus and take any other action,
which in the opinion of Morse, Zelnick, Rose & Lander, LLP, counsel to the
Underwriters, may be reasonably necessary or advisable in connection with the
distribution of the Securities and will use its best efforts to cause the same
to become effective as promptly as possible.
(j) Prior to the Effective Date, the persons described in Section
1(y)
shall have executed the Lock-up Agreements described therein. You shall have
received written waivers of demand and/or piggy-back registration rights, if
any, from all the holders thereof prior to the Effective Date of the
Registration Statement.
(k) The Company shall upon the initial filing of the Registration
Statement make all filings required to obtain approval for listing for
quotation of the Securities on the National Association of Securities Dealers,
Inc. ("NASDAQ") National Market System of the Firm Shares and the Option
Shares and shall use its best efforts to maintain such listing for at least
five (5) years from the date of this Agreement. In the event that the
Securities do not
-13-
initially qualify for listing on the NASDAQ National Market System, such
Securities shall be listed on the NASDAQ SmallCap System. In addition, the
Company shall upon the initial filing of the Registration make all filings
required to obtain approval for listing the Firm Shares and the Option Shares
on the PSE. Within ten (10) days after the Effective Date, the Company shall
cause the Company to be listed in Xxxxx'x OTC Industrial Manual and shall use
its best efforts to cause such listings to be maintained for five (5) years
from the date of this Agreement.
(l) The Company represents that it has not taken, and agrees that it
will not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock or Securities
or to facilitate the sale or resale of the Common Stock or Securities.
(m) During the ninety (90)-day period commencing as of the First
Closing Date, the Company shall not, without your prior written consent, which
consent shall not be unreasonably withheld, grant options to purchase shares
of Common Stock at a price less than the closing bid price of the Common Stock
on the Effective Date. Furthermore, during the 24-month period commencing on
the Effective Date, no options shall be granted by the Company to its officers
or directors pursuant to any stock option plan unless such option is either
(a) not exercisable during such 24-month period, or (b) the shares issuable
upon exercise of such option are subject to a lock-up agreement with the
Representative restricting the sale of such shares during such twenty-four
(24) month period.
(n) Prior to the Closing Date or any Option Closing Date, as the
case
may be, the Company shall not issue any press release or other communication
directly or indirectly and shall hold no press conference with respect to the
Company or its financial condition, results of operations, business,
properties, or assets or this offering, without your prior written consent,
which consent will not be unreasonably withheld.
(o) During the period of the offering, and for a period of twelve
(12)
months from the Effective Date, the Company shall not sell or otherwise
dispose of any securities of the Company, except for shares of Common Stock
issuable upon exercise of options, warrants or convertible securities
outstanding on the Effective Date or options authorized for grant under stock
option plans as of the Effective Date, without your prior written consent,
which consent shall not be unreasonably withheld. During the period of the
offering, and for a period of twenty-four (24) months from the Effective Date,
the Company shall not sell or otherwise dispose of any securities of the
Company pursuant to Regulation S under the Act without your prior written
consent.
(p) The Company shall reserve and keep available that number of its
authorized but unissued shares of Common Stock, which are issuable upon
exercise of the Representative's Warrant outstanding from time to time.
(q) Within ninety (90) days from the First Closing Date, the Company
shall deliver to you, at the Company's expense, six (6) bound volumes in form
and content acceptable to you, containing the Registration Statement and all
exhibits filed therewith, and all amendments thereto, and all other
correspondence, filings, certificates and other documents filed and/or
delivered in connection with this offering, together with an index to all such
documents.
(r) On or prior to the Effective Date, the Company shall retain a
public relations firm, reasonably acceptable to you, for a period of two (2)
years from the Effective Date.
-14-
(s) On or prior to the Closing Date, the Company shall enter into
the
Financial Consulting Agreement with you for a period of one (1) year pursuant
to which you will consult with the Company on corporate financing and other
financial service matters for a fee of $60,000 payable in full on the Closing
Date.
(t) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use
of Proceeds" in the Prospectus. Except as described in the Prospectus, no
portion of the net proceeds shall be used, directly or indirectly, to acquire
any securities issued by the Company.
(u) For a period of three (3) years from the Closing Date, the
Company
shall, as the Representative may reasonably request, but not more often than
monthly, furnish to the Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock (ii) the list
of holders of all of the Company's securities.
(v) For a period of three (3) years from the date of the Prospectus,
the Representative shall have the right, but not the obligation, to designate
one (1) representative to be a non-voting observer to receive notice of and to
attend all meetings of the Company's Board of Directors. Such individual
shall be reimbursed for all out-of-pocket expenses incurred in connection with
attending such meetings and shall be indemnified by the Company against any
claims arising out of his attendance at such Board meetings. The Company's
Board of Directors shall hold at least four (4) meetings in each year.
(w) For a period of two (2) years from the Closing Date, pursuant to
the M/A Agreement, the Company shall, if it participates in any merger,
consolidation or other transaction which the Representative has brought to the
Company (including an acquisition of assets or stock for which it pays, in
whole or in part, with shares of the Company's Common Stock or other
securities) pay for the Representative's services an amount equal to 5% of the
first $3,000,000 of value paid or received in the transaction, 2 1/2% of any
consideration paid over $3,000,000 and less than $5,000,000 and 2% of all
such value above $5,000,000; in addition, during such two-year period, if
someone other than the Representative brings such a merger, consolidation or
other transaction to the Company, and if the Company in writing retains the
Representative for consultation or other services in connection therewith,
then upon consummation of the transaction the Company shall pay to the
Representative as a fee the aforesaid amount or as otherwise agreed to between
the Company and the Representative.
(x) The Company shall cause a Registration Statement under the
Exchange Act to be declared effective concurrently with the completion of the
offering of the Securities.
(y) For a period of six (6) months following the Effective Date the
Company shall provide the Representative with DTC Stock Transfer Sheets on a
weekly basis and thereafter on a monthly basis.
4. Conditions of Underwriters' Obligations.
The obligations of the Underwriters to purchase and pay for the
Shares
hereunder are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations, warranties and
covenants of the Company herein, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
-15-
(a) The Registration Statement shall have become effective and you
shall have received notice thereof not later than 4:00 p.m., New York time, on
the date following the date of this Agreement, or at such later time or on
such later date as to which you may agree in writing; on the Closing Dates, no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that or any similar purpose shall have
been instituted or shall be pending or, to the knowledge of the Underwriters
or to the knowledge of the Company, shall be contemplated by the Commission;
any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of Morse, Zelnick, Rose
& Lander, LLP, counsel to the Underwriters; and no stop order shall be in
effect denying or suspending effectiveness of the Registration Statement nor
shall any stop order proceedings with respect thereto be instituted or pending
or threatened under the Act.
(b) At the First Closing Date, you shall have received the opinion,
dated as of the First Closing Date, of Xxxx Xxxxx Xxxxxxxx Xxxxx & Xxxxxx, P.
C., counsel for the Company, in form and substance satisfactory to counsel for
the Underwriters, to the effect that:
(i) the Company has been duly organized and is validly existing
as a corporation in good standing under the laws of its state of incorporation
and is duly authorized to transact business as a foreign corporation in good
standing in each other jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified and in good standing would not have a
material adverse effect on the Company; to such counsel's knowledge, the
Company does not own an equity interest in any other corporation, partnership,
joint venture, trust or other business entity;
(ii) to the best knowledge of such counsel, (a) the Company
has obtained, or is in the process of obtaining, all licenses, permits and
other
governmental authorizations necessary to the conduct of its business as
described in the Prospectus, and (b) such obtained licenses, permits and other
governmental authorizations are in full force and effect and the Company is in
all material respects complying therewith;
(iii) the authorized capitalization of the Company is as set
forth under "Capitalization" in the Prospectus; all of the Company's
outstanding securities requiring authorization for issuance by the Company's
Board of Directors have been duly authorized and validly issued, are fully
paid and non-assessable and conform in all material respects to the
description thereof contained in the Prospectus; the outstanding securities of
the Company have not been issued in violation of the preemptive rights of any
stockholder, under the Delaware General Corporation Law or the Company's
certificate of incorporation or by-laws and the stockholders of the Company do
not have any statutory preemptive rights or, to the best of such counsel's
knowledge, other than as set forth in the Prospectus, other rights to
subscribe for or to purchase, and there are no restrictions upon the voting of
any of the Common Stock; the Shares, the Common Stock and the Representative's
Warrant conform to the respective descriptions thereof contained in the
Prospectus; the Securities to be issued as contemplated in the Registration
Statement have been duly authorized and, when issued and paid for, will be
non-assessable and free of preemptive rights under the New York Business
Corporation Law or the Company's certificate of incorporation or by-laws, or,
to the best of such counsel's knowledge, contractual preemptive rights, and no
personal liability will attach to the ownership thereof; a sufficient number
of shares of Common Stock have been
-16-
reserved for issuance upon exercise of the Representative's Warrant (without
regard to the anti-dilution provisions thereof) and upon such issuance upon
exercise in accordance with the terms of the Representative's Warrant, when
the purchase price is paid, will be fully paid, non-assessable and free of
preemptive rights under the Delaware General Corporation or the Company's
certificate of incorporation or by-laws or, to the best of such counsel's
knowledge, contractual preemptive rights, and no personal liability will
attach to the ownership thereof; and to the best of such counsel's knowledge,
except as set forth in the Prospectus, neither the filing of the Registration
Statement nor the offering or sale of the Securities as contemplated by this
Agreement gives rise to any registration rights or other rights, other than
those which have been waived or satisfied, for or relating to the registration
of the Securities;
(iv) this Agreement, the Financial Consulting Agreement,
the
M/A Agreement and the Representative's Warrant have been duly and validly
authorized, executed and delivered by the Company and, assuming due execution
and delivery by you, all of such agreements are, or when duly executed will
be, the valid, legally binding and enforceable obligations of the Company,
except (i) as limited by applicable bankruptcy, insolvency, reorganization and
other laws affecting creditors' rights, or (ii) as limited by general
principles of equity; provided, however, that no opinion need be expressed as
to the enforceability of the indemnity provisions contained in Section 6 or
the contribution provisions contained in Section 7 of this Agreement;
(v) the certificates evidencing the shares of Common Stock are
in valid and proper form;
(vi) except as disclosed in the Prospectus, such counsel
knows of no pending legal or governmental proceedings to which the Company is
a party which could materially adversely affect the business, property,
financial condition or operations of the Company or which question the
validity of the Securities, this Agreement, the Financial Consulting
Agreement, the M/A Agreement or the Representative's Warrant, or of any
action taken or to be taken by the Company pursuant to this Agreement, the
Financial Consulting Agreement, the M/A Agreement or the Representative's
Warrant; except as disclosed in the Prospectus, no such proceedings are
known to such counsel to be threatened against the Company; and there are no
governmental proceedings or regulations known to such counsel required to be
described or referred to in the Registration Statement which are not so
described or referred to;
(vii) to the knowledge of such counsel, the Company is not in
violation of or default under this Agreement, the Financial Consulting
Agreement, the M/A Agreement or the Representative's Warrant, and the
execution and delivery hereof and thereof and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated will not result in a violation of,
or constitute a default under, the certificate of incorporation or by-laws of
the Company, or, to the best of such counsel's knowledge, in the performance
or observation of any material obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or in
any contract, indenture, mortgage, loan agreement, lease, joint venture or
other agreement or instrument to which the Company is a party or, to the best
of such counsel's knowledge, in a violation of any material order, rule,
regulation, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign applicable to the Company or to
which it is subject;
-17-
(viii) the Registration Statement has become effective under
the
Act, and to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in effect, no proceedings for
that purpose have been instituted or are pending before, or threatened by, the
Commission and the Registration Statement and the Prospectus (except for the
financial statements and other financial and statistical data contained
therein, or omitted therefrom, as to which such counsel need express no
opinion) comply as to form in all material respects with the applicable
requirements of the Act and the Rules and Regulations;
(ix) during the course of the preparation of the Registration
Statement, such counsel has participated in conferences with officers and
other representatives of the Company, the Underwriters and independent public
accountants of the Company, at which conferences the contents of the
Registration Statement and the Prospectus contained therein and related
matters were discussed and, although such counsel need not pass upon and does
not assume any responsibility for the adequacy, accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus contained therein (except as specified in such counsel's opinion),
solely on the basis of the foregoing without independent check and
verification, no facts have come to such counsel's attention which lead it to
believe that the Registration Statement or any amendment thereto, at the time
the Registration Statement or amendment became effective, contained an 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 in which they were made, not misleading or the Prospectus or any
amendment or supplement thereto, at the time they were filed pursuant to Rule
424(b) or at the date hereof, contained an 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 (except that no view need be expressed as to (i)
financial information and statistical data and information included in the
Registration Statement or the Prospectus, (ii) information included in the
Registration Statement or the Prospectus which was furnished by or on behalf
of the Underwriters, or (iii) information included in the second paragraph of
the "Underwriting" section of the Prospectus).
(x) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and other
documents are accurate and complete in all material respects and such counsel
is familiar with the contracts and other documents referred to in the
Registration Statement and the Prospectus and any such amendment or
supplement, or filed as exhibits to the Registration Statement, and such
counsel does not know of any contracts or documents of a character required to
be summarized (other than real property leases) or described therein or to be
filed as exhibits thereto which are not so summarized, described or filed;
each of the Preliminary Prospectus, the Registration Statement, and the
Prospectus and any amendments or supplement thereto (other than the financial
statements and other financial and statistical data included therein, as to
which no opinion need be rendered) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations.
(xi) except as described in the Prospectus, no
authorization,
approval, consent or license of any governmental or regulatory authority or
agency is necessary in connection with the authorization, issuance, transfer,
sale or delivery of the Securities by the Company, in connection with the
-18-
execution, delivery and performance of this Agreement by the Company or in
connection with the taking of any action contemplated herein, or the issuance
of the Representative's Warrant or the shares of Common Stock underlying the
Representative's Warrant, other than registration or qualification of the
Securities under applicable state or foreign securities or blue sky laws (as
to which such counsel need express no opinion) and registration under the Act;
(xii) the statements in the Registration Statement under the
captions "Business," "Use of Proceeds," "Management - Summary Compensation"
(other than the data contained in the Summary Compensation table), "Principal
Shareholders," "Certain Transactions," and "Description of Securities" have
been reviewed by such counsel and, insofar as they refer to statements of law,
descriptions of statutes, licenses, rules or regulations or legal conclusions,
are correct in all material respects;
(xiii) to the knowledge of such counsel, except as described in
the Prospectus, no holders of Common Stock or other securities of the Company
have any registration rights with respect to Common Stock, except as described
in the Prospectus or which have been validly waived or satisfied. All
registration rights known to such counsel have been so described and have been
validly waived or satisfied with respect to the transaction contemplated
hereby;
(xiv) the Company is not required, and will not be required,
as a result of this offering, to be registered as an "investment company"
under the Investment Company Act of 1940, as amended;
(xv) the properties and business of the Company conform to the
descriptions thereof contained in the Registration Statement and the
Prospectus;
(xvi) the Company is not in breach of, or in default under,
any term or provision of any license, contract, indenture, mortgage,
installment
sale agreement, deed of trust, lease, voting trust agreement, shareholders'
agreement, partnership agreement, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which the
Company may be bound or to which the property or assets (tangible or
intangible) of the Company is subject or affected, which could materially
adversely affect the Company; and 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, judgment, decree, order, statute, rule or
regulation the result of which would materially and adversely affect the
condition, financial or otherwise, or the earnings, business affairs,
position, stockholders' equity, value operation, properties, business or
results of operations of the Company.
(xvii) the Company owns or possesses, free and clear of all
liens
or encumbrances and rights thereto or therein by third parties, the requisite
licenses or other rights to use all trademarks, service marks, copyrights,
service names, trade names, patents, patent applications and licenses
necessary to conduct its business (including, without limitation, any such
licenses or rights described in the Prospectus as being owned or possessed by
the Company), and to the best of such counsel's knowledge after reasonable
investigation, there is no claim or action by any person pertaining to, any
proceeding, pending, or threatened, which challenges the exclusive rights of
the Company with respect to, any trademarks, service marks, copyrights,
service names, trade names, patents, patent applications and licenses used in
the conduct of the Company's business (including, without limitations any such
licenses or rights described in the Prospectus as being owned or possessed by
the Company).
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(xviii) except as described in the Prospectus, the Company does
not (A) maintain, sponsor or contribute to any ERISA Plans, (B) maintain or
contribute now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA, and (C) has never completely or partially
withdrawn from a "multiemployer plan"; and
(xix) the Securities have been approved for listing on the
Nasdaq SmallCap Market and the PSE, and the Company's Registration Statement
on
Form 8-A under the Exchange Act has become effective.
(xx) to such counsel's knowledge, the persons listed under the
caption "Principal Shareholders" in the Prospectus are the respective
"beneficial owners" (as such phrase is defined in Regulation 13d-3 under the
Exchange Act) of the securities set forth opposite their respective names
thereunder as and to the extent set forth therein;
(xxi) to such counsel's knowledge, except as described in
the
Prospectus, no person, corporation, trust, partnership, association or other
entity has the right to include and/or register any securities of the Company
in the Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration
statement;
(xxii) to such counsel's knowledge, 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 Shares or the financial consulting arrangement
between the Representative and the Company, if any, or any other arrangements,
agreements, understandings, payments or issuances that may affect the
Underwriters' compensation, as determined by the NASD;
(xxiii) the Lock-up Agreements are legal, valid and binding
obligations of the parties thereto, enforceable against each such party and
any subsequent holder of the securities subject thereto in accordance with its
terms (except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application
of equitable principles in any action, legal or equitable); and
(xxiv) all actions under the Act necessary to make the public
offering and consummate the sale of the Securities as provided in this
Agreement have been taken by the Company; and the provisions of the
certificate of incorporation and by-laws of the Company comply as to form in
all material respects with the Act and the Rules and Regulations.
Such opinion shall also cover such matters incident to the
transactions
contemplated hereby as you or counsel for the Underwriters shall reasonably
request. In rendering such opinion, such counsel may rely upon certificates
of any officer of the Company or public officials as to matters of fact and
may rely as to matters relating to patent law and regulations on the opinion
of Xxxxxx & Xxxxxxx, P. C. and as to matters relating to Singapore law on the
opinion of __________.
(c) All corporate proceedings and other legal matters relating to
this
Agreement, the Registration Statement, the Prospectus, and other related
matters shall be reasonably satisfactory to or approved by Morse, Zelnick,
Rose & Lander, LLP, counsel to the Underwriters.
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(d) At the First Closing Date, you shall have received the opinion,
dated as of the First Closing Date, of Xxxxxx & Xxxxxxx, P. C. with respect to
all patent matters and of ______________ with respect to all matters
concerning Singapore law in form and substance satisfactory to counsel for the
Underwriters.
(e) At the time this Agreement is executed and at the Closing Date
and
any Additional Closing Date, as the case may be, you shall have received a
letter, addressed to the Underwriters and in form and substance satisfactory
to you, with reproduced copies or signed counterparts thereof for each of the
Underwriters, from Xxxxxx Xxxxxxxx. LLP, dated the date of delivery:
(i) confirming that they are, and during the period covered by
their report(s) included in the Registration Statement and the Prospectus that
they were, independent certified public accountants with respect to the
Company within the meaning of the Act and the public Regulations and stating
that the response to Item 10 of the Registration Statement is correct insofar
as it relates to them;
(ii) stating that, in their opinion, the financial statements
and
schedules of the Company included in the Registration Statement examined by
them comply in form in all material respects with the applicable accounting
requirements of the Act and the Regulations;
(iii) stating that, on the basis of procedures (but not an
examination made in accordance with generally accepted auditing standards)
consisting of a reading of the latest available unaudited interim financial
statements of the Company (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 of the Company
and committees of such board, inquiries to certain 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
that caused them to believe that (A) the unaudited financial statements and
schedules of the Company included in the Registration Statement and Prospectus
do not comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published rules
and regulations under either such act or are not fairly presented in
conformity with generally accepted accounting principles (except to the extent
that certain footnote disclosures regarding any stub period may have been
omitted in accordance with the applicable rules of the Commission under the
Exchange Act) applied on a basis consistent with that of the audited financial
statements appearing therein, (B) any unaudited financial information of the
Company included in the Prospectus was not determined on a basis substantially
consistent with the corresponding information in the audited statements of
operations, (C) there was any change in the capital stock or debt of the
Company or any decrease in the net current assets or stockholders' equity of
the Company as of the date of the latest available monthly financial
statements of the Company or as of a specified date not more than five (5)
business days prior to the date of such letter, each as compared with the
amounts shown in the September 30, 1996 balance sheet included in the
Registration Statement and Prospectus, other than as properly described in the
Registration Statement and Prospectus or any change or decrease (which shall
be set forth therein) which you in your sole discretion shall accept, or (D)
there was any decrease in revenue, net earnings, or net earnings per share of
Common Stock of the Company during the period of September 30, 1996 to the
date of the latest available monthly financial statements of the Company or to
a specified date not
-21-
more than five (5) business days prior to the date of such letter, each as
compared with the corresponding prior year period, other than as properly
described in the Registration Statement and Prospectus or any decrease (which
shall be set forth therein) which you in your sole discretion shall accept;
and
(iv) stating that they have compared specific numerical data and
financial information pertaining to the Company set forth in the Registration
Statement, each Preliminary Prospectus, and the Prospectus, if applicable,
which have been specified by you prior to the date of this Agreement, to the
extent that such data and information may be derived from the general
accounting records of the Company, and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries, and other appropriate procedures
(which procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter, and found them
to be in agreement.
(f) At each of the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects with the same effect as if made on and as of
such Closing Date, and the Company shall have performed all of its obligations
hereunder and satisfied all the conditions on its part to be satisfied at or
prior to such Closing Date; (ii) the Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all statements which
are required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statements of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; (iii) there shall have been, since the
respective dates as of which information is given, no material adverse change
in the business, properties, condition (financial or otherwise), results of
operations, capital stock, long-term or short-term debt or general affairs of
the Company from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the Effective Date, and the Company shall not have
incurred any material liabilities or entered into any agreement not in the
ordinary course of business other than as referred to in the Registration
Statement and Prospectus; and (iv) except as set forth in the Prospectus, no
action, suit or proceeding at law shall be pending or threatened against the
Company which would be required to be disclosed in the Registration Statement,
and no proceedings shall be pending or threatened against the Company before
or by any commission, board or administrative agency in the United States or
elsewhere, wherein an unfavorable decision, rule or finding would materially
and adversely affect the business, property, condition (financial or
otherwise), results of operations or general affairs of the Company. In
addition, you shall have received, at the First Closing Date, a certificate
signed by the Chief Executive Officer and the principal financial or
accounting officer of the Company, dated as of the First Closing Date,
evidencing compliance with the provisions of this subsection (f).
(g) Upon exercise of the option provided for in Section 2(b) hereof,
the obligations of the Underwriters to purchase and pay for the Option Shares
referred to therein will be subject (as of the date hereof and as of the
Option Closing Date) to the following additional conditions:
-22-
(i) the Registration Statement shall remain effective at the
Option Closing Date, no stop order suspending the effectiveness thereof shall
have been issued, and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Underwriters or the
knowledge of the Company, shall be contemplated by the Commission, and any
reasonable request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of Morse,
Zelnick, Rose & Lander, LLP, counsel to the Underwriters;
(ii) at the Option Closing Date there shall have been delivered
to you the opinion of Xxxx Xxxxx Xxxxxxxx Xxxxx & Xxxxxx, P. C., counsel to
the Company, Xxxxxx & Xxxxxxx, P.C. and ____________, dated as of the Option
Closing Date, in form and substance reasonably satisfactory to Morse, Zelnick,
Rose & Lander, LLP, counsel to the Underwriters, which opinion shall be
substantially the same in scope and substance as the opinion furnished to you
at the First Closing Date pursuant to Sections 4(b) and 4(d) hereof,
respectively, except that such opinion, where appropriate, shall cover the
Option Shares rather than the Firm Shares. If the First Closing Date is the
same as the Option Closing Date, such opinions may be combined;
(iii) at the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and the
principal financial or accounting officer of the Company dated the Option
Closing Date, in form and substance satisfactory to Morse, Zelnick, Rose &
Lander, LLP, counsel to the Underwriters, substantially the same in scope and
substance as the certificate furnished to you at the First Closing Date
pursuant to Section 4(f) hereof;
(iv) at the Option Closing Date, there shall have been delivered
to you a letter in form and substance satisfactory to you from Xxxxxx
Xxxxxxxx, LLP, dated the Option Closing Date and addressed to you, confirming
the information in each of their letters referred to in Section 4(e) hereof as
of the date thereof and stating that, without any additional investigation
required, nothing has come to their attention during the period from the
ending date of their review referred to in said letter to a date not more than
five (5) days prior to the Option Closing Date which would require any change
in said letter if it were required to be dated the Option Closing Date;
(v) all proceedings taken at or prior to the Option Closing
Date
in connection with the sale and issuance of the Option Shares shall be
reasonably satisfactory in form and substance to you, and you and Morse,
Zelnick, Rose & Lander, LLP, counsel to the Underwriters, shall have been
furnished with all such documents, certificates and opinions as you may
request in connection with this transaction in order to evidence the accuracy
and completeness of any of the representations, warranties or statements of
the Company or its compliance with any of the covenants or conditions
contained herein.
(h) If any of the conditions herein provided for in this Section
shall
not have been completely fulfilled in all material respects as of the date
indicated, this Agreement and all obligations of the Underwriters under this
Agreement may be canceled at, or at any time prior to, each Closing Date by
your notifying the Company of such cancellation in writing or by telegram at
or prior to the applicable Closing Date. Any such cancellation shall be
without liability of the Underwriters to the Company, except as otherwise
provided herein.
(i) The Company shall have entered into the Financial Consulting
Agreement with the Representative providing for the non-refundable payment to
the Representative, commencing on the Closing Date, of a three thousand dollar
($5,000) per month retainer for a period of 12 months, all of which shall be
payable in advance at the Closing.
-23-
(k) The Company shall have entered into the M/A Agreement with the
Representative in final form and substance satisfactory to the Representative
and its counsel.
5. Conditions of the Obligations of the Company.
The obligation of the Company to sell and deliver the Shares is
subject
to the following conditions:
(a) The Registration Statement shall have become effective not later
than 4:00 p.m. New York time, on the date following the date of this
Agreement, or on such later date or time as the Company and you may agree in
writing.
(b) On the Closing Dates, no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the First Closing Date but are not
fulfilled
after the First Closing Date and prior to the Option Closing Date, then only
the obligation of the Company to sell and deliver the Option Shares on
exercise of the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriters, each officer, director, employee and agent of the Underwriters
and each person, if any, who controls the Underwriters, within the meaning of
the Act, from and against any losses, claims, damages or liabilities (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys'
fees), joint or several, to which the Underwriters or such controlling person
may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment thereof or supplement thereto,
(B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by
the Company filed in any state or other jurisdiction in order to qualify any
or all of the Securities under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any supplement thereto, or in
any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent,
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company through you by or on behalf of the Underwriters
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such Preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto. This indemnity shall be in addition to any liability
which the Company may otherwise have.
-24-
(b) The Underwriters agree to indemnify and hold harmless the
Company,
each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company, within the meaning of the
Act, from and against any losses, claims, damages or liabilities (which shall,
for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys'
fees) to which the Company or any such director, nominee, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged untrue
statement or omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or omission or
alleged untrue statement or omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company through you by or on behalf of the Underwriters and with
respect to the Underwriters specifically for use in preparation thereof,
provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus directly relating to the transactions effected by the Underwriters
in connection with this Offering. The Company acknowledges that the
statements with respect to the public offering of the Securities set forth
under the heading "Underwriting" and the stabilization legend in the
Prospectus have been furnished by the Underwriters expressly for use therein
and constitute the only information furnished in writing by or on behalf of
the Underwriters for inclusion in the Prospectus. This indemnity will be in
addition to any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section, notify in writing the indemnifying party of the commencement
thereof, but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party under this
Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying
party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that the fees and expenses of
such counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party or (ii) the named parties to any such action (including
-25-
any impleaded parties) include both such Underwriters or such controlling
person and the indemnifying party, and the indemnified party or parties shall
have reasonably concluded that the indemnified party or parties have one or
more legal defenses available to it which are in conflict to those available
to the indemnifying party (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of such indemnified
party or parties, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys). The
indemnifying party shall be free to settle any claim or action in respect to
which indemnity may be sought against it pursuant to this Section; provided,
however, that the indemnifying party shall not settle any such claim or action
if such settlement would result in the imposition against the indemnified
party or parties of a judgment, decree or order in the nature of equitable
relief without the consent of the indemnified party, which shall not be
unreasonably withheld in light of all factors of importance to such
indemnified party.
7. Contribution.
In order to provide for just and equitable contribution under the Act
in any case in which (i) an indemnified party makes claims for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 6 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of
any Underwriter, then the Company and the persons who control the Company, in
the aggregate, and such Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in
either such case (after contribution from others) in such proportions that
such Underwriter is responsible in the aggregate for that portion of such
losses, claims, damages or liabilities represented by the percentage that the
underwriting discount per Share appearing on the cover page of the Prospectus
bears to the public offering price per Share appearing thereon, and Company
shall be responsible for the remaining portion; provided, however, that if
such allocation is not permitted by applicable law, then the relative fault of
the Company and an Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The
relative fault shall be determined by reference to, among other things,
whether in the case of an untrue statement of a material fact or the omission
to state a material fact, such statement or omission relates to information
supplied by the Company or the Underwriters, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Underwriters agree that it
would not be just and equitable if the respective obligations of the Company
and the Underwriters to contribute pursuant to this Section 7 were to be
determined by pro rata or per capita allocation of the aggregate damages or by
any other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 7 and that
the contribution of the Underwriters shall not be in excess of its
proportionate share of the portion of such losses, claims, damages or
liabilities for which the Underwriters are responsible. No person guilty of a
fraudulent
-26-
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the word "Company" includes any
officer, director, or person who controls the Company within the meaning of
Section 15 of the Act. If the full amount of the contribution specified in
this paragraph is not permitted by law, then each Underwriter and each person
who controls each Underwriter shall be entitled to contribution from the
Company to the full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and the
Underwriters. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the settlement;
provided, however, that such consent shall not be unreasonably withheld in
light of all factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of
the
Shares to the Underwriters is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company,
including but not limited to the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus and the
Prospectus, as amended or supplemented, the fee of the National Association of
Securities Dealers, Inc. ("NASD") in connection with the filing required by
the NASD relating to the offering of the Securities contemplated hereby; all
expenses, including reasonable fees and disbursements of counsel to the
Underwriters, in connection with the qualification of the Securities under the
state securities or Blue Sky Laws which you shall designate; the cost of
printing and furnishing to the Underwriters copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selling Agreement and the Blue Sky Memorandum; the cost of printing the
certificates representing the Shares and Warrants, the expenses of Company due
diligence meetings and presentations, and the expense (which shall not exceed
$10,000) of placing one or more "tombstone" advertisements as directed by you.
The Company shall pay any and all taxes (including any transfer, franchise,
capital stock or other tax imposed by any jurisdiction) on sales to the
Underwriters hereunder. The Company will also pay all costs and expenses
incident to the furnishing of any amended Prospectus or of any supplement to
be attached to the Prospectus as called for in Section 3(a) of this Agreement
except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall at the
First Closing Date pay to you the balance of a non-accountable expense
allowance of $180,000, of which $____________ has been paid. In the event the
over-allotment option is exercised in part or in full, the Company shall pay
to you at the Option Closing Date, as a non-accountable expense allowance, an
amount equal to three percent (3%) of the gross proceeds received upon
exercise of the over-allotment option. In the event the proposed offering is
terminated for any reason, the Underwriters shall return any portion of the
$____________ advanced by the Company not previously expended in connection
with the proposed offering for actual accountable out-of-pocket expenses. If
the proposed offering is not completed due to the Company's breach of any
representation, warranty, covenant or condition contained in this Agreement,
or because of the Company's actions or failure to take such actions as are
reasonably required hereunder and the Underwriters are prepared to perform in
accordance with the terms herein, the Company shall be liable for all of the
Underwriters' actual accountable out-of-pocket expenses, including reasonable
legal fees.
-27-
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriters or from any other person
for services as a finder in connection with the proposed offering, and the
Company agrees to indemnify and hold harmless each Underwriter, and the
Underwriters agree to indemnify and hold harmless, severally and not jointly,
the Company from and against any losses, claims, damages or liabilities, joint
or several (which shall, for all purposes of this Agreement, include, but not
be limited to, all reasonable costs of defense and investigation and all
attorneys' fees) to which the indemnified party may become subject insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such
person's or entity's influence or prior contact with the indemnifying party.
9. Effective Date.
This Agreement shall become effective upon its execution, except that
you may, at your option, delay its effectiveness until 4:00 p.m., New York
time, on the first full business day following the Effective Date, or at any
such earlier time after the Effective Date as you in your discretion shall
first commence the initial public offering by the Underwriters of any of the
Shares. The time of the initial public offering shall mean the time of
release by you of the first newspaper advertisement with respect to the
Securities, or the time when the Securities are first generally offered by the
Underwriters to dealers by letter or telegram, whichever shall first occur.
This Agreement may be terminated by you at any time before it becomes
effective as provided above except that Sections 3(c), 6, 7, 8, 12, 13, 14 and
15 shall remain in effect notwithstanding such termination.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13, 14
and
15, may be terminated at any time prior to the First Closing Date, and the
option referred to in Section 2 (b), if exercised, may be canceled, at any
time prior to the Option Closing Date, by you if in your judgment it is
impracticable to offer for sale or to enforce contracts made by the
Underwriters for the resale of the Shares agreed to be purchased hereunder, by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree, (ii)
trading in securities on the New York Stock Exchange or the American Stock
Exchange having been suspended or limited, (iii) material governmental
restrictions having been imposed on trading in securities generally which are
not in force and effect on the date hereof, (iv) a banking moratorium having
been declared by federal or New York State authorities, (v) an outbreak of
major international hostilities or other national or international calamity
having occurred, (vi) the passage by the Congress of the United States or by
any state legislative body of similar impact, of any act or measure, or the
adoption of any orders, rules or regulations by any governmental body or any
authoritative accounting institute or board, or any governmental executive,
which is reasonably believed likely by you to have a material adverse impact
on the business, financial condition or financial statements of the Company,
(vii) any material adverse change in the financial or securities markets
beyond normal fluctuations in the United States having occurred since the date
of this Agreement, or (viii) any material adverse change having occurred since
the respective dates for which information is given in the Registration
Statement and Prospectus, in the earnings, business, prospects or general
condition of the Company, financial or otherwise, whether or not arising in
the ordinary course of business.
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(b) If you elect to prevent this Agreement from becoming effective
or
to terminate this Agreement as provided in this Section 10 or in Section 9,
the Company shall be promptly notified by you, by telephone or telegram,
confirmed by letter.
11. Representative's Warrant.
On the First Closing Date, the Company will issue to you, for total
consideration of $5.00 and upon the terms and conditions set forth in the form
of Representative's Warrant annexed as an exhibit to the Registration
Statement, a Representative's Warrant to purchase, in the aggregate, one Share
for each ten Firm Shares sold in the offering. In the event of conflict in
the terms of this Agreement and the Representative's Warrant, the language of
the Representative's Warrant shall control.
12. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations, warranties
and
other statements of the Company or its affiliates, where appropriate, and the
Underwriters, set forth in or made pursuant to this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Underwriters, the Company or any of its officers or directors or any
controlling persons and will survive delivery of and payment for the Shares
and the termination of this Agreement.
13. Notice.
All communications hereunder will be in writing and, except as other-
wise expressly provided herein, if sent to the Representative, will be mailed,
delivered or telecopied and confirmed to it at X.X. Xxxxxx & Co., Inc., 0000
Xx. Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000, with a copy sent to Morse,
Zelnick, Rose & Lander, LLP, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx
00000, or if sent to the Company, will be mailed, delivered, or telecopied and
confirmed to it at 000 X Xxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxx 00000, with a
copy sent to Xxxx Xxxxx Xxxxxxxx Xxxxx & Xxxxxx, P.C., 000 00xx Xxxxxx, Xxxxx
0000 Xxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000-0000.
14. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of the
Underwriters, the Company and, to the extent expressed, the affiliates, any
person controlling the Company, or the Underwriters, and directors of the
Company, nominees for directors of the Company (if any) named in the
Prospectus, the officers of the Company who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser, as such purchaser, from Underwriters.
[Balance of page intentionally blank]
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15. Applicable Law.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York applicable to agreements made and to be
entirely performed within New York.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it shall become a
binding agreement between the Company and you, as Representative of the
several Underwriters, in accordance with its terms.
Yours very truly,
ASHA CORPORATION
By:_________________________________________
Alain X-X Xxxxxx, Chief Executive Officer
Dated: ________ __, 1997
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
X.X. XXXXXX & CO., INC.
By:________________________________
Authorized Officer
Dated: ________ __, 1997
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SCHEDULE I
Name
Shares
X.X. Xxxxxx & Co., Inc.
Total
