1
EXHIBIT 1.1
[XXXXX XXXXXXX SECURITIES, INC. LETTERHEAD]
600,000 Units, each Unit Consisting of
Two (2) Shares of Common Stock and
One (1) Class A Redeemable
Common Stock Purchase Warrant
of
XXXXX XXXX, INC.
UNDERWRITING AGREEMENT
New York, New York
September , 1996
Xxxxx Xxxxxxx Securities, Inc.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Xxxxx Xxxx, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Xxxxx Xxxxxxx Securities, Inc. ("Xxxxx Xxxxxxx)", and each of the
other underwriters named in Schedule I hereto (collectively, the "Underwriters,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 11), for whom Xxxxx Xxxxxxx is acting as representative (in
such capacity, Xxxxx Xxxxxxx shall hereinafter be referred to as the
"Representative"), with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of 600,000 units ("Units"),
each Unit consisting of two (2) shares (the "Shares") of the Company's common
stock, par value $.001 per share ("Common Stock"), and one (1) Class A
Redeemable Common Stock Purchase Warrant (the "Redeemable Warrants"), each of
which Redeemable Warrants entitles the holder thereof to purchase one share of
Common Stock at an exercise price of $7.00 per share pursuant to a warrant
agreement (the "Warrant Agreement") between the Company and the warrant agent,
set forth in Schedule II, and with respect to the grant by the Company to the
Underwriters, acting severally and not jointly, of the option described in
2
Section 2(b) hereof to purchase all or any part of 90,000 additional Units for
the purpose of covering over-allotments, if any. The aforesaid 600,000 Units,
1,200,000 Shares and 600,000 Redeemable Warrants (the "Firm Securities") and
together with all or any part of the Units, Shares and Redeemable Warrants
subject to the overallotment option described in Section 2(b) hereof (the
"Overallotment Securities") are hereinafter collectively referred to as the
"Securities." The Company also proposes to issue and sell to the Underwriters,
an option (the "Unit Purchase Option") pursuant to the Underwriters' Unit
Purchase Option Agreement (the "Underwriters' Unit Purchase Option Agreement")
for the purchase of an aggregate of 60,000 additional Units consisting of
100,000 Shares (the "Underwriters' Unit Shares") and 60,000 Common Stock
Purchase Warrants (the "Underwriters' Unit Warrants"). The shares of Common
Stock issuable upon exercise of the Redeemable Warrants and the Underwriters'
Unit Warrants are hereinafter sometimes referred to as the "Warrant Shares." The
Shares, the Redeemable Warrants, the Unit Purchase Option, Underwriters' Unit
Shares, Underwriters' Unit Warrants, and the Warrant Shares are more fully
described in the Registration Statement (as defined in Subsection 1(a) hereof)
and the Prospectus (as defined in Subsection 1(a) hereof) referred to below.
Unless the context otherwise requires, all references to the "Company" shall
include all subsidiaries and entities to be acquired by the Company on or prior
to the Closing Date, as (defined in Subsection 2(c) hereof) referred to below.
All representations, warranties and opinions of counsel shall cover any such
subsidiaries and to be acquired entities.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters as of the
date hereof, and as of the Closing Date and any Option Closing Date, (as defined
in Subsection 2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form S-1 (No. _________) including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Securities under the Securities Act of 1933, as amended (the "Act"), which
registration statement and any amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act and the rules and
regulations of the Commission under the Act. The Company will promptly file a
further amendment to said registration statement in the form heretofore
delivered to the Underwriters and will not, before the registration statement
becomes effective, file any other amendment thereto unless the Underwriters
shall have consented thereto after having been furnished with a copy thereof.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents
2
3
filed as a part thereof and all information deemed to be a part thereof as of
such time pursuant to paragraph (b) of Rule 430A of the Rules and Regulations),
is hereinafter called the "Registration Statement" and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations, is hereinafter called the "Prospectus." For purposes hereof,
"Rules and Regulations" mean the rules and regulations adopted by the Commission
under either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part thereof and no
proceedings for a stop order have been instituted or are pending or, to the best
knowledge of the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed in
all material respects with the requirements of the Act and the Rules and
Regulations, and neither the Preliminary Prospectus, the Registration Statement
or Prospectus at the time of filing thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters expressly for
use in such Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing Date
and during such longer period as the Prospectus may be required to be delivered
in connection with sales by the Underwriters or a dealer, the Registration
Statement and the Prospectus will contain all material statements which are
required to be stated therein in compliance with the Act and the Rules and
Regulations, and will in all material respects conform to the requirements of
the Act and the Rules and Regulations; neither the Registration Statement, nor
any amendment thereto, at the time the Registration Statement or such amendment
is declared effective under the Act, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, not misleading, and the Prospectus
at the time the Registration Statement becomes effective, at the Closing Date
and at any Option Closing Date, will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and
3
4
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information supplied to the Company in writing by or
on behalf of the Underwriters expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is now, and at the
Closing Date and any Option Closing Date will be, validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company does not own, directly or indirectly, an interest in any corporation,
partnership, trust, joint venture or other business entity; provided, that the
foregoing shall not be applicable to the investment of the net proceeds from the
sale of the Securities in short-term, low-risk investments as set forth under
"Use of Proceeds" in the Prospectus. The Company is duly qualified and licensed
and in good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of its properties or the character of its operations
require such qualification or licensing, except where the failure to so qualify
would not have a material effect on the Company. The Company has all requisite
power and authority (corporate and other), and has obtained any and all
necessary applications, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operation of the Company.
The disclosures in the Registration Statement concerning the effects of federal,
state, local, and foreign laws, rules and regulations on the Company's business
as currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and will
have the adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or other
4
5
arrangement providing for the Company to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Shares, Redeemable Warrants, the Unit
Purchase Option, Underwriters' Unit Shares, the Underwriter's Unit Warrants, and
the Warrant Shares and all other securities issued or issuable by the Company
conform or, when issued and paid for, will conform in all respects to all
statements with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company, or similar contractual rights granted by the
Company. The Securities, the Unit Purchase Option , the Underwriters' Unit
Shares, and the Underwriter's Unit Warrants to be issued and sold by the Company
hereunder, and the Warrant Shares issuable upon exercise of the Redeemable
Warrants and the Underwriter's Unit Warrants and payment therefor, are not and
will not be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and delivered
in accordance with the terms hereof and thereof, will be validly issued, fully
paid and non-assessable and will conform to the descriptions thereof contained
in the Prospectus; the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities, the Unit Purchase Option, the
Underwriters' Unit Shares, and the Underwriter's Unit Warrants, and the Warrant
Shares has been duly and validly taken; and the certificates representing the
Securities, the Underwriter's Unit Warrants, and the Warrant Shares will be in
due and proper form. Upon the issuance and delivery pursuant to the terms hereof
of the Securities to be sold by the Company hereunder, the Underwriters will
acquire good and marketable title to such Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a prospective
change in the condition, financial or otherwise, or in the earnings, business
affairs, position, prospects, value, operation, properties, business, or results
of operation of the Company,
5
6
whether or not arising in the ordinary course of business, since the dates of
the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and intangible,
and the business of the Company, conforms in all material respects to the
descriptions thereof contained in the Registration Statement and in the
Prospectus.
(g) Xxxxxx Xxxxxx & Company, LLP, whose report is filed with
the Commission as a part of the Registration Statement, is an independent
certified public accountant as required by the Act and the Rules and
Regulations.
(h) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, withholding
taxes and taxes payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986 (the "Code"), (ii) has furnished all tax and information returns it
is required to furnish pursuant to the Code, and has established adequate
reserves for such taxes which are not due and payable, and (iii) does not have
knowledge of any tax deficiency or claims outstanding, proposed or assessed
against it.
(i) The Company maintains insurance, which is in full force
and effect, of the types and in the amounts which it reasonably believes to be
adequate for its business, including, but not limited to, personal injury and
product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(j) Except as disclosed in the Prospectus, there is no action,
suit, proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of the Company which: (i) questions the validity of the capital stock
of the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement; (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all respects); or (iii) might materially affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operations of the Company.
(k) The Company has full legal right, power and authority to
enter into this Agreement, the Underwriters' Unit Purchase Option Agreement and
the Warrant Agreement and to consummate the transactions provided for in such
agreements; and this Agreement,
6
7
the Underwriters' Unit Purchase Option Agreement and the Warrant Agreement have
each been duly and properly authorized, executed and delivered by the Company.
Each of this Agreement, the Underwriters' Agreement and the Warrant Agreement,
constitutes a legal, valid and binding agreement of the Company, subject to due
authorization, execution and delivery by the Representative and/or the
Underwriters, enforceable against the Company 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 except as rights to
indemnity or contribution may be limited by applicable law). Neither the
Company's execution or delivery of this Agreement, the Underwriters' Unit
Purchase Option Agreement, and the Warrant Agreement, its performance hereunder
and thereunder, its consummation of the transactions contemplated herein and
therein, nor the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, conflicts
with or will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of: (i) the Articles of
Incorporation or By-Laws of the Company; (ii) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, stockholders agreement, note,
loan or credit agreement or any other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of its
properties or assets (tangible or intangible) is or may be subject; or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the Company
of any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' purchase and distribution of the
Firm Securities and Overallotment Securities to be sold by the Company
hereunder; or (ii) the issuance and delivery of the Unit Purchase Option, the
Underwriters' Unit Shares, the
7
8
Underwriter's Unit Warrants, the Redeemable Warrants or the Warrant Shares.
(m) All executed agreements or copies of executed agreements
filed as exhibits to the Registration Statement to which the Company is a party
or by which the Company may be bound or to which any of its assets, properties
or businesses may be subject have been duly and validly authorized, executed and
delivered by the Company, and constitute the legal, valid and binding agreements
of the Company, enforceable against it in accordance with its respective terms.
The descriptions contained in the Registration Statement of contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Rules and
Regulations and there are no material contracts or other documents which are
required by the Act or the Rules and Regulations to be described in the
Registration Statement or filed as exhibits to the Registration Statement which
are not described or filed as required, and the exhibits which have been filed
are complete and correct copies of the documents of which they purport to be
copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business,
material changes in or affecting the general affairs, management, financial
operations, stockholders equity or results of operations of the Company.
(o) No default exists in the due performance and observance of
any material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders 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 any of
the Company may be bound or to which any of its property or assets (tangible or
intangible) of the Company is subject or affected.
(p) 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
8
9
employment practices, terms and conditions of employment and wages and hours.
(q) Since its inception, the Company has not incurred any
liability arising under or as a result of the application of the provisions of
the Act.
(r) The Company does not presently maintain, sponsor or
contribute to, and never has maintained, sponsored or contributed to, any
program or arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan " or a "multiemployer plan" as such terms are defined in
Sections 3(2), 3(1) and 3(37) respectively of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). 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.
(s) The Company is not in violation in any material respect of
any domestic or foreign laws, ordinances or governmental rules or regulations to
which it is subject.
(t) No holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
within eighteen (18) months of the date hereof or to require the Company to file
a registration statement under the Act during such eighteen (18) month period,
except such registration rights as have been waived or disclosed in the
Prospectus.
(u) Neither the Company, nor, to the Company's best knowledge,
any of its employees, directors, stockholders or affiliates (within the meaning
of the Rules and Regulations) has taken, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected to
cause or result in, under the Exchange Act, or otherwise, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities or otherwise.
(v) Except as described in the Prospectus, to the best of the
Company's knowledge, none of the patents, patent applications, trademarks,
service marks, trade names and copyrights, or licenses and rights to the
foregoing presently owned or held by the Company is in dispute or are in any
conflict with the right of any other person or entity within the Company's
current area of operations nor has the Company received notice of any of the
foregoing. To the best of the Company's knowledge, the Company: (i) owns or has
the right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents,
9
10
trademarks, service marks, trade names and copyrights, technology and licenses
and rights with respect to the foregoing, used in the conduct of its business as
now conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing; and (ii) except as
set forth in the Prospectus, is not obligated or under any liability whatsoever
to make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, service mark trade
name, copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
(w) The Company owns and has the unrestricted right to use all
material trade secrets, trade-marks, trade names, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "Intellectual
Property") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the
Company, free and clear of and without violating any right, lien, or claim of
others, including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company, or employees or agents, could have
developed trade secrets or items of technical information similar or identical
to those of the Company.
(x) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all the Intellectual Property
material to its operations.
(y) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property owned
or leased by it free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects, or other restrictions or equities of any
kind whatsoever, other than those referred to in the Prospectus and liens for
taxes or assessments not yet due and payable.
(aa) The Company has obtained duly executed legally binding
and enforceable agreements pursuant to which each of the Company's officers and
directors and any person or entity deemed to be an affiliate of the Company
(pursuant to the Rules and Regulations) has agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber any of their shares of
Common Stock or other securities of the Company (either pursuant to Rule 144 of
the Rules and Regulations or otherwise) or dispose of any beneficial interest
therein for a period of not less than 24
10
11
months following the effective date of the Registration Statement without the
prior written consent of the Representative. The Company will cause the Transfer
Agent, as defined below, to mark an appropriate legend on the face of stock
certificates representing all of such shares of Common Stock and other
securities of the Company.
(bb) Except as disclosed in the Prospectus, the Company has
not incurred any liability and there are no arrangements or understandings for
services in the nature of a finder's or origination fee with respect to the sale
of the Securities or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company or any of its officers,
directors, employees or affiliates that may adversely affect the Underwriters'
compensation, as determined by the NASD.
(cc) The Firm Securities have been approved for quotation on
the Nasdaq SmallCap Market of the Nasdaq Stock Market, Inc. [and approved for
listing on the Boston Stock Exchange,] subject to official notice of issuance.
(dd) Neither the Company nor any of its respective officers,
employees, agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company;
or (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any such person or entity or the Company, has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) 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, except with
11
12
respect to the beneficial ownership of not more than 1% of the outstanding
shares of capital stock of any publicly-held entity; 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, or principal stockholder of the Company, or any affiliate or associate
of any such person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
(gg) The Company has entered into employment agreements with
Xxxxxxxx Xxxxxx and Xxxxxxx Xxxxx as described in the Prospectus. The Company
has obtained a key-man life insurance policy in the amount of not less than
$1,000,000 on the life of Xx. Xxxxxx, which policy is owned by the Company and
names the Company as the sole beneficiary thereunder.
(hh) No securities of the Company have been sold by the
Company since its inception, except as disclosed in Part II of the Registration
Statement.
(ii) The minute books of the Company have been made available
to Underwriters' Counsel and contain a complete summary of all meetings and
actions of the Board of Directors and Shareholders of the Company since the date
of its incorporation.
2. Purchase, Sale and Delivery of the Securities and Agreement to
Issue Underwriters' Unit Purchase Option.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at the price per
Unit set forth below, that proportion of the number of Units set forth in
Schedule I opposite the name of such Underwriter that such number of Units bears
to the total number of Units, subject to such adjustment as the Underwriters in
their discretion shall make to eliminate any sales or purchases of fractional
Securities, plus any additional numbers of Units which such Underwriter may
become obligated to purchase pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby
12
13
grants an option to the Underwriters, severally and not jointly, to purchase up
to an additional 90,000 Units, each Unit consisting of two (2) Shares and one
(1) Redeemable Warrant at the prices per Unit set forth below. The option
granted hereby will expire 45 days after the date of this Agreement, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Overallotment Securities as to which the
Underwriters are then exercising the option and the time and date of payment and
delivery for such Overallotment Securities. Any such time and date of delivery
shall be determined by the Underwriters, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Date, as defined in paragraph (c) below, unless otherwise agreed to
between the Representative and the Company. In the event such option is
exercised, each of the Underwriters, acting severally and not jointly, shall
purchase such number of Overallotment Securities then being purchased which
shall have been allocated to such Underwriter by the Representative, and which
such Underwriter shall have agreed to purchase, subject in each case to such
adjustments as the Underwriters in their discretion shall make to eliminate any
sales or purchases of fractional Securities. Nothing herein contained shall
obligate the Underwriters to make any over-allotments. No Overallotment
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of Xxxxx
Xxxxxxx, Representative, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such
other place as shall be agreed upon by the Underwriters and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on _____
__, 1996 or at such other time and date as shall be designated by the
Representative but not less than three (3) nor more than five (5) business days
after the effective date of the Registration Statement (such time and date of
payment and delivery being hereafter called "Closing Date"). In addition, in the
event that any or all of the Overallotment Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for such Option Securities shall be made at the above-mentioned office or at
such other place and at such time (such time and date of payment and delivery
being hereinafter called "Overallotment Closing Date") as shall be agreed upon
by the Representative and the Company on each Overallotment Closing Date as
specified in the notice from the Underwriters to the Company. Delivery of the
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be made to the Underwriters against payment by the Underwriters of the
purchase price for the Firm Securities and the Overallotment Securities, if any,
to the
13
14
order of the Company as the case may be by certified check in New York Clearing
House funds, certificates for the Firm Securities and the Overallotment
Securities, if any, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered in such
names as the Underwriters may request in writing at least two (2) business days
prior to Closing Date or the relevant Overallotment Closing Date, as the case
may be. The certificates for the Firm Securities and the Overallotment
Securities, if any, shall be made available to the Underwriters at the
above-mentioned office or such other place as the Underwriters may designate for
inspection, checking and packaging no later than 9:30 a.m. on the last business
day prior to Closing Date or the relevant Overallotment Closing Date, as the
case may be.
The purchase price of the Units to be paid by each of the
Underwriters, severally and not jointly, to the Company for the Units purchased
under Clauses (a) and (b) above will be $4.50 per Unit (which price is net of
the Underwriters' discount and commissions). The Company shall not be obligated
to sell any Securities hereunder unless all Firm Securities to be sold by the
Company are purchased hereunder. The Company agrees to issue and sell 600,000
Units to the Underwriters in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to
the Underwriters, the Underwriters' Unit Purchase Option at a purchase price of
$60.00 which Unit Purchase Option shall entitle the holders thereof to purchase
an aggregate of 60,000 Units. The Underwriter's Unit Purchase Option shall be
exercisable for a period of three (3) years commencing one (1) year from the
effective date of the Registration Statement at an initial exercise price equal
to one hundred twenty percent (120%) of the initial public offering price of the
Units. The Underwriter's Unit Purchase Option Agreement and form of Unit
Purchase Option Certificate shall be substantially in the form filed as an
Exhibit to the Registration Statement. Payment for the Underwriters' Unit
Purchase Option shall be made on the Closing Date. The Company has reserved and
shall continue to reserve a sufficient number of Shares for issuance upon
exercise of the Underwriters' Unit Purchase Option and the Underwriters' Unit
Warrants contained in the Underwriters' Unit Purchase Option.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Underwriters deem advisable, but in no
event more than five (5) business days after such effective date, the
Underwriters shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Underwriters may allow such concessions and
discounts upon sales to other dealers as set forth in the Prospectus. The
Underwriters may from time to time increase
14
15
or decrease the public offering price after distribution of the Securities has
been completed to such extent as the Underwriters, in their sole discretion deem
advisable.
4. Covenants of the Company. The Company covenants and agrees with
each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act (i) before termination of the offering of the Securities
by the Underwriters which the Underwriters shall not previously have been
advised and furnished with a copy, or (ii) to which the Underwriters shall have
objected or (iii) which is not in compliance with the Act, the Exchange Act or
the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriters and confirm by notice in
writing: (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution or proceeding for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose; (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriters) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Underwriters
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of
15
16
this Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Underwriters notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), will furnish the Underwriters with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the Underwriters
or Xxxxxxxxx & XxXxxxx, LLP ("Underwriters' Counsel"), shall reasonably object.
(e) The Company shall cooperate in good faith with the
Underwriters, and Underwriters' Counsel, at or prior to the time the
Registration Statement becomes effective, in endeavoring to qualify the
Securities for offering and sale under the securities laws of such jurisdictions
as the Underwriters may reasonably designate, and shall cooperate with the
Underwriters and Underwriters' Counsel in the making of such applications, and
filing such documents and shall furnish such information as may be required for
such purpose; provided, however, the Company shall not be required to qualify as
a foreign corporation or file a general consent to service of process in any
such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Underwriters agree that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
16
17
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriters' Counsel, and the Company will furnish
to the Underwriters a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period commencing on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriters, an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(h) During a period of three (3) years after the date hereof
and provided that the Company is required to file reports with the Commission
under Section 12 of the Exchange Act, the Company will furnish to its
stockholders, as soon as practicable, annual reports (including financial
statements audited by independent public accountants), and will deliver to the
Underwriters:
(i) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
(iii) every press release and every material news item
or article of interest to the financial community in respect of the Company and
any future subsidiaries or their affairs which was released or prepared by the
Company;
(iv) any additional information of a public nature
concerning the Company and any future subsidiaries or their respective
businesses which the Underwriters may reasonably request;
(v) a copy of any Schedule 13D, 13G 14D-1, 13E-3 or
13E-4 received or filed by the Company from time to time.
17
18
During such three-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) For as long as the Company is required to file reports
with the Commission under Section 12 of the Exchange Act, the Company will
maintain a Transfer Agent and Warrant Agent, which may be the same entity, and,
if necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer and Warrant Agent) for its Units,
Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Underwriters or pursuant
to the Underwriters' direction, without charge, at such place as the
Underwriters may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include all financial
statements and exhibits), the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such quantities
as the Underwriters may reasonably request.
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the provisions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be used
directly or indirectly to acquire any securities issued by the Company.
(m) The Company shall timely file all such reports, forms or
other documents as may be required (including but not limited to a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(n) The Company shall furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest
18
19
available unaudited consolidated interim financial statements of the Company
(which in no event shall be as of a date more than forty-five (45) days prior to
the date of the Registration Statement) which have been read by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to Section 6(k) hereof.
(o) For a period of two (2) years from the Closing Date, the
Company shall furnish to the Underwriters at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Representative's reasonable request; (ii) a list of holders of Securities upon
the Representatives reasonable request; (iii) a list of, if any, the securities
positions of participants in the Depository Trust Company upon the
Representative's reasonable request.
(p) For a period of two (2) years after the effective date of
the Registration Statement, the Company shall use its best efforts to cause one
(1) individual selected by the Representative to be elected to the Board of
Directors of the Company (the "Board"), if requested by the Representative and
provided such individual is reasonably acceptable to and approved by the
Company. Alternatively, the Representative shall be entitled to appoint an
individual who shall be permitted to attend all meetings of the Board and to
receive all notices and other correspondence and communications sent by the
Company to members of the Board. The Company shall reimburse the
Representative's designee for his or her out-of-pocket expenses reasonably
incurred and authorized in advance by the Company in connection with his or her
attendance of the Board meetings. To the extent permitted by law, the Company
agrees to indemnify and hold the designee (as a director or observer) and the
Representative harmless against any and all claims, actions, awards and
judgements arising out of his or her service as a director or an observer and
the Company shall maintain a liability insurance policy in an amount of not less
than $5,000,000 affording coverage for the action of its officer and directors,
to include such designee and the Representative as an insured under such policy.
(q) For a period equal to the lesser of (i) five (5) years
from the date hereof, or (ii) the sale to the public of the Warrant Shares, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Forms S-1 or, if applicable, S-2 and S-3 (or other appropriate
form) for the registration under the Act of the Warrant Shares.
(r) For a period of five (5) years from the date hereof, use
its best efforts at its cost and expense to maintain the listing of the
Securities on the Nasdaq SmallCap Market [and for a period of two years maintain
the listing of the Securities on the Boston Stock Exchange.]
19
20
(s) On or before the effective date of the Registration
Statement, retain or make arrangements to retain a financial public relations
firm reasonably satisfactory to the Representative which shall be continuously
engaged from such engagement date to a date 24 months from the effective date of
the Registration Statement.
(t) (i) As soon as practicable, but in no event more than 5
business days after the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities and (ii) promptly take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and/or
Xxxxx'x OTC Manual and to continue such inclusion for a period of not less than
five (5) years from the date hereof.
(u) Following the Effective Date of the Registration Statement
and for a period of two (2) years thereafter, the Company shall, at its sole
cost and expense, prepare and file such blue sky trading applications with such
jurisdictions as the Representative may reasonably request after consultation
with the Company, and on the Representative's request, furnish the Underwriters
with a secondary trading survey prepared by securities counsel to the Company.
(v) The Company shall not amend or alter any term of any
written employment agreement between the Company and any executive officer,
during the term thereof, in a manner more favorable to such employee, without
the express written consent of the Representative.
(w) Until the completion of the distribution of the
Securities, the Company shall not without the prior written consent of the
Representative and Underwriters' Counsel, which consent shall not be
unreasonably withheld, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(x) Commencing one (1) year from the date hereof, upon the
exercise of any Warrant, the exercise of which was solicited by the Underwriters
in accordance with the applicable rules and regulations of the NASD prevailing
at the time of such solicitation, the Company shall pay to the soliciting
Underwriter a fee of 5% of the aggregate exercise price of such Warrant within
five (5) business days of such exercise and receipt of the exercise price. The
Company further agrees that it will not solicit the exercise of any Warrant
other than through the Underwriters, unless either: (i) the Underwriters cannot
legally solicit the exercise of the Warrants at the time of such solicitation;
(ii) the Representative declines, in writing, to solicit the exercise of the
20
21
Warrants within five (5) business days of such a written request by the Company;
or (iii) the Representative consents to the solicitation of the exercise of the
Warrants by the Company or another entity.
(y) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of five (5) years
from the Closing Date.
(z) On the Closing Date, the Company and the Underwriters
shall enter into a financial consulting agreement, in the form filed as Exhibit
_____ to the Registration Statement, pursuant to which the Underwriters will
provide financial consulting services to the Company for a two (2) year period
for an aggregate fee of $108,000, all of which will be paid on the Closing Date
(the "Financial Consulting Agreement").
(aa) For a period of 18 months commencing on the Closing Date,
except with the written consent of the Underwriters, which consent shall not be
unreasonably withheld, the Company will not issue or sell, directly or
indirectly, any shares of its capital stock, or sell or grant options, or
warrants or rights to purchase any shares of its capital stock, except pursuant
to (i) this Agreement, (ii) the Unit Purchase Option and the Underwriters' Unit
Warrants, (iii) warrants and options of the Company heretofore issued and
described in the Prospectus, and (iv) the grant of options and the issuance of
shares issued upon exercise of options issued or to be issued under the
Company's 1996 Stock Option Plan as contemplated by the Prospectus; except that,
during such period, the Company may issue securities in connection with an
acquisition, merger or similar transaction, provided that such securities are
not publicly registered and the acquirer of the securities is not granted
registration rights with respect thereto which are effective prior to 24 months
after the Closing Date. Notwithstanding anything to the contrary set forth in
the prior sentence, the Company may not issue any class or series of Preferred
Stock for a period of 18 months from the Closing Date without the unanimous vote
or consent of all members of the Board of Directors of the Company. Prior to the
Closing Date, the Company will not issue any options or warrants without the
prior written consent of the Representative.
(bb) The Company will not file any registration statement
relating to the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the 12 months following the Closing
Date without the Underwriters' prior written consent.
(cc) Subsequent to the dates as of which information is given
in the Registration Statement and Prospectus and prior to the Closing Dates,
except as disclosed in or contemplated by the Registration Statement and
Prospectus, (i) the Company will not
21
22
have incurred any liabilities or obligations, direct or contingent, or entered
into any material transactions other than in the ordinary course of business;
(ii) there shall not have been any change in the capital stock, funded debt
(other than regular repayments of principal and interest on existing
indebtedness) or other securities of the Company, any adverse change in the
condition (financial or other), business, operations, income, net worth or
properties, including any loss or damage to the properties of the Company
(whether or not such loss is insured against), which could adversely affect the
condition (financial or other), business, operations, income, net worth or
properties of the Company; and (iii) the Company shall not pay or declare any
dividend or other distribution on its Common Stock or its other securities or
redeem or repurchase any of its Common Stock or other securities.
(dd) Except as disclosed in or contemplated by the
Registration Statement and Prospectus, the Company, for a period of two (2)
years following the Closing Date, shall not redeem any of its securities, and
shall not pay any dividends or make any other cash distribution in respect of
its securities in excess of the amount of the Company's current or retained
earnings derived after the Closing Date without obtaining the Underwriters'
prior written consent, which consent shall not be unreasonably withheld. The
Underwriters shall either approve or disapprove such contemplated redemption of
securities or dividend payment or distribution within ten (10) business days
from the date the Underwriters receive written notice of the Company's proposal
with respect thereto; a failure of the Underwriters to respond within the five
(5) business day period shall be deemed approval of the transaction.
(ee) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date
and the Overallotment Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation: (i) the fees and
expenses
22
23
of accountants and counsel for the Company; (ii) all costs and expenses incurred
in connection with and due diligence the preparation, duplication, printing,
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing and delivery of this Agreement,
the Selected Dealer Agreements, the Agreement Among Underwriters, Underwriters
Questionnaires, Powers of Attorney and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters in
quantities as hereinabove stated; (iii) the printing, engraving, issuance and
delivery of the Securities including any transfer or other taxes payable
thereon; (iv) disbursements and fees of Underwriters' Counsel in connection with
the qualification of the Securities under state or foreign securities or "Blue
Sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, which Underwriters' Counsel fees (exclusive of
filing fees and disbursements) shall equal $20,000 and of which $10,000 has
previously been paid; (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with information meeting held in New
York, New York, and presentations, and prospectus memorabilia all of which costs
and expenses shall be approved in advance by the Company; (vi) fees and expenses
of the transfer agent; (vii) the fees payable to the NASD; and (viii) the fees
and expenses incurred in connection with the listing of the Securities on the
Nasdaq SmallCap Market [and The Boston Stock Exchange.] All fees and expenses
payable to the Underwriters shall be payable at the Closing Date or
Overallotment Closing Date, as applicable.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 12, the
Company shall reimburse and indemnify the Representative for up to $50,000
out-of-pocket expenses reasonably incurred in connection with the transactions
contemplated hereby including the fees and disbursements of counsel for the
Underwriters of which the Representative acknowledges $35,000 has been paid
prior to the date hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriters a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Firm
Securities $35,000 of which has been paid to date to the Underwriters. The
Company will pay the remainder of the non-accountable expense allowance on the
Closing Date by certified or bank cashier's check or, at the election of the
Underwriters, by deduction from the proceeds of the offering
23
24
contemplated herein. In the event the Underwriters elects to exercise the
over-allotment option described in Section 2(b) hereof, the Company further
agrees to pay to the Underwriters on the Option Closing Date (by certified or
bank cashier's check or, at the Underwriters' election, by deduction from the
proceeds of the offering) a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Overallotment Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Overallotment Closing Date, if any, as if they had been made on and as of
the Closing Date or each Overallotment Closing Date, as the case may be; the
accuracy on and as of the Closing Date or Overallotment Closing Date, if any, of
the statements of officers of the Company made pursuant to the provisions
hereof; and the performance by the Company on and as of the Closing Date and
each Option Closing Date, if any, of each of its covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriters, and, at
Closing Date and each Overallotment Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Securities
and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriters of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Underwriters shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriters' opinion, is material or omits to
state a fact which, in the Underwriters' opinion, is material and is required to
be stated therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the Underwriters' reasonable opinion,
24
25
is material, or omits to state a fact which, in the Underwriters' reasonable
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) On or prior to the Closing Date, and each Overallotment
Closing Date, as the case may be, the Underwriters shall have received from
Underwriters' Counsel, such opinion or opinions with respect to the organization
of the Company the validity of the Securities, the Registration Statement, the
Prospectus and other related matters as the Underwriters reasonably may request
and such counsel shall have received such papers and information as they request
to enable them to pass upon such matters.
(d) At the Closing Date, and the Option Closing Date the
Underwriters shall have received the favorable opinion of Xxxxx Xxxxxxx, counsel
to the Company, dated the Closing Date, or Option Closing Date, as the case may
be, addressed to the Underwriter and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(e) The Company: (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (B) to the best of counsel's knowledge, the Company is
duly licensed or qualified as a foreign corporation in all jurisdictions in
which by reason of maintaining an office in such jurisdiction or by owning or
leasing real property in such jurisdiction it is required to be so licensed or
qualified except where failure to be so qualified or licensed would have no
material adverse effect; and (C) to the best of counsel's knowledge, the Company
has not received any notice of proceedings relating to the revocation or
modification of any such license or qualification.
(ii) The Registration Statement, each Preliminary
Prospectus that has been circulated and the Prospectus and any post-effective
amendments or supplements thereto (other than the financial statements,
schedules 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 Regulations and the conditions for use of a
registration statement on Form S-1 have been satisfied by the Company. Such
counsel shall state that such counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Underwriters at which the contents of the Registration Statement, the Prospectus
and related matters were discussed and, although such counsel is not passing
upon and does not assume any responsibility for the
25
26
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus, on the basis of the foregoing, no facts
have come to the attention of such counsel which lead them to believe that
either the Registration Statement or any amendment thereto at the time such
Registration Statement or amendment became effective or the Prospectus as of the
date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or to make the
statements therein in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus or with
respect to statements or omissions made therein in reliance upon information
furnished in writing to the Company on behalf of any Underwriter expressly for
use in the Registration Statement or the Prospectus).
(iii) To the best of such counsel's knowledge, except
as described in the Prospectus, the Company does not own an interest of a
character required to be disclosed in the Registration Statement in any
corporation, partnership, joint venture, trust or other business entity;
(iv) To the best of such counsel's knowledge, the
Company has a duly authorized, issued and outstanding capitalization as set
forth in the Prospectus as of the date indicated therein, under
"Capitalization". The Units, Shares, Redeemable Warrants, the Unit Purchase
Option, the Underwriters' Unit Warrants, and the Warrant Shares conform in all
material respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof, to counsel's best knowledge, are not
subject to personal liability by reason of being such holders, and none of such
securities were issued in violation of the preemptive rights of any holder of
any security of the Company. The Securities to be sold by the Company hereunder,
the Unit Purchase Option to be sold by the Company under the Underwriter's Unit
Purchase Option Agreement and Underwriters' Unit Warrant and the Warrant Shares
are not, to the best of such counsel's knowledge, subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; that the holders of the Common Stock shall
not be personally liable for the payment of the Company's debts solely by reason
of being such holders except as they may be liable by reason of their own
conduct or acts; and that the certificates representing the Units, Shares,
Redeemable Warrants, Unit Purchase Option, the
26
27
Underwriters' Unit Shares, and the Underwriters' Unit Warrants are in due and
proper legal form.
(v) The issuance of the Shares, Redeemable Warrants and
the Warrant Shares have been duly authorized and when issued and paid for in
accordance with this Agreement and the Warrant Agreement, respectively, will be
validly issued, fully paid and non-assessable securities of the Company. The
holders of the Securities when issued and paid for, will not be subject to
personal liability by reason of being such holders. The Securities are not and
will not be subject to the preemptive or similar contractual rights of any
shareholder of the Company. All corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The certificates representing the Units, Shares and Redeemable Warrants
are in due and proper form. Upon delivery of the Shares to the Underwriters
against payment therefor as provided for in this Agreement, the Underwriters
(assuming they are bona fide purchasers within the meaning of the Uniform
Commercial Code) will acquire good title to the Units, free and clear of all
liens, encumbrances, equities, security interests and claims.
(v) The Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has been timely made
in the appropriate form under Rule 430A, and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and to the best of such counsel's knowledge, no
proceedings for that purpose have been instituted or are pending or threatened
or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A) there
are no material contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form SB-2
and the Rules and Regulations;
(vii) This Agreement, the Underwriters' Warrant
Agreement, the Warrant Agreement, and the Financial Consulting Agreement have
each been duly and validly authorized, executed and delivered by the Company,
and assuming that it is a valid and binding agreement of the Underwriters, so as
the case may be, constitutes a legal, valid and binding agreement of the Company
enforceable as against the Company in accordance with its respective terms
(except as such enforceability may be limited by
27
28
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors rights and
the application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable law
or pursuant to public policy).
(ix) Neither the execution or delivery by the Company
of this Agreement, the Underwriter's Warrant Agreement, the Financial Consulting
Agreement, and the Warrant Agreement, nor its performance hereunder or
thereunder, nor its consummation of the transactions contemplated herein or
therein, nor the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, nor the
issuance of the securities conflicts with or will conflict with or results or
will result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a material default under, or result in the
creation imposition of any material lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of, (A) the Certificate of Incorporation or By-Laws of the Company,
(B) to the best knowledge of such counsel, any indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument that is material to the Company
to which the Company is a party or by which it may be bound or to which its
properties or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (C) to the best knowledge of such counsel, and except to the
extent it would not have a material adverse effect on the Company, any statute,
judgment, decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, having jurisdiction over the Company or any of its
respective activities or properties.
(x) No consent, approval, authorization or order, and
no filing with, any court, regulatory body, government agency or other body,
(other than such as may be required under state securities laws, as to which no
opinion need be rendered) is required in connection with the issuance by the
Company of the Securities pursuant to the Prospectus and the Registration
Statement, the performance of this Agreement, the Underwriters' Unit Purchase
Option Warrant Agreement, the Financial Consulting Agreement and the Warrant
Agreement by the Company, and the taking of any action by the Company
contemplated hereby or thereby, which has not been obtained;
(xi) Except as described in the Prospectus, to the best
knowledge of such counsel, the Company is not in breach of, or in default under,
any material term or provision of any indenture,
28
29
mortgage, installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders' 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 any of the property or assets (tangible or
intangible) of the Company is subject or affected; and the Company is not in
violation of any material term or provision of its Certificate of Incorporation
or By-Laws or in violation of any material franchise, license, permit, judgment,
decree, order, statute, rule or regulation material to the Company business;
(xii) The statements in the Prospectus under "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES ELIGIBLE FOR FUTURE
SALE" 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 best of such counsel's knowledge, except
as described in the Prospectus, no person, corporation, trust, partnership,
association or other entity holding securities of the Company has the
contractual 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
for eighteen months from the date hereof;
(xiv) the Securities are eligible for listing on the
Nasdaq SmallCap Market [and upon issuance will be listed on the Boston Stock
Exchange].
In rendering such opinion, such counsel may rely, (A) as to matters
involving the application of laws other than the laws of the United States, the
corporate laws of Delaware and New York and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably
acceptable to Underwriters' Counsel, familiar with the applicable laws, and (B)
as to matters of fact, to the extent they deem proper, on certificates and
written statements of responsible officers of the Company and certificates or
other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company; provided, that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and, in their opinion, the Underwriters
and they are justified in relying thereon.
29
30
(e) At each Overallotment Closing Date, if any, the
Underwriters shall have received the favorable opinion of counsel to the
Company, each dated the Overallotment Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming as of Overallotment Closing Date the statements made by such firm, in
their opinion, delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the
Overallotment Closing Date, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
(g) Prior to the Closing Date and each Overallotment Closing
Date, if any: (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness;
(iv) no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or
to its knowledge threatened against the Company, or affecting any of its
properties or businesses before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vi) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(h) At the Closing Date and each Overallotment Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Overallotment
Closing Date, as the case may be, to the effect that:
30
31
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing Date
or the Overallotment Closing Date, as the case may be, and the Company has
complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Overallotment Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus or any supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Overallotment Closing Date, as the case may
be, other than in the ordinary course of its business, any material liabilities
or obligations, direct or contingent; (B) the Company has not paid or declared
any dividends or other distributions on its capital stock; (C) the Company has
not entered into any transactions not in the ordinary course of business; (D)
there has not been any change in the capital stock or any increase in long-term
debt or any increase in the short-term borrowings (other than any increase in
the short-term borrowings in the ordinary course of business) of the Company;
(E) the Company has not sustained any material loss or damage to its property or
assets, whether or not insured; (F) there is no litigation which is pending or
threatened against the Company which is required to be set forth in an amended
or supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or
affiliates shall have taken, and the Company, its officers and affiliates will
not take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in the stabilization or manipulation
of the price of the
31
32
Company's securities to facilitate the sale or resale of the Shares.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriters shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Representative
shall have received a letter, dated such date, addressed to the Representative
in form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters, from Xxxxxx Xxxxxx & Company, LLP:
(i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion that the combined
financial statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriters may rely upon the opinion of Xxxxxx Xxxxxx
& Company, LLP with respect to the financial statements and-supporting schedules
included in the Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim combined
financial statements of the Company (with an indication of the date of the
latest available unaudited interim combined financial statements), a reading of
the latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
combined financial statements and supporting schedules of the Company included
in the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited combined financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than five (5) days
prior to the effective date of the Registration Statement, there
32
33
has been any change in the capital stock or long-term debt of the Company, or
any decrease in the stockholders' equity or net current assets or net assets of
the Company as compared with amounts shown in the financial statements included
in the Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease, and (C) during the period from ________
to a specified date not more than five (5) days prior to the effective date of
the Registration Statement, there was any decrease in net revenues, net earnings
or increase in net earnings per common share of the Company, in each case as
compared with the corresponding period beginning _________ other than as set
forth in or contemplated by the Registration Statement, or, if there was any
such decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5)
days prior to the date of the Registration Statement, the amount of liabilities
of the Company (including a breakdown of commercial paper and notes payable to
banks);
(v) stating that they have compared specific dollar
amounts, numbers of Securities, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) stating that they have not during the immediately
preceding five (5) year period brought to the attention of the Company's
management any "weakness", as defined in Statement of Auditing Standard No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit,
" in the Company's internal controls;
(vii) stating that they have in addition carried out
certain specified procedures, not constituting an audit, with respect to certain
pro forma financial information which is included in the Registration Statement
and the Prospectus and that nothing has come to their attention as a result of
such procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the applicable
accounting requirements of Rule ll-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of that information; and
33
34
(viii) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriters may reasonably request.
(k) At the Closing Date and each Option Closing Date, the
Underwriters shall have received from Xxxxxx Xxxxxx & Company, LLP, a letter,
dated as of the Closing Date, or Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (j) of this Section , except that the specified date referred to
shall be a date not more than five days prior to Closing Date and, if the
Company has elected to rely on Rule 430A of the Rules and Regulations, to the
further effect that they have carried out procedures as specified in clause
(iii) of subsection (j) of this Section with respect to certain amounts,
percentages and financial information as specified by the Underwriters and
deemed to be a part of the Registration Statement pursuant to Rule 430A(b) and
have found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (iii).
(l) On each of Closing Date and Overallotment Closing Date, if
any, there shall have been duly tendered to the Underwriters for the several
Underwriters' accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the
Overallotment Closing Date, if any, and no proceedings for that purpose shall
have been instituted or to its knowledge or that of the Company shall be
contemplated.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Overallotment Closing
Date, as the case may be, is not so fulfilled, the Underwriters may terminate
this Agreement or, if the Underwriters so elect, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters, including specifically each person who may be substituted for
an Underwriter as provided in Section 11 hereof) and each person, if any, who
controls any Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
34
35
incurred, to which such Underwriter or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in any Preliminary Prospectus, except that the indemnification contained in
this paragraph with respect to any preliminary prospectus shall not inure to the
benefit of the Underwriter or to the benefit of any person controlling the
Underwriter on account of any loss, claim, damage, liability or expense arising
from the sale of the Firm Securities by the Underwriter to any person if a copy
of the Prospectus, as amended or supplemented, shall not have been delivered or
sent to such person within the time required by the Act, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended and supplemented, and such correction would have
eliminated the loss, claim, damage, liability or expense), the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the Underwriters' Unit Purchase Option; or (iii) in
any application or other document or written communication (in this Section 8
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, Nasdaq Stock Market, Inc. or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company with respect to any Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of the Act to the
same extent as the foregoing indemnity from the Company to the Underwriters but
only with
35
36
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto in any post-effective amendment, new registration statement or
prospectus, or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
any Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any post-effective amendment, new registration
statement or prospectus, or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto, in any post-effective amendment, new registration statement
or prospectus or in any such application, provided, further, that the liability
of each Underwriter to the Company shall be limited to the amount of the net
proceeds of the Offering received by the Company. The Company acknowledges that
the statements with respect to the public offering of the Firm Securities set
forth under the heading "Underwriting" and the stabilization legend and the last
paragraph of the cover age in the Prospectus have been furnished by the
Underwriters expressly for use therein and any information furnished by or on
behalf of the Underwriter filed in any jurisdiction in order to qualify the
Securities under State Securities laws or filed with the Commission, the NASD or
any securities exchange constitute the only information furnished in writing by
or on behalf of the Underwriters for inclusion in the Prospectus and the
Underwriters hereby confirm that such statements and information are true and
correct.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the foregoing
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or
36
37
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnifying party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided however, that
such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, 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 this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriters are the indemnified party the
relative benefits received by the Company on the one hand, and the Underwriters,
on the other, shall
37
38
be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts and commissions received by the Underwriters hereunder,
in each case as set forth in the table on the Cover Page of the Prospectus.
Relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, expenses or liabilities (or actions in
respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), the Underwriters shall
not be required to contribute any amount in excess of the amount of the net
proceeds of the Offering received by the Company. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, or any controlling
38
39
person, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters.
9. Effective Date.
This Agreement shall become effective at _____ a.m., New York
City time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Underwriters, in their discretion, shall release the Securities for the sale to
the public, provided, however that the provisions of Sections 5, 7 and 10 of
this Agreement shall at all times be effective. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Underwriters of telegrams to
securities dealers releasing such Securities for offering or the release by the
Underwriters for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) The Underwriters shall have the right to terminate this
Agreement: (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a New
York State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or if the Company shall have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; or (vii) if there shall have been such material adverse change in the
conditions or prospects of the Company, involving a change not contemplated by
the Registration Statement, or (viii) if there shall have been such material
adverse general market conditions as in the Underwriters' reasonable judgment
would make it inadvisable to proceed with the offering, sale and/or delivery of
the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way
39
40
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities), the
Underwriters shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Underwriters shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all nondefaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities, this Agreement shall terminate without
liability on the part of any nondefaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default such Underwriter under this
Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Underwriters shall have the right to postpone
the Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Underwriters' option, by notice from the Underwriters to the Company,
terminate the Underwriters' several obligations to purchase Securities from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 5 and Section 7 hereof. No action taken
pursuant to this Section shall relieve the Company from liability, if any, in
respect of such default.
40
41
13. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at Xxxxx Xxxxxxx Securities, Inc., 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, with a copy to Xxxxxxxxx & XxXxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxxxxxx, Esq. Notices to the Company
shall be directed to the Company at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxxx Xxxxxx, with a copy to Xxxxx Xxxxxxx, 000 Xxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx, Attention: Xxxxx X. Xxxxxx, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and their respective
heirs and legal representatives and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of or
by virtue of this Agreement or any provisions herein contained. No purchaser of
Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
15. Construction. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
41
42
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
XXXXX XXXX, INC.
By:___________________________
Name:
Title:
Confirmed and accepted as of the date first above written.
XXXXX XXXXXXX SECURITIES, INC., as
Representative of the Several Underwriters
By:_____________________________
Name:
Title:
42
43
SCHEDULE I
UNDERWRITER NUMBER OF SECURITIES
43
44
SCHEDULE II
WARRANT AGENT -
44
