57
EXHIBIT 1.1
CASTLE SECURITIES CORP.
00 Xxxxxx Xxxxxx, Xxxxx #00
Xxxxxxxx, Xxx Xxxx 00000
(000) 000-0000
with
EXHAUST TECHNOLOGIES, INC.
Up to 1,000,000 Units
and
1,000,000 Class A Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
Exhaust Technologies, Inc.
000 Xxxxx Xxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Dear Sirs:
Exhaust Technologies, Inc., a Washington corporation (the
"Company"), with principal offices located at 000 Xxxxx Xxxxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000, has an authorized capitalization of
100,000,000 shares of Common Stock, $.00001 par value per share
("Common Stock"), of which 3,000,000 shares of Common Stock are
presently issued and outstanding. The Company proposes to offer and
sell to the public up to 1,000,000 Units at $5.10 per Unit and
1,000,000 Class A Common Stock Purchase Warrants ("Additional
Warrants") at $.10 per Warrant. Each Unit shall consist of one (1)
share of Common Stock, $.00001 par value per share, and one (1) Class
A Common Stock Purchase Warrant. Each Class A Warrant included in the
Units as well each Additional Warrant shall entitle the holder thereof
to purchase one share of Common Stock, par value $.00001 per share, at
a price of $7.00 exercisable at any time from the Separation Date (as
hereinafter defined) through _________________________, 2000 ("Exercise
Period One") and at a price of $9.00 from ______________, 2000 to
______________, 2001 ("Exercise Period Two"). Moreover, the respective
exercise prices may be adjusted pursuant to the anti-dilution
provisions contained therein. In addition, the Class A Common Stock
Purchase Warrants shall be callable at any time solely during the
exercise period at $.01 per Warrant on at least thirty (30) days'
written notice and provided that the closing bid price for the Common
Stock of the Company on each day during the thirty (30) trading days
immediately preceding the date of the notice during Exercise Period One
is at least $10.00 per share and is at least $15.00 per share during
Exercise Period Two. None of the Class A Common Stock Warrants shall
be exercisable, detachable or transferable until the "Closing Date" (as
hereinafter defined). The date on which the Class A Common Stock
Purchase Warrants shall become detachable is referred to herein as the
"Separation Date". The Units and the Common Stock and Warrants of
which they consist as well as the Additional Warrants are to be sold as
more fully set forth in the "Registration Statement" and "Prospectus"
hereinafter mentioned.
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1. Certain Definitions
The following shall constitute the definitions of certain
additional terms used in this Agreement.
(a) "Act" shall refer to the Securities Act of 1933, as amended.
(b) "Closing Date" shall be the time and date set for payment and
delivery of the offered Units and Additional Warrants.
(c) "Commission" shall refer to the Securities and Exchange
Commission.
(d) "Common Stock" shall refer to the Common Stock, $.00001 par
value, of the Company.
(e) "Company" shall refer to Exhaust Technologies, Inc.
(f) "Effective Date" shall be the date upon which the
Registration Statement becomes effective pursuant to notice from the
Securities Exchange Commission (the "SEC") and/or the passage of time
in accordance with the Act.
(g) "Preliminary Prospectus" refers to and means any Prospectus
included in the Registration Statement before the Registration
Statement becomes effective.
(h) "Prospectus" shall refer to the Prospectus filed as part of
the Registration Statement as finally amended and revised prior to the
Effective Date.
(i) "Public Warrants" shall refer to the Class A Common Stock
Purchase Warrant included in the Units and the Additional Warrants
which the Company proposes to offer and sell pursuant to this
Agreement.
(j) "Registration Statement" shall refer to the Registration
Statement filed by the Company, including exhibits and financial
statements as finally amended and revised prior to the Effective Date.
(k) "Regulations" shall refer to the rules and regulations of the
Commission.
(l) "Securities Being Offered" shall mean the Units and
Additional Warrants which the Company proposes to offer and sell to the
public pursuant to this Agreement.
(m) "Share" shall mean one (1) share of Common Stock, $.00001 par
value of the Company.
(n) "Termination Date" shall refer to the date upon which this
Agreement shall terminate for whatever reason.
(o) "Underwriter" shall refer to Castle Securities Corp.
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(p) "Underwriter's Public Warrants" shall mean the Public
Warrants except that (i) the initial exercise date thereof shall be the
date of exercise of the Underwriter's Warrant, and the expiration
thereof shall be the expiration date of the Public Warrants, (ii) the
initial exercise prices thereof shall be $7.00 per share during
Exercise Period One and $9.00 during Exercise Period Two; and,
thereafter determined as hereinafter set forth, (iii) the Company may
not redeem such Underwriter's Public Warrants, (iv) no terms of the
Underwriter's Public Warrants may be modified without the consent of
the Underwriter and (v) the Common Shares subject to the Underwriter's
Public Warrants shall initially be as set forth in the Warrant
Agreement and thereafter determined as hereinafter set forth without
regard to the terms of the Warrant Agreement.
(q) "Underwriter's Warrants" shall mean the Warrants referred in
Section 2(d) hereof.
(r) "Units" shall refer to the 1,000,000 Units which the Company
proposes to offer and sell pursuant to this Agreement.
(s) "Warrants" shall refer to the Class A Common Stock Purchase
Warrants issued in connection with the sale of the Units..
(t) "Warrant Agreement" shall refer to an agreement between the
Company and American Securities Transfer & Trust, Inc. with respect to
the Warrants and Additional Warrants.
2. Underwriter's Compensation
(a) The Company hereby appoints the Underwriter as its exclusive
agent for a period of ninety (90) days from the Effective Date (unless
extended by mutual written consent for an additional ninety (90) days)
to sell and to obtain purchasers for the purchase of up to 1,000,000
Units at a price of $5.10 per Unit (the "Public Offering Unit Price")
and the purchase of up to 1,000,000 Additional Warrants at a per of
$.10 per Warrant (the "Public Offering Additional Warrant Price") all
on a "best efforts" basis. Unless at least one (1) Unit and/or one
(1) Additional Warrant is sold and paid for within 90 days from the
Effective Date (unless further extended as specified in Paragraph 4
hereof), the Underwriter will not receive any of the commissions
or expense allowances hereinafter mentioned unless otherwise
hereinafter provided. Moreover, it is understood that if the required
funds relating to one Unit and/or one (1) Additional Warrant or such
greater amount sold are received and deposited within the Escrow
Account referred in Paragraph 4 hereof, but not cleared within the time
set forth above, then up to an additional five (5) business days shall
be allowed for the sole purpose of clearance of such funds and the
Closing of the offering. Such exclusive agency shall be good and
irrevocable unless and until terminated as herein and hereinafter set
forth.
(b) Subject to the filing and the becoming effective of a
Registration Statement in compliance with the provisions of the Act and
the availability for sale to the public of the Units and Additional
Warrants, pursuant to law, and subject to the fulfillment of all of the
obligations of the Company and compliance with all of the terms and
conditions hereof by the Company and in reliance upon the warranties,
representations and covenants made by the Company herein, the
Underwriter accepts the foregoing exclusive agency and agrees to use
its best efforts during the term of the within Agreement to sell the
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Units and Additional Warrants when and as issuable at the public
offering price set forth above; and to make a public offering of the
Units and Additional Warrants as soon as reasonably practicable after
the Registration Statement has become effective and the Units and
Additional Warrants have become available for public offering.
(c) As compensation for the services of the Underwriter herein,
the Company shall allow the Underwriter subject to the sale and receipt
of funds for at least one (1) Unit and/or one (1) Additional Warrant
to be offered herein, a sales commission or discount of Ten Percent
(10%) of the Public Offering Price on all offered Units and Additional
Warrants to be sold hereunder. The Underwriter may organize a selling
group (the "Selected Dealers", each of whom shall be a member of the
National Association of Securities Dealers, Inc.), which group may
include the Underwriter; in such event, the Underwriter may allow to
such Selected Dealers such part of the aforementioned commission or
discount as it may, in its sole discretion, determine. The Selected
Dealers, other than the Underwriter itself, are not to be deemed agents
of the Company and shall not offer or sell the offered Units and
Additional Warrants except at the price of $5.10 per Unit and $.10 per
Additional Warrant. The Underwriter shall be paid a non-accountable
expense allowance of $.153 for each Unit sold and $.003 for each
Additional Warrant sold, subject to the conditions set forth in Section
6(m) hereof. Such commission and expense allowance shall be deductible
by the Underwriter at closing prior to remittance by it to the Company
on account of the Units and Additional Warrants sold.
(d) At the closing of this offering the Company shall, subject to
the sale and receipt of funds for at least one Unit to be offered
herein, sell and deliver to the Underwriter for each 10 offered Units
sold herein, 1 Underwriter's Warrant at a purchase price of $.0001 per
Underwriter's Warrant, up to a maximum of 100,000 Underwriter's
Warrants.
The said Underwriter's Warrants shall represent the right to
purchase one Unit, each consisting of one (1) Share of Common Stock and
one (1) Public Warrant for each Underwriter's Warrant owned and shall
be exercisable only during a term of 4 years commencing 12 months after
the Effective Date, at an exercise price of $6.12 per Unit. The sale
and delivery to the Underwriter of the Underwriter's Warrants will take
place at the Closing Date. The Underwriter's Warrants shall contain
customary anti-dilution clauses, protecting warrant holders in the
event the Company pays stock dividends, effects stock splits,
or effects a sale of assets, merger or consolidation. The Underwriter
represents that for a period of not less than 12 months commencing from
the Effective Date of the offering the Underwriter will not sell,
transfer, assign or hypothecate any of the said Underwriter's Warrants
or the securities underlying said Underwriter's Warrants except to
officers or partners of the Underwriter, Selected Dealers or officers
or partners of the Selected Dealers and that upon the purchase by the
Underwriter of the said Underwriter's Warrants, the Underwriter will
not thereafter resell any of the said Underwriter's Warrants or the
underlying securities thereof, except in conformity with the applicable
provisions of the Act and all applicable "Blue Sky" laws.
(e) The Company agrees that upon written request of the holders
(including the Underwriter or its specific authorized designee) of at
least a 40% of the Underwriter's Warrants and/or the underlying
securities, together with the Underwriter's or its specific authorized
designee's consent, made at any time after 12 months following the
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Effective Date (and during the Underwriter's exercise period) but, in
any event for a period not to exceed seven (7) years following the
Effective Date, the Company will file no more than one Registration
Statement under the Act or Notification under Regulation A (or any
successor thereto) registering or qualifying the Underwriter's Warrants
and/or the securities underlying the Underwriter's Warrants, and the
Company agrees to use its best efforts to cause the above filing to
become effective and to keep said Registration Statement current for
two (2) years after it has been cleared by the SEC. The expenses of
such registration or qualification, including but not limited to
printing charges (including sufficient number of Prospectuses to permit
the sale of the securities), all legal fees and disbursements of the
Company's counsel and all accounting fees, and all filing and
miscellaneous expenses, will be borne by the Company. The Company
agrees that if at any time during the period when the Underwriter or
its specific authorized designee and/or the holders have the right to
exercise their Warrants but in any event for a period not to exceed
seven (7) years following the Effective Date it should file a
Registration Statement or Notification with the Commission pursuant to
the Act regardless of whether the Underwriter specific authorized
designee and/or the holders shall have theretofore availed themselves
of the right hereinabove provided, the Company, at its own expense,
will offer to the Underwriter and/or the holders the opportunity to
register or qualify the Underwriter's Warrants and/or securities
underlying the Underwriter's Warrants, limited, in the case of a
Regulation A offering, to the amount of any available exemption, but
unless such registration or qualification includes all of the
Underwriter's Warrants and/or underlying securities it will not relieve
the Company of such foregoing obligation to qualify the same. In
addition to the rights hereinabove provided, the Company will cooperate
with the Underwriter or its specific authorized designee and/or the
holders in preparing any additional Registration Statement or
Notification required to sell or transfer the underlying securities and
will supply information required therefore, but such additional
Registration Statement or Notification shall be at the holders of the
Warrants and/or securities issuable thereunder, and not at the expense
of the Company.
(f) If at any time any condition of the material obligations of
the Company hereunder shall not have been met or shall cease to be met
after five (5) days written notice of such deficiency by the
Underwriter and the Underwriter shall have given the Company further
notice of the desire of the Underwriter to terminate this Agreement on
account of the non-fulfillment of any such condition or obligation,
then upon such notice, the within Agreement shall terminate, saving all
such rights as the respective parties may then by law possess. Any
such notice must be in writing. If the within Agreement shall not be
sooner terminated as provided in the within paragraph, then, and in all
events, the Agreement herein shall terminate at such time as all of the
offered Units shall have been subscribed for pursuant to the terms of
the public offering herein.
3. Representations and Warranties of the Company
As a material inducement to the Underwriter to enter into this
Agreement, the Company hereby represents and warrants to, and agrees
with the Underwriter, which representations, warranties and agreements
shall survive the closing, as follows:
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(a) A Registration Statement with respect to the Units and
Additional Warrants, copies of which have heretofore been delivered by
the Company to the Underwriter, has been carefully prepared by the
Company in conformity with the requirements of the Act, and such
Registration Statement has been filed with the Commission, and one or
more amendments to said Registration Statement copies of which have
heretofore been delivered to the Underwriter, has or have been filed;
and the Company may file on or prior to the Effective Date an
additional amendment to said Registration Statement.
(b) The Commission has not issued any order preventing or
suspending the use of any Prospectus with respect to the Units and
Additional Warrants and each Prospectus has conformed in all material
respects with the requirements of the Act and the Regulations and has
not included any fact required to be stated therein or necessary to
make the statements therein not misleading. When the Registration
Statement becomes effective and on the Closing Date hereinafter
mentioned, it will conform in all material respects with the
requirements of the Act and the applicable Regulations and the
Registration Statement and any further amendments or supplements
thereto will contain all statements which are required to be stated
therein or necessary to make the statements therein not misleading;
provided, however the Company does not make any representations or
warranties as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon written
information furnished on behalf of the Underwriter or by the
Underwriter, specifically for use therein or in any amendments or
supplements thereto.
(c) The financial statements of the Company together with the
related schedules and notes as set forth in the Registration Statement
and Prospectus, as reported upon by an independent certified public
accountant, fairly present the financial position of the Company at the
respective dates or for the respective periods to which they apply;
such financial statements have been prepared in accordance with
generally accepted principles of accounting consistently applied
throughout the periods concerned except as otherwise stated therein.
(d) Except as may be reflected in or contemplated by the
Registration Statement or the Prospectus, subsequent to the dates as of
which information is given in the Registration Statement and the
Prospectus, and prior to the Closing Date (i) there shall not be any
material adverse change in the condition, financial or otherwise, or in
the results of operations or the general affairs of the Company or in
its business taken as a whole; (ii) there shall not have been any
material transaction entered into by the Company other than
transactions in the ordinary course of business; (iii) the Company
shall not have incurred any material obligations, contingent or
otherwise, which are not disclosed in the Prospectus; and (iv) there
shall not have been, nor will there be any change in the common stock
or long term debt (except current payments) of the Company.
(e) Except as may be set forth in the Registration Statement or
Prospectus, the Company is not in violation of any term or provision of
its Charter or By-Laws, or of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to
the Company.
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(f) The execution and delivery of this Agreement by the Company
has been duly authorized by all necessary corporate action, and this
Agreement is the valid, binding and legally enforceable obligation of
the Company; the execution and delivery of, and compliance with, this
Agreement, and the issuance and delivery of the securities being
offered do not conflict with or constitute a breach of or default under
the Certificate of Incorporation or By-Laws of the Company, any
indenture, agreement, or other instrument by which the Company is, or
on the Closing Date will be bound, or any order, rule or regulation
applicable to the Company of any court or any law, administrative
regulation or court decree.
(g) The Company is, and at the Closing Date will be, duly
incorporated and validly existing in good standing as a corporation
under the laws of its jurisdiction of incorporation, with an authorized
and outstanding common stock as set forth in the Registration Statement
and the Prospectus, and with full power and authority (corporate and
other) to own its property and conduct its business, present and
proposed, as described in the Registration Statement and Prospectus;
the Company has full power and authority to enter into this Agreement;
the Company has no subsidiaries; and the Company is duly qualified and
in good standing as a foreign corporation in each jurisdiction, other
than its jurisdiction of incorporation, in which such qualification is
required by the laws of such jurisdiction.
(h) The Company has an authorized and outstanding capitalization
as set forth in the Registration Statement and Prospectus; all of the
outstanding securities of the Company have been validly authorized and
issued and are fully paid and nonassessable; no sales of securities
have been made by the Company in violation of the Act; the securities
being offered hereunder have been validly authorized and, upon delivery
and payment therefor pursuant to this Agreement, will have been validly
issued and will be fully paid and non-assessable; the Warrants and
Underwriter's Warrants will represent the binding obligations of the
Company; the holders of the Underwriter's Warrants and or underlying
securities thereof and any of the Units and Additional Warrants to be
sold by the Company are not and will not be subject to any liability as
shareholders; and except as set forth in the Prospectus there are no
preemptive or other rights to subscribe for or purchase any of the
securities being offered, or any options, warrants, agreements or
similar rights calling for the issuance by the Company of any of its
securities outstanding as of the Closing Date.
(i) The securities being offered conform to the description
thereof contained in the Prospectus.
(j) No consent, approval, authorization or other order of any
governmental authority is required in connection with the execution and
delivery by the Company of this Agreement or the issuance and sale by
the Company of the Units and Additional Warrants, except such as may be
required under the Act or state securities laws.
(k) Except as set forth in the Registration Statement and
Prospectus there is, and at the Closing Date there will be, no action,
suit or proceeding before any court or governmental agency, authority
or body pending or, to the knowledge of the Company, threatened, which
might result in judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse
change in the condition (financial or otherwise), business or prospects
of the Company or would materially affect its properties or assets.
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(l) Upon delivery of any payment for the Underwriter's
Warrants to be sold by the Company as set forth in Paragraph 2(d) of
this Agreement, the Underwriter will receive good and marketable title
thereto free and clear of any and all liens, encumbrances, charges and
claims whatsoever; and the Company will have, on the Effective Date and
at the time of delivery of such Underwriter's Warrants, full legal
right and power and all authorization and approval required by law to
sell, transfer and deliver such Underwriter's Warrants in the manner
provided hereunder.
(m) The Company knows of no outstanding claims for services in
the nature of a finder's fee or origination fee with respect to the
sale of the Units hereunder resulting from its acts for which the
Underwriter may be responsible.
(n) Each contract to which the Company is a party and to which
reference is made in the Registration Statement and Prospectus has been
duly and validly executed, is in full force and effect in all material
respects in accordance with their respective terms, and none of such
contracts have been assigned by the Company and the Company knows of no
present situation or condition or fact which would prevent compliance
with the terms of such contracts, as amended to date. The Company has
no intention of exercising any right which it may have to cancel any of
its rights or obligations under any of such contracts and has no
knowledge that any other party to any of such contracts has any
intention not to render full performance under such contracts.
(o) The Company has filed all federal and state tax returns which
are required to be filed, and will pay all taxes shown due on such
returns and all assessments received by it to the extent such taxes
have become due. All taxes with respect to which the Company is
obligated have been paid or adequate accruals have been set up to cover
any such unpaid taxes.
(p) Except as otherwise set forth in the Prospectus, (i) the
Company has good and marketable title, free and clear of all liens,
encumbrances and defects, except liens for current taxes not due and
payable, to all property and assets which are described in the
Registration Statement and the Prospectus as being owned by the
Company, subject only to such exceptions as are not material and do not
adversely affect the present or prospective business of the Company;
and, (ii) the properties, including any equipment, referred to in the
Registration Statement and the Prospectus as being held under lease by
the Company are held under valid, subsisting and enforceable leases
with only such exceptions which collectively are not material and do
not adversely affect the present or prospective business of the
Company.
4. Escrow Account
(a) Notwithstanding anything contained herein to the contrary,
unless the Underwriter shall sell at least one (1) Unit and/or one (1)
Additional Warrant, none of the Units and Additional Warrant, as the
case may be, will be sold to the public and this Agreement shall
automatically be terminated with respect to the security not sold. The
Underwriter agrees to open an appropriate escrow account to be
maintained at __________________________, ____________________________,
______________________, ______________________ at the Company's
expense, if any, for all monies to be received from the sale of the
securities being offered. Such monies shall be deposited in full
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without any deductions for commissions and/or expenses. In the event
that none of the Units and/or Additional Warrants are sold and paid for
within ninety (90) days from the Effective Date (unless extended by
mutual written consent for an additional Ninety (90) days) the proposed
offering herein will be withdrawn. However, it is understood that if
the required funds relating to one (1) Unit and/or one (1) Additional
Warrant or such greater amount sold are received and deposited within
the Escrow Account referred in Paragraph 4 hereof, but not cleared
within the time set forth above, then up to an additional five (5)
business days shall be allowed for the sole purpose of clearance of
such funds and the Closing of the offering.
(b) Appropriate arrangements will be made by the Underwriter to
provide for the receipt of funds from the subscribers of the securities
being offered and to provide for the disposition thereof, in accordance
with the provisions of this section.
(c) Unless the Underwriter shall have sold at least one (1) Unit
and/or one Additional Warrant and the proceeds thereof shall have been
received by the Company, it shall not be entitled to receive any
expense allowance or commissions, or be entitled to purchase any
Underwriter's Warrants from the Company (except as otherwise stated
hereinafter).
(d) The "Closing Date" shall take place at the office of the
______________________________________, ______________________________,
________________________, ___________________ or the Underwriter at
such time as will be fixed by notice in writing to be given by the
Underwriter to the Company, such date to be not less than five (5) full
business days after the date on which such notice shall have been given
and not less than five (5) and not more than ten (10) full business
days after the date on which any of the conditions allowing the release
of the proceeds from the escrow account to the Company, and Underwriter
as provided in the Escrow Agreement shall have occurred. The Closing
Date and place may be changed by agreement of the Underwriter and the
Company.
(e) The Underwriter shall comply in all respects with the
requirements of Rule 15c2-4 of the rules and regulations made by the
Commission under the Securities Exchange Act of 1934, as amended. The
Underwriter shall deposit by 12 noon of the next business day
subsequent to the receipt of funds all funds received from the sale of
the offered Units and/or Additional Warrant, which funds shall be made
payable to the escrow agent, in an escrow account, to be maintained at
a bank as escrow agent for the benefit of the Subscribers, and the same
shall be held in such bank account until the Closing Date, and upon
such Closing Date the said funds, shall be promptly transmitted to the
Company, who shall at said time provide such documents, certificates,
receipts and any and all other papers or instruments as counsel may
reasonably deem necessary or appropriate under the circumstances.
5. Selected Dealers
(a) In selling the securities being offered the Underwriter shall
offer them solely as agent for the Company and such offer shall be made
upon the terms and subject to the conditions set forth in the
Registration Statement and Prospectus. The Underwriter shall commence
making such offer as agent for the Company as soon after the Effective
Date as it may deem advisable.
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(b) The Underwriter may offer and sell the securities being
offered for the Company's account to Selected Dealers pursuant to a
form of Selling Agreement pursuant to which the Underwriter may allow
such concession (out of its underwriting commission) as it may
determine, within the limits set forth in the Registration Statement
and Prospectus. All purchases by selected dealers, shall be as agents
for the accounts of their customers, and the Underwriter shall have no
authority to employ any such dealers as agents for the Company.
(c) On each sale by the Underwriter of any of the securities
being offered to selected dealers, the Underwriter shall require any
selected dealer purchasing any such securities being offered to agree
to re-offer the same on the terms and conditions of offering set forth
in the Prospectus and to comply with all Commission requirements that
the Underwriter is required to comply with.
(d) The Selected Dealer shall comply in all respects with the
requirements of Rule 15c2-4 of the rules and regulations made by the
Commission under the Securities Exchange Act of 1934, as amended. The
Selected Dealer shall deposit by 12 noon of the next business day
subsequent to the receipt of funds all funds received from the sale of
the offered Units, which funds shall be made payable to the escrow
agent, in an escrow account, to be maintained at a bank as escrow agent
for the benefit of the Subscribers, and the same shall be held in such
bank account until the Closing Date, and upon such Closing Date the
said funds, shall be promptly transmitted to the Company, who shall at
said time provide such documents, certificates, receipts and any and
all other papers or instruments as counsel may reasonably deem
necessary or appropriate under the circumstances.
6. Covenants of the Company
The Company covenants and agrees with the Underwriter as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and will advise the
Underwriter immediately and, if requested by the Underwriter, will
confirm such advice in writing (i) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective, or when any supplement to the Prospectus or any amended
Prospectus has been filed; (ii) of any request by the Commission for
any amendments or supplements to the Registration Statement or the
Prospectus or for additional information; (iii) of the issuance by the
Commission of any order suspending the effectiveness of the
Notification for the sale of the Units hereunder or of any order
preventing or suspending the use of any Prospectus or the institution
of any proceedings for any such purposes; (iv) of the happening of any
event which in the judgment of the Company makes any statement in the
Registration Statement or Prospectus untrue or which requires the
making of any changes in the Registration Statement or the Prospectus
in order to make the statements therein not misleading; and (v) of the
refusal to qualify or the suspension of the qualifications of the Units
and the Additional Warrants for offering or sale in any jurisdiction,
or of the institution of any proceedings for any of such purposes. The
Company will use its best efforts to prevent the issuance of any such
order or of any order preventing or suspending such use, to prevent any
such refusal to qualify or any such suspension, and to obtain as soon
as possible a lifting of any such order, the reversal of any such
refusal and the termination of any such suspension.
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(b) The Company will not at any time, whether before, after or on
the Effective Date, file any amendment to the Registration Statement or
supplement to the Prospectus of which the Underwriter shall not
previously have been advised and furnished with copies or to which the
Underwriter shall have objected in writing or which is not in
compliance with the Act and the Regulations.
(c) To deliver to the Underwriter, without charge, three (3)
signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith and any amendments or
supplements thereto, and to deliver without charge to the Underwriter
three (3) conformed copies of the Registration Statement and any
amendment or supplement thereto, including such financial statements
and exhibits.
(d) Prior to the Effective Date of the Registration Statement the
Company will have delivered to the Underwriter, without charge, in such
quantities as the Underwriter may reasonably request, copies of each
form of Preliminary Prospectus. The Company consents to the use of
each form of Prospectus by the Underwriter and by dealers prior to the
Effective Date of the Registration Statement, if permitted under the
Act.
(e) To deliver to the Underwriter, without charge, as soon as
practicable after the Effective Date of the Registration Statement and
thereafter from time to time as many copies as it may reasonably
request of the Prospectus and of any amended or supplemented Prospectus
as the Underwriter may reasonably request.
(f) If, during such period of time as in the opinion of the
Underwriter or its counsel a Prospectus relating to this financing is
required to be delivered, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time after the Effective Date of the Registration
Statement to amend or supplement the Prospectus to comply with the Act,
the Company will forthwith notify the Underwriter thereof and prepare
and file with the Commission and furnish and deliver to the Underwriter
and to others whose names and addresses are designated by the
Underwriters, all at the cost of the Company, a reasonable number of
the amended or supplemented Prospectus which as so amended or
supplemented will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
Prospectus not misleading in the light of the circumstances when it is
delivered to a purchaser or prospective purchaser, and which will
comply in all respects with the Act; and, in the event the Underwriter
is required to deliver a Prospectus 90 days or more after the Effective
Date upon request to prepare promptly such Prospectus as may be
necessary to permit compliance with the requirements of the Act.
(g) For a period of three (3) years after the Closing Date, the
Company will, as soon as practicable and in any event within 120 days
after the close of each fiscal year, deliver (i) to its security
holders and to the Underwriter a copy of the annual report of the
Company containing a balance sheet setting forth the financial
condition of the Company as of the end of such fiscal year, together
with statements of income and surplus of the Company for such fiscal
year, all reasonably detailed. Such balance sheet and statements of
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income and surplus shall be accompanied by a copy of the accountant's
report with respect thereto of independent public accountants, who may
be the regular accountants for the Company; and (ii) to the
Underwriter, (a) a copy of all reports which the Company shall file
with the Commission or with any national securities exchange promptly
after the same have been forwarded to the Commission or exchange and a
copy of all financial statements and other reports which the Company
shall send to its security holders, and (b) from time to time such
other information as the Underwriter may reasonably request. In the
event the Company shall have any subsidiaries the account of which are
customarily consolidated with those of the Company, the financial
statements to be furnished in this paragraph shall be the consolidated
financial statements of the Company and such subsidiaries. In
addition, and for a period of three (3) years after the Closing Time,
the Company shall furnish unaudited monthly financial statements to the
Underwriter on a timely basis.
(h) The Company will enter into employment contracts no later
then the Effective Date but to begin on the Closing Date with its
President and Chief Executive Officer, Xxxxxx X. Xxxxxxxx, and its
Vice-President, Xxxxxxx X. Xxxxxxxx, which agreements shall remain in
effect for at least three (3) years and provide that their annual
compensation shall be $125,000.00 and $100,00.00, respectively. In
addition, the Company will enter into employment contracts no later
then the Effective Date but to begin on the Closing Date with its other
key personnel, which agreements shall remain in effect for at least
three (3) years and provide that their annual compensation shall be
subject to the approval of the Underwriter.
(i) The Company will provide the Underwriter for its confidential
use, at the Company's expense, with copies of its quarterly transfer
sheets and annual lists of shareholders for a period of three (3) years
from the Closing Date.
(j) The Company will deliver to the Underwriter true and correct
copies of its Articles of Incorporation and all amendments thereto,
such copies to be certified by the Secretary of the Company; true and
correct copies of the By-Laws of the Company and of the minutes of all
meetings of the directors and stockholders of the Company held prior to
the Closing Date; and true and correct copies of all contracts to which
the Company is a party.
(k) Prior to the Effective Date the Company will cooperate with
the Underwriter and its counsel in connection with the registration or
qualification of the securities being offered for offering and sale by
the Underwriter and dealers under the Securities or Blue Sky laws of
such states as the Underwriter may reasonably designate and will file
such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification. The
Company shall bear the expenses incurred in qualifying the securities
being offered under the Securities or Blue Sky laws of such states
including the fees and charges of the various states, the cost of a
printed memorandum with respect thereto, and reasonable legal fees and
expenses. The Company shall not be required, however, to sign a
general consent to service of process in any jurisdiction where it is
not now subject to such service.
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(l) The Company will pay and bear, whether or not the
transactions contemplated hereunder are consummated or this Agreement
is prevented from becoming effective, or is terminated, all costs and
expenses incident to the performance of its obligations under this
Agreement, including all expenses incident to the authorization of the
securities being offered and their issue and delivery to the
Underwriter, any original issue taxes in connection therewith, all
transfer taxes, if any, incident to the initial sale of the securities
being offered by the Underwriter to the public and to Selected Dealers;
the fees and expenses of the Company's counsel and accountants, the
costs and expenses incident to the issuance, sale and delivery of the
Underwriter's Warrants to the Underwriter, the costs and expenses
incident to the preparation, printing and filing under the Act, the
Registration Statement (including financial statements), any
Preliminary Prospectus and the Prospectus and any amendments or
supplements thereto; the reproduction and distribution of this
Agreement, the Agreement Among Underwriters, if any, the Selected
Dealers Agreement, the Underwriter's Questionnaire, the Blue Sky
survey, the Certificates for the Shares and Warrants, the issue and
delivery of the securities being offered, the filing fees of the
Commission and the National Association of Securities Dealers, Inc.,
and any state regulatory agencies, the cost of preparing and filing all
exhibits to the Registration Statement, the cost of furnishing the
Underwriter copies of the Registration Statement and Prospectus as
herein provided; the cost and fees of qualifying the securities being
offered under the Securities or Blue Sky laws as herein provided, and
disbursements incurred by counsel for the Company, in connection with
the Blue Sky filing of this offering; and, the costs and fees of any
escrow agent referred to in Paragraph 4(a).
In addition, the Company shall also bear the cost of investigative
reports (such as Xxxxxx'x Reports) of the Company's principal executive
officers, directors and substantial shareholders which cost shall not
exceed the sum of $5,000.
(m) Provided that at least one (1) Units and/or one (1)
Additional Warrant is sold during the offering, the Company will pay to
the Underwriter a non-accountable expense allowance of $.153 for each
Unit sold and $.003 for each Additional Warrant sold, i.e., $.303 if
one (1) Unit is sold and $.003 if one (1) Additional Warrant is sold;
and adjusted proportionately upwards ($25,000 of which has been
advanced to the Underwriter and shall be credited as a part payment of
this allowance) if all of the securities being offered are sold for the
fees and disbursements of counsel to the Underwriter and for the actual
costs of advertising, traveling, postage, due diligence expenses,
telephone and telegraph expenses and other miscellaneous expenses
incurred by or on behalf of the Underwriter in preparation for, or in
connection with, the offering and sale and distribution of the
securities being offered, and the Underwriter shall not be obligated to
account to the Company for such disbursements and expenses.
(n) If the Underwriter is unable to attempt or complete the
proposed offering and sale of the securities being offered mentioned
hereinabove because of (i) any failure or non-willingness of the
Company to act as contemplated herein or to qualify the Units and
Additional Warrants contemplated to be offered herein, or (ii) any
material discrepancy in any representations made to the Underwriter, or
(iii) any reason within the control of the Company, then the Company
will reimburse the Underwriter for any actual costs and expenses, on an
70
accountable basis, incurred by the Underwriter relative to the offering
contemplated hereby (including counsel fees of the Underwriter) up to
but not exceeding $50,000 inclusive of the $25,000 previously paid and
referred to in 6(m) hereof.
(o) Prior to the Closing Date, the Company will cooperate with
the Underwriter in such investigation as the Underwriter may make or
cause to be made of the properties, business and operations of the
Company in connection with the purchase and public offering of the
securities being offered and will make available to the Underwriter in
connection therewith such information in its possession as the
Underwriter may request, provided the Underwriter agrees to treat any
such information as confidential information.
(p) The Company has appointed or shall promptly hereafter appoint
American Securities Transfer and Trust Co., Inc. as its Transfer and
Warrant Agent, which entity shall agree to provisions of Paragraph 9(b)
of the Underwriter's Warrant, for the securities being offered.
Subject to the closing, for a period of five (5) years following the
Closing Date the Company will not change or terminate any such
appointments without the written consent of the Underwriter, which
consent shall not be unreasonably withheld.
(q) The Company will use all reasonable efforts to comply or
cause to be complied with, the conditions precedent to the several
obligations of the Underwriter specified in this Agreement.
(r) On or prior to the Effective Date, unless waived, in part or
in whole, by the Underwriter in writing, the Company shall deliver an
agreement of each officer, director (except that Xxxxxx Xxxxxxxx and
Xxxxxxx Xxxxxxxx, combined, shall be allowed to sell up to in the
aggregate 200,000 shares after one (1) year following the Effective
Date provided the bid price for the common stock is at least $10.00 and
all sales of such stock are effected through the Underwriter) and
shareholder of the Company setting forth a representation to the effect
that such shareholders agree not to sell, transfer or convey by
registration or otherwise, without the prior consent of the
Underwriter, any of the securities of the Company owned directly or
beneficially for a period of two (2) years from the Effective Date
without the written consent of the Underwriter or its specific
authorized designee or any greater period required by any state in
which the offering of the securities being offered is to be registered;
and that, thereafter, and for a period of two (2) years, all sales
pursuant to Rule 144 shall be effected through the Underwriter. An
appropriate legend shall be marked on the face of the stock
certificates representing all of such securities.
(s) The Company will deliver to the Underwriter and its counsel
bound volumes of copies of all documents and appropriate correspondence
filed or received from the Commission and the NASD and all closing
documents.
(t) The Company shall use its best efforts to obtain on or before
the Closing Date a "Key Man" life insurance policy in the amount of
$500,000 each on the lives of its key personnel and the Company shall
pay the premiums therefor for a period of not less than five (5) years
from the Closing Date.
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(u) The Company will use its best efforts promptly to do and
perform all things to be done and performed by it hereunder prior to
the Closing Date and to satisfy all conditions which it is required to
satisfy prior to the delivery by it of the securities being offered.
(v) The Company will use the net proceeds to be received by it
from the sale of the securities being offered in the manner and for the
purposes set forth in the Prospectus and will comply with all reporting
and other requirements of the Act respecting the use of the proceeds.
(w) The Company will comply with the Act and Regulations and the
Securities Exchange Act of 1934 and the rules and regulations of the
Commission thereunder so as to permit the continuance of sales of and
dealings in the securities being offered under the Act and the
Securities Exchange Act of 1934, as and if required under said Act.
(x) The Company will pay and bear the full cost of "Tombstone"
advertisements of at least 5 x 5 inches in publications to be
designated by the Underwriter the cost of which shall not exceed
$4,000.
(y) Prior to the Closing time the Company will not issue directly
or indirectly without the Underwriter's prior written consent any press
release or other communication or hold any press conference with
respect to the Company or its activities or the offering of the
securities.
(z) If at least one (1) Unit and/or one Additional Warrant is
sold and for a period of five (5) years commencing from the Closing
Date, the Company shall continue to employ the services of a firm of
independent certified public accountants acceptable to the Underwriter
in connection with the preparation of the financial statements to be
included in any Registration Statement to be filed by the Company
hereunder, or any amendment or supplement thereto. For the purposes of
the foregoing, BDO Xxxxxxx LLP and any "Regional" accounting firm shall
be deemed to be acceptable to the Underwriter.
(aa) If at least one (1) Unit and/or one Additional Warrant is
sold and for a period of five (5) years after the Closing Time, the
Underwriter shall have the right to have a designated non-voting
advisor appointed by the Company. Said designee shall be entitled to
attend meetings of the Company's Board of Directors and shall be
entitled to receive reimbursement for all reasonable costs incurred in
attending such meetings, including, but not limited to food, lodging
and transportation.
(bb) The Company will, within thirty (30) days after the Closing
Time, apply for listing in Standard and Poor's Corporation Reports and
Xxxxx'x Over-the-Counter Guide, and will use its best efforts to have
itself listed in such reports.
(cc) The Company will employ an investor relations firm
reasonably satisfactory to the Underwriter for a period of not less
than three (3) years from the closing date.
(dd) Within ten (10) days after the end of the first three (3)
month period following the Effective Date of the Registration
Statement, the Company shall prepare and file with the Commission a
report on Form SR as prescribed by Rule 463 of Regulation C under the
Securities Act of 1933, as amended. Within thirty (30) days after the
72
Closing Date, the Company shall prepare and file with the Commission a
Registration Statement on Form 8-A with respect to the Securities being
offered pursuant to and as contemplated by Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "34 Act"), regardless
of whether the Company would be required otherwise by the terms of such
Section to file such a Registration Statement, and shall file a request
for acceleration of the effective date under Section 12(g) in
connection therewith. The Company shall thereafter comply with all
periodic reporting and proxy solicitation requirements imposed by the
Commission pursuant to the 34 Act, and shall promptly furnish the
Underwriter with copies of all materials filed with the Commission
pursuant to the 34 Act or otherwise furnished to shareholders of the
Company.
(ee) The Company will pay to you a commission in an amount equal
to ten (10%) percent of the exercise price of the Warrants included in
the Units and the Additional Warrants for each Warrant exercised
commencing one year after the Effective Date provided (1) the market
price for the Common Stock is greater than the exercise price of the
Warrant; (2) that the Underwriter had solicited the holder to exercise
the Warrant with such solicitation being confirmed in writing by each
holder; and (3) that the compensation arrangements were disclosed to
holders at the time of exercise as well as in the Prospectus, such
disclosure being confirmed in writing by each holder. The commission
is further conditioned upon the Warrant Agent being furnished by the
Underwriter with a certificate stating that:
i) the Warrants exercised were not held in a discretionary
account;
ii) the Underwriter did not, within the required time period
(2 or 9 business days) immediately preceding the solicitation of
the exercise of the Warrant or the date of such exercise, bid for
or purchase the Common Stock of the Company or any securities of
the Company immediately convertible into or exchangeable for the
Common Stock (including the Warrants) or otherwise engage in any
activity that would be prohibited by Regulation M under the
Securities Exchange Act of 1934, as amended, with one engaged in
a distribution of the Company's securities, and
iii) in connection with the solicitation, the Underwriter
disclosed the compensation it would receive upon exercise of the
Warrant.
(ff) At the Closing Time, the Company shall enter into a
financial consulting agreement with us pursuant to which we will
receive a consulting fee in an amount equal to two (2%) of the gross
proceeds of the total dollar amount raised payable at the Closing for
services for a period of one (1) year from the Effective Date which
shall include, but not be limited to, advising the Company regarding
shareholder relations including the preparation of the annual report
and other releases, assisting in long-term financial planning, advice
in connection with corporate re-organizations and expansion and capital
structure, and other financial assistance.
(gg) If at least one (1) Unit and/or one Additional Warrant is
sold and for a period of five (5) years after the Closing Time, the
Company may not adopt a qualified and/or non-qualified stock option
plan for its employees without the prior written concent of the
Underwriter, which consent shall not be unreasonably withheld.
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(hh) For a period of five (5) years following the Effective Date
or until such time as the securities of the Company are listed on the
New York Stock Exchange or the American Stock Exchange, the Company
shall cause its legal counsel to provide the Underwriter with a list,
to be updated at least annually, of those states in which the
securities of the Company may be traded in non-issuer transactions
under the Blue Sky laws of the states and the basis for such authority
with the first list to be given at the time of Closing.
(ii) For a period of three (3) years following the Closing Date,
the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit) the
Company's financial statements for each of the first three (3) fiscal
quarters prior to the announcement of quarterly financial information,
the filing of the Company's 10-Q quarterly report and the mailing of
quarterly financial information to security holders.
(jj) If at least one (1) Unit and/or one Additional Warrant is
sold, the Company shall grant the Underwriter a right of first refusal
with respect to the public sale of any securities of the Company to be
made by the Company, its principal shareholders or subsidiaries at any
time during the period commencing at the completion of the offering and
ending three (3) years thereafter except (1) securities which are the
issued in connection with or pursuant to mergers, acquisitions,
recapitalizations, reorganizations or stock option plans, solely by the
Company and/or its subsidiaries, and (2) private or broker sales
pursuant to Rule 144 or otherwise by shareholders on a principal basis
provided such sales do not result in the loss of control of the Company
by those shareholders presently having such control. In connection
with such right, the Company covenants and agrees to furnish the Under-
writer with the terms and conditions of any bona fide proposed public
sale of securities to be made by it, its principal shareholders or
subsidiaries, and the name and address of the Underwriter, broker or
dealer proposing to effectuate such sale, together with all compensa-
tion terms. The Underwriter shall have the right within ten (10) days
from such notification by the Company to notify the Company whether the
Underwriter will exercise its right to effect such proposed financing
on the terms no less favorable to the Company than those proposed by
such other broker or dealer. In the event the Underwriter declines to
exercise its right of first refusal, such action shall only relate to
the financing and terms and conditions contained in the specific notice
furnished to the Underwriter and not to any other proposed financing
thereafter.
(kk) If at least one (1) Unit and/or one Additional Warrant is
sold, should the Company shall within five (5) years from the Effective
Date, enter into any agreement or understanding introduced by the
Underwriter involving (I) the sale of all or substantially all of the
assets and properties of the Company, (ii) the merger or consolidation
of the Company (other than a merger or consolidation effected for the
purpose of changing the Company's domicile) or (iii) the acquisition by
the Company of the assets or stock of another business entity, which
agreement or understanding is thereafter consummated, whether or not
during such five (5) year period, the Company, upon such consummation,
shall pay to the Underwriter an amount equal to the following
percentages of the consideration paid by the Company in connection with
such transaction:
74
5% of the first $1,000,000, or portion thereof, of such
consideration;
4% of the second $1,000,000, or portion thereof, of such
consideration;
3% of such consideration in excess of the first $2,000,000 of
such consideration.
(ll) If at least one (1) Unit and/or one Additional Warrant is
sold, the Company, provided its meets the financial requirements, shall
use its best reasonable efforts at its cost and expense to take all
necessary and appropriate action such that the Securities are listed
for trading in the NASDAQ System immediately upon the closing of the
proposed offering and, that the Securities remain listed for at least
five years from said Closing Date provided that the Company otherwise
complies with the prevailing requirements of NASDAQ.
(mm) The Company shall deliver to the Underwriter an agreement
executed by the founders of the Company owning 1,000,000 shares of
Common Stock whereby each of them agree to place their securities
(1,000,000) in escrow with the Company's counsel at the time of
closing of the offerings contemplated herein subject to the Company
reflecting on an audited financial statement sales and pretax income in
excess of $35,000,000.00 and $7,500,000.00, respectively, no later than
January 31, 2004. In the event such sales and pretax income are not
achieved by January 31, 2004, then the shares shall be cancelled. The
1,000,000 shares as well as the dollar amount of sales and pretax
income set forth above shall be prorated downward if less than
$5,000,000 is raised in the offering contemplated herein.
7. Conditions of Underwriter's Obligations
The Underwriter's obligation to act as Agents of the Company
hereunder and to find purchasers for the securities being offered and
to make payment to the Company on the Closing Date is subject to the
accuracy of and compliance with the representations and warranties on
the part of the Company herein as of the date hereof and as of the
Closing Date, to the performance by the Company of its obligations and
covenants hereunder, to the accuracy of certificates of the Company and
officers of the Company to be delivered pursuant to this Agreement, all
as to the Closing Date, and to the following further conditions:
(a) The Registration Statement shall become effective on or at
such reasonable date as the Underwriter may agree to. No stop order or
order suspending the effectiveness of the Registration Statement for
the sale of the securities being offered shall have been issued at or
before the Closing Date and no proceedings for that purpose shall have
been instituted or shall be pending or, to the knowledge of the
Company, contemplated by the Commission, and any request for additional
information on the part of the Commission to be included in the
Registration Statement or the Prospectus or otherwise shall have been
complied with, and no amendments to the Registration Statement or
Prospectus shall have been filed to which the Underwriter and its
counsel have not given their consent in writing.
75
(b) All corporate action taken and all legal opinions and
proceedings relating to the securities being offered and the
Underwriter's Warrants, the Registration Statement and Prospectus and
all other matters incident thereto and to the transaction to which this
Agreement relates shall be satisfactory in all respects to Xxxxxx X.
Xxxxx, P.C. and Xxxxxxx X. Xxxx, Esq., counsel for the Underwriter and
he shall have been furnished with such certificates, documents and
information as he may request in this connection.
(c) On the Closing Date, (i) the Registration Statement and
Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with
the Act and shall in all material respects conform to the requirements
of the Act and neither the Registration Statement nor the Prospectus
nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) since the respective dates as of which
information is given in the Notification there shall have been no
material adverse change in the business, properties or financial
condition of the Company from that set forth in the Registration
Statement and Prospectus and there shall not have been any material
transaction, contract or agreement entered into by the Company which
is not referred to in the Registration Statement, (iii) no action, suit
or proceeding at law or in equity shall be pending or, to the knowledge
of the Company, threatened against the Company which would be required
to be set forth in the Registration Statement other than as set forth
therein, and no proceedings shall be pending or, to the knowledge of
the Company, threatened against the Company before or by any federal,
state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would have a material adverse
effect upon the business, property, financial condition or income of
the Company, and (iv) the Company shall not have declared dividends or
made any payments or made any acquisitions or capital stock or made any
other distribution on outstanding shares of capital stock other than as
set forth in the Registration Statement.
(d) Prior to the Closing Date the Company shall not have
sustained a loss on account of fire, flood, accident or other calamity
which, in the judgment of the Underwriter materially and adversely
affects the Company, regardless of whether or not such loss shall have
been insured.
(e) The Underwriter shall receive on and as of the Closing Date
an opinion of ____________________________, counsel for the Company,
to the effect that (i) the Company is a corporation in good standing,
duly organized and validly existing under the laws of the state of
incorporation, and is authorized by its Certificate of Incorporation to
own its properties and to conduct its business, present and proposed,
as set forth in the Prospectus; (ii) the Company is duly qualified to
transact the business in which it is engaged and is in good standing in
each jurisdiction in which its ownership of property or its conduct of
business requires such qualification or registration (naming such
jurisdiction); the Company does not own or control any subsidiaries;
(iii) the Company has an authorized and outstanding capitalization as
set forth in the Prospectus all of the outstanding securities of the
Company have been validly authorized and issued, and are fully paid and
non-assessable; the securities being offered to be sold by the Company
have been validly authorized and when issued will be fully paid and
non-assessable; the securities issuable upon exercise of the
76
Underwriter's Warrants has been validly authorized and reserved for
issuance and when issued, will be validly issued and will be fully paid
and nonassessable; there are no preemptive or other rights to subscribe
for or purchase the securities being offered; there are no options,
warrants, agreements or similar rights calling for the issuance by the
Company of any of its securities except as described in the
Registration Statement; (iv) the securities being offered by the
Company conform as to their legality with the description thereof
contained in the Registration Statement; (v) this Agreement has been
duly authorized, executed and delivered by the Company and is a valid
and binding agreement of the Company in accordance with its terms; the
Company has the legal power to sell and deliver the securities being
offered pursuant to the provisions of this Agreement and will deliver
to the purchasers valid marketable title thereto, free and clear of any
claims, liens and encumbrances; to the best of such counsel's
knowledge, (1) the execution, performance and delivery of this
Agreement and the consummation of the transactions contemplated hereby
will not result in any breach of violation (a) of any of the terms or
provisions of, or constitute a default under, any statute, indenture,
mortgage, deed of trust, note, agreement or other agreement or
instrument known to counsel to which the Company is a party or by which
it is bound or of which any of its property is the subject, and (b) the
Company's Articles of Incorporation, as amended, or By-Laws, or any
order, rule or regulation known to counsel of any court or governmental
agency or body having jurisdiction over the Company or any of their
activities or properties, and, (2) no consent, approval, authorization
or order of any court or governmental agency or body is required for
the consummation of the transaction contemplated hereby except such as
have been obtained under the Act or Regulations or under state
securities laws; (vi) the sale of the Company's securities (other than
the securities being offered) prior to the Closing Date was made
pursuant to exemptions from the registration requirements of the Act;
(vii) the Registration Statement has become effective under the Act and
the public offering and sale of the securities being offered is made
pursuant to such effective Registration Statement and, to the best
knowledge of such counsel, no order suspending the effectiveness of
such Registration Statement for the sale of securities being offered
has been issued and no proceedings for such for such purposes have been
instituted or are pending or contemplated by the Commission and to such
counsel's knowledge and belief no grounds exist for the suspension of
such Registration Statement the Registration Statement and Prospectus
and any supplement or amendment thereto (except as to the financial
statements and schedules included therein as to which counsel need not
express opinion) comply as to form in all material respects with the
Act and such counsel has received no information which would indicate
that the Registration Statement or Prospectus or any supplement or
amendment thereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading;
(viii) such counsel does not know of any legal or government
proceedings required to be described in the Registration Statement or
Prospectus or of any contract or document of a character required to be
described in the Registration Statement or Prospectus or required to be
filed as an exhibit to the Registration Statement which is not
described or filed as required; (ix) the Company has good marketable
title in fee simple, except as stated in the Registration Statement or
Prospectus to all of the real property described therein as being owned
by it, free and clear of all liens and encumbrances, except liens and
encumbrances, if any, which in the opinion of such counsel, are not
material and do not interfere with the use made and proposed to be made
77
of such property, and holds such valid leases, property rights and
easements as are set forth in the Registration Statement or the
Prospectus are necessary to the operations and proposed operations of
the Company (such counsel being entitled to rely with respect to the
opinions called for by this subdivision (x) on certificates of the
Company as to the use or proposed use of properties and as to the
materiality and non-interference of liens and encumbrances and on
opinions of local counsel or on abstracts of title and certificates;
reports or title policies of title insurance companies); and (xi) the
Underwriter's Warrants to be sold by the Company have been duly
authorized and constitute valid and binding obligations of the Company;
the Company had at the date of this Agreement and has at the Closing
Date full legal right and authority to sell and deliver in the manner
provided in this Agreement, the Underwriter's Warrants sold by it
hereunder; and the delivery by the Company as described in the
Registration Statement of certificates for the Underwriter's Warrants
sold hereunder, will pass good and marketable title to such
Underwriter's Warrants, free and clear of all liens, encumbrances,
charges and claims whatsoever, except as may be provided by federal and
state securities laws. The opinion referred to in this subsection
shall also cover such other legal matters relating to this Agreement
and the transactions contemplated hereby as the Underwriter or their
counsel may reasonably request.
In expressing their opinion on the matters set forth in this
Paragraph 7(e), said counsel shall be entitled to rely, as to any
questions of fact upon which such opinion is predicated, on the
representations of the officers of the Company or opinions of other
counsel.
(f) The Underwriter shall have received on the Closing Date
certificates, dated as of the Closing Date, signed by the President,
Treasurer and Secretary of the Company certifying that:
(i) No Order suspending the effectiveness of the Registration
Statement or stop order regarding the sale of the securities being
offered is in effect and no proceedings for such purpose are pending or
are, to their knowledge, threatened by the Commission;
(ii) They do not know of any litigation instituted or threatened
against the Company of a character required to be disclosed in the
Registration Statement which are not disclosed therein; they do not
know of any contracts which are required to be summarized in the
Prospectus which are not so summarized; and they do not know of any
material contracts required to be filed as exhibits to the Registration
Statement which are not so filed;
(iii) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any amendment
or supplement to either of the foregoing contains an untrue statement
of any material fact or omits to state any material fact required to be
stated therein or necessary to make the statement therein not
misleading; and since the Effective Date, to the best of their
knowledge, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
78
(iv) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus there has not been any
material adverse change in the condition of the Company, financial or
otherwise, or in the results of its operations, except as reflected in
or contemplated by the Registration Statement and the Prospectus, and
except as so reflected or contemplated since such date there has not
been any material transaction entered into by the Company;
(v) The representations and warranties set forth in this
Agreement are true and correct and the corporation has complied with
all of its agreements herein contained;
(vi) The Company is not delinquent in the filing of any federal,
state and municipal tax return or the payment of any federal, state or
municipal taxes; they know of no proposed redetermination or
re-assessment of taxes, adverse to the Company, and the Company has
paid or provided by adequate reserves for all known tax liabilities;
(vii) They know of no material obligation or liability of the
Company, contingent or otherwise, not disclosed in the Registration
Statement and Prospectus;
(viii) This Agreement, the consummation of the transactions
herein contemplated, and the fulfillment of the terms hereof, will not
result in a breach by the Company of any terms of, or constitute a
default under, its Certificate of Incorporation or By-Laws, any
indenture, mortgage, lease, deed or trust, bank loan or credit
agreement or any other agreement or undertaking of the Company
including, by way of specification but not by way of limitation, any
agreement or instrument to which the Company is now a party or pursuant
to which the Company has acquired any right and/or obligations by
succession or otherwise;
(ix) The financial statements and schedules filed with and as
part of the Registration Statement present fairly the financial
position of the Company as of the dates thereof all in conformity with
generally accepted principles of accounting applied on a consistent
basis throughout the periods involved. Since the respective dates of
such financial statements there has been no material adverse change in
the condition or general affairs of the Company, financial or
otherwise, other than as referred to in the Prospectus; and,
(x) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as may
otherwise be indicated therein, the Company has not prior to the
Closing Date, either (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, or
(ii) entered into any material transaction other than in the ordinary
course of business. The Company has not declared, paid or made any
dividend or distribution of any kind on its capital stock.
(g) The Company shall have performed all agreements herein
contained to be performed on its part at or before the Closing Date and
all other covenants and conditions set forth in Paragraph 6 shall have
been performed.
(h) At the time that this Agreement is executed by the
Company and at the Closing Date, the Underwriter shall have received a
letter from BDO Xxxxxxx LLP, dated as of the date this Agreement is
executed by the Company and as of the Closing Date, confirming that it
79
is an independent public accountant with the meaning of the Securities
Act and the published Rules and Regulations and that the answer to Item
25 of the Registration Statement is correct insofar as it related to it
and stating in effect (a) that in its opinion the financial statements
and schedules examined by it and included or incorporated by reference
in the Registration Statement and Prospectus comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act and the published Rules and Regulations, and (b) that on
the basis of a reading of the unaudited financial statements and the
schedules included in the Registration Statement and of the latest
available unaudited interim financial statement prepared by the
Company, consultations with and inquiries of officials of the Company,
responsible for financial and accounting matters, a reading of the
Minute Book of the Company, and such other procedures and inquiries (if
any) as may be specified in such letter, nothing has come to its
attention which gave it reason to believe that (i) the unaudited
financial statements and schedules included in the Registration
Statement and Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Securities
Act and the published Rules and Regulations or were not prepared in
accordance with generally accepted accounting principles and practices
applied on a basis consistent with those followed in the preparation of
such audited financial statements or that (ii) during the period from
________________, 199__ to a specified date not more than five days
prior to the date of such letter there was any change in the capital
stock or long term debt of the Company as compared with corresponding
amounts shown in the ________________, 199__ Balance Sheet included in
the Registration Statement or (iii) during the period from June 1, 1993
to the date of the Company's most recent financial statement there was
any decreases in net current assets or net assets as compared with
corresponding amounts shown in the ________________, 199__ Balance
Sheet included in the Registration Statement or any decreases in net
sales or in the total or per share amounts of income before
extraordinary items or of net income of the Company compared with the
corresponding period of the preceding year, except as set forth in or
contemplated by the Registration Statement or Prospectus.
(i) All of the securities being offered by the Company shall be
tendered for delivery in accordance with the terms and provisions of
this Agreement.
(j) The securities being offered shall be qualified in such
states as the Underwriter may reasonably request and each such
qualification shall be in effect and not subject to any stop order or
other proceeding on the Effective Date, and Closing Date.
(k) The Company shall have furnished to the Underwriter such
other and further certificates, documents, and opinions as the
Underwriter may reasonably request or its counsel may request
(including certificates of officers) as to the accuracy, at and as of
the Closing Date, of the representations and warranties of the Company
herein, as to the performance by the Company of its obligations
hereunder, and as to other conditions concurrent and precedent to its
obligations hereunder.
All the opinions, affidavits, letters, evidence and certificates
specified in this Paragraph 7 or elsewhere in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are
in form reasonably satisfactory to the Underwriter and its counsel.
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Any certification signed by an officer of the Company and
delivered to the Underwriter or to its counsel will be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein.
In the event that any of the conditions specified in this
Paragraph 7 shall not have been fulfilled, the Underwriter shall have
the right, upon written notice to the Company, and upon the Company's
failure to cure the condition within ten (10) days from the date of
such notice, to terminate the obligations of the Underwriter under this
Agreement.
8. Indemnification
(a) The Company will indemnify and hold harmless the Underwriter
and each person who controls the Underwriter within the meaning of
Section 15 of the Act from and against any and all losses, claims,
damages, expenses or liabilities, joint or several to which they or any
of them may become subject under the Act or under any other statute or
at common law or otherwise and will reimburse the Underwriter and each
such person specified as above for any legal or other expenses
(including the cost of any investigation and preparation) reasonably
incurred by them or any one them in connection with investigating or
defending any litigation or claim whether or not resulting in any
liability, only insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereto or
in any Blue Sky application or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein necessary to make the statements therein not
misleading, all as of the date when the Registration Statement or such
post-effective amendment, the filing of any such Blue Sky application
as the case may be, becomes effective or any untrue statement or
alleged untrue statement of a material fact contained in the
Preliminary Prospectus or Prospectus (as amended or as supplemented
thereto), or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, not misleading;
provided, however, that the indemnity agreement contained in this
subsection (a) shall not apply to amounts paid in settlement of any
such litigation if such settlement is effected without the consent of
the Company, nor shall it extend to any Underwriter or any person
controlling any Underwriter in respect of any such losses, claims,
damages, expenses, liabilities, or actions arising out of, or based
upon any such untrue statement or alleged untrue statement, or any such
omission, if such statement or omission was made in reliance upon and
in conformity with, written information furnished to the Company by the
Underwriter on behalf of such Underwriter specifically for use in
connection with the preparation of the Registration Statement, the
Prospectus, or any such amendment thereof or supplement thereto or Blue
Sky Application.
The Underwriter and each controlling person of the Underwriter
agree after their receipt of written notice of the commencement of any
action against such Underwriter or against any such person controlling
any Underwriter as aforesaid, in respect of which indemnity may be
sought from the Company on account of the Indemnity agreement contained
in this subsection (a), to notify the Company within ten (10) days in
writing of the commencement thereof and to supply a copy of any legal
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documents served upon such Underwriter or such controlling person in
connection with such action. The omission of such Underwriter or such
controlling person of such Underwriter to so notify the Company of any
such action shall relieve the Company from any liability which it may
have to such Underwriter or such controlling persons as to any such
action on account of the indemnity agreement contained in this
subsection (a), but shall not relieve the Company from any other
liability which it may have to such Underwriter, to such controlling
person or to any other underwriter or controlling person. In case any
such action shall be brought against any Underwriter or any controlling
person, such Underwriter or controlling person of such Underwriter
shall promptly notify the Company of the commencement thereof and the
Company shall be entitled to participate in (and, to the extent it
shall wish, to direct) the defense thereof at its own expense but such
defense shall be conducted by counsel of recognized standing and
reasonably satisfactory to such Underwriter and to such controlling
person or persons who are defendant or defendants in such litigation.
The Underwriter or any such controlling person shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof subject to the Company's reasonable right to approve
such counsel which will not be unreasonably withheld, but the fees and
expenses of such counsel shall not be at the expense of the Company
unless (i) the employment of such counsel has been specifically
authorized by the Company, or (ii) the Company shall not have employed
counsel to have charge of the defense of such action,. or (iii) there
is a conflict of interest which would prevent counsel for the Company
from representing both the Company and the Underwriter or such
controlling person, in any of which cases the Company shall not have
the right to direct the defense of such action on behalf of the
Underwriter or such controlling person. It is understood that,
regardless of whether such counsel is representing all of the parties
entitled to indemnification under this subsection (a), the Company
shall not be liable, under clause (iii) above, for the fees and
expenses of more than one separate counsel who shall be approved by the
Underwriter. The Company agrees to notify each Underwriter promptly of
the commencement of any litigation or proceeding against it or against
any of the officers or directors of the Company of which it may be
advised, in connection with the issue and sale of any of its
securities, and to furnish the Underwriter, at the Underwriter's
request, with copies of all pleadings therein and to permit the
Underwriter to be an observer therein and to apprise it of all of the
developments therein, all at the Company's expense. The provisions of
this paragraph 8(a) shall also apply to the subsequent registration of
the Underwriter's Warrants and/or the securities underlying the
Underwriter's Warrants.
(b) The Underwriter will indemnify and hold harmless the Company,
the directors of the Company, the officers of the Company who shall
have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, from
and against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which they or any of them may become
subject under the Act or under any other statute or at common law or
otherwise and, except as hereinafter provided, will reimburse the
Company and such officers or controlling person indemnified for as
above for any legal or other expenses (including the cost of any
investigation and preparation) reasonably incurred by them or any of
them in connection with investigating or defending any litigation or
claims whether or not resulting in any liability, only insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of
82
or are based upon any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any
post-effective amendment thereto or in any Blue Sky application or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, all as of the
date when the Registration Statement or such post-effective amendment,
or the date the filing of any such Blue Sky application as the case may
be, becomes effective, or any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have
filed with the Commission any amendments thereof or supplements
thereto), or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
but only if insofar as such statement or omission was made in reliance
upon information furnished in writing to the Company by the Underwriter
specifically for use in connection with the preparation of the
Registration Statement, the Preliminary Prospectus or the Prospectus,
or any such amendment thereof or supplement thereto or Blue Sky
application. This indemnity agreement is in addition to any other
liability which the Underwriter may have to the Company. The
Underwriter shall not be liable for amounts paid in settlement of any
such litigation, if such settlement was effected without its consent.
In case of the commencement of any action, respect of which indemnity
may be sought from any such Underwriter on account of its indemnity
agreement contained in this subsection (b), the Company and each person
agreed to be indemnified by such Underwriter shall have the same
obligation to notify such Underwriter and such Underwriter shall have
the same right to participate in (and, to the extent that it shall
wish, to direct), as set forth in subsection (a) above, the defense of
such action at its own expense but such defense shall be conducted by
counsel of recognized standing and reasonably satisfactory to the
Company or such other person agreed to be indemnified by such
Underwriter. The Underwriter agrees to notify the Company promptly of
the commencement of any litigation or proceeding against it or against
any such controlling person of which it may be advised in connection
with the issue or sale of any of the securities of the Company. The
provisions of this subparagraph shall also apply to the subsequent
registration of the Underwriter's Warrants and/or securities underlying
the Underwriter's Warrants.
(c) The respective indemnity agreements of the Company, and the
Underwriter contained in subsections (a) and (b) above, and the
representations and warranties of the Company set forth in this
Agreement, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any such
officer or controlling person of the Company, and shall survive the
delivery of the Units and/ additional Warrants, and any successor of
the Underwriter, or of such controlling person of the Company or of any
controlling person of the Company, as the case may be, shall be
entitled to the benefit of these respective indemnity agreements.
9. Contribution.
In order to provide for just and equitable contribution under the
Act in any case in which (i) the Underwriter makes claims for
indemnification pursuant to Section 8 hereto but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
83
denial of the last right of appeal) that such indemnification may not
be enforced in such case, notwithstanding the fact that the express
provisions of Section 8 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of the
Underwriter, then the Company and each person who controls the Company,
in the aggregate, and the Underwriter shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees) in either such case (after contribution
from others) in such proportions that the Underwriter is responsible in
the aggregate for that portion of such losses, claims, damages or
liabilities represented by the percentage that the underwriting
commission per Unit appearing on the cover page of the Prospectus bears
to the public offering price appearing thereon, and the Company shall
be responsible for the remaining portion, provided, however, that (a)
if such allocation is not permitted by applicable law, then the
relative fault of the Company and the Underwriter and controlling
persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of
an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information
supplied by the Company or the Underwriter, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if the
representative obligations of the Company and the Underwriter to
contribute pursuant to this Section 9 were to be determined by pro rata
or per capita allocation of the aggregate damages or by any other
method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 9;
and, (b) the contribution of the Underwriter shall not be in excess of
its proportionate share of the portion of such losses, claims, damages
or liabilities for which the Underwriter is responsible. No person
guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person
who controls the Company within the meaning of Section 15 of the Act.
If the full amount of the contribution specified in this paragraph is
not permitted by law, then the Underwriter and each person who controls
any Underwriter shall be entitled to contribution from the Company to
the full extent permitted by law. The foregoing contribution agreement
shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and
the Underwriter. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent not be unreasonably
withheld in light of all factors of importance to such party.
10. Termination
This Agreement shall be terminated (a) in the event that all the
Securities Being Offered are not sold as provided in sections 2 and 4
above; (b) at any time prior to the Closing Date by the Underwriter by
written notice to the Company if in the sole and absolute judgment of
the Underwriter it is impracticable to offer the Securities Being
Offered for sale, by reason of (i) an outbreak of major hostilities or
84
other national or international calamity having occurred; (ii) any loss
of whatsoever nature, whether or not insured, which, in the sole and
absolute opinion of the Underwriter, substantially affects the value of
the property of the Company or materially interferes with the operation
of the business of the Company; (iii) any material adverse change in
the business, property or financial condition of the Company; (iv) any
action, suit or proceeding at law or in equity against the Company, or
by any Federal, State or other Commission, board or agency wherein any
unfavorable decision would materially adversely effect the business,
property, financial condition or income of the Company; (v) adverse
market conditions including but not limited to the suspension and\or
limitations of trading in securities on the New York Stock Exchange,
Inc., or the American Stock Exchange, Inc. and\or minimum prices having
been established on either such Exchange; (vi) any action having been
taken by any government in respect of its monetary affairs which, in
the sole and absolute opinion of the Underwriter, has a material
adverse effect on the United States securities markets, or
(vii) conditions arising subsequent to the execution hereof, the
Underwriter believes no favorable public market exists for the sale of
the Securities Being Offered.
If this Agreement shall be terminated pursuant to section 7 or
this section 10, or if the transaction provided for herein is not
consummated because of any refusal, inability or failure on the part of
the Company to comply with any of the terms or to fulfill any of the
conditions of this Agreement, or if for any reason the Company shall be
unable to perform all of its obligations under this Agreement, the
Company shall not be liable to the Underwriter for liability of any
character on account of loss of anticipated profits arising out of the
transactions covered by this Agreement, but the Company shall remain
liable to the extent provided in Paragraphs 6(l), 6(m), 6(n) and 8(a)
hereof, and except where termination occurs pursuant to clauses (i),
(iv), (v), (vi) or (vii) of this Section 10, the Company shall pay in
addition thereto all out-of-pocket expenses incurred by the
Underwriter, on an accountable basis, in contemplation of the
performance by it of its obligations hereunder, including fees and
disbursements of counsel and printing and traveling expenses and
postage, due diligence expenses, charges of the Underwriter which
charges shall not exceed the sum of $50,000; and, if termination should
occur pursuant to clauses (i), (iv), (v), (vi) or (vii) of this section
10, the Company shall reimburse the Underwriter for the aforesaid
expenses incurred by it, on an accountable basis, in the sum of not
more than $25,000
Any notice under this section 10 may be given by telephone or
telegraph, but shall be subsequently confirmed by letter within three
(3) days of such notification. Moreover, nothing in this section 10
shall be construed so to permit the Underwriter to be reimbursed for
expenses by it in excess of its actual expenses as described above.
11. Finders
(a) The Company knows of no claims for services in the nature of
a finder's fee or origination fee with respect to this financing
resulting from the respective acts of its officers, directors or
employees, for which the Underwriter may be responsible, and the
Company agrees to indemnify and hold the Underwriter free and harmless
from any claims for any services of such nature arising from any act of
the Company or its employees, and will reimburse the Underwriter for
any counsel fees, legal or other expenses reasonably incurred by the
Underwriter in investigating or defending against any such claim.
85
(b) The Underwriter knows of no claims for services in the nature
of a finder's fee or origination fee with respect to this financing
resulting from the respective acts of its officers, directors, or
employees, for which the Company may be responsible, and the
Underwriter agrees to indemnify and hold the Company free and harmless
from any claims for any services of such nature arising from any act of
such Underwriter or their employees or agents, and will reimburse the
Company for any legal or other expenses reasonably incurred by the
Company in investigating or defending against any such claim.
11. Underwriter's Covenant
The Underwriter covenants and agrees with the Company as follows:
(a) By the Closing Date the Underwriter will supply the Company
with all information requested by the Company with regard to the names
and addresses of all subscribers to the securities being offered; and,
(b) The Underwriter and all Selected Dealers are registered as a
broker-dealers with the Commission and are members in good standing
with the NASD, and the Underwriter and all Selected Dealers will be
registered as broker-dealers with the Commission and members in good
standing of the NASD.
(c) There is not now pending or threatened or to the best
knowledge of the Underwriter or its counsel, contemplated against the
Underwriter any action or proceeding, either in any court of competent
jurisdiction or before the Commission or any state securities
commission, or administrative body or tribunal, except as fully
disclosed or required to be disclosed in the Prospectus.
(d) In the event of any action or proceeding of the type referred
to in subparagraph (c) above shall be instituted or threatened against
the Underwriter at any time prior to the Effective Date, or in the
event that the Underwriter shall cease to be a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD"), or in
the event there shall be filed by or against the Underwriter in any
court pursuant to any federal, state, local or municipal statute, a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of its assets or if the
Underwriter makes an assignment for the benefit of creditors, the
Underwriter shall give written notice of the occurrence of such event
or events to the Company, and the Company shall have the right on three
(3) days' written notice to the Underwriter to terminate this Agreement
without any liability to the Underwriter of any kind.
(e) The Company agrees that, upon the closing and immediately
upon the request of the Underwriter it will give instructions to its
Transfer Agent to issue Share and Warrant Certificates in the names and
denominations submitted to it by the Underwriter. The Underwriter
agrees that when funds in sufficient amount as required by this
Agreement are in liquid form it will submit, within three (3) days
thereafter, to the Transfer Agent a list of the names and addresses of
the subscribers and the denominations of the certificates to be issued
to them. The Transfer Agent shall be required by the Company to issue
said certificates within seven (7) days after receipt of the aforesaid
list from the Underwriter and the delivery of the certificates shall be
made to the Underwriter within seven (7) days thereafter against
receipt of payments as provided in this Agreement.
86
(f) Whether or not the transactions contemplated hereunder are
consummated or this Agreement is prevented from becoming effective, the
Underwriter will pay and bear all costs and expenses incident to the
performance of its obligations of this Agreement except as otherwise
specified herein.
12. Survival of Representation, Warranties and Agreements
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its officers as set
forth in or made pursuant to this Agreement and the respective
indemnities, agreements, representations, warranties, covenants and
other statements of the Underwriter or its officers as set forth in or
made pursuant to this Agreement shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf
of the Company or the Underwriter or any controlling person, and will
survive termination of this Agreement and the delivery of any payment
for the securities being offered, on the Closing Date.
13. Benefit
This Agreement has been made solely for the benefit of and
shall be binding upon the Underwriter, the Company and, to the extent
expressed, any person controlling the Company or the Underwriter and
the officers and directors of the Company, and their respective legal
representatives, successors and assigns, all as and to the extent
provided herein, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "legal representatives,
successors and assigns" shall not include any purchaser of any of the
securities being offered from the Underwriter merely because of such
purchase.
14. New York Law
This Agreement shall be construed in accordance with the laws of
the State of New York and subject to the exclusive jurisdiction of the
courts of said state.
15. Notices
All communications hereunder shall be in writing and, if to the
Underwriter, shall be mailed by certified mail or delivered to the
Underwriter at its address appearing on Page 1 hereof, or if to the
Company, shall be mailed by certified mail or delivered to it at its
address appearing on Page 1 hereof, or sent to Counsel to such parties
named in the Prospectus at the respective addresses indicated therein.
If the foregoing correctly states and sets forth in full the
Agreement between us, please indicate by signing this letter in the
space provided below for that purpose. The within Agreement may be
executed simultaneously in two or more counterparts, each of which
shall be deemed the original, but all of which together shall
constitute one and the same instrument and shall be valid and binding
between us.
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Very truly yours,
CASTLE SECURITIES CORP.
By: ____________________________________
Xxxxxxx X. Xxxxxx, President
Dated: Spokane, Washington
_________________, 1999
ACCEPTED AND AGREED:
EXHAUST TECHNOLOGIES, INC.
By: ___________________________________
Xxxxxx Xxxxxxxx, President
