EX-1.1
Underwriting Agreement between Company & Xxxxxxx
UNDERWRITING AGREEMENT
between
PURO WATER GROUP, INC.
and
XXXXXXX EQUITIES, INC.
Dated: ________, 1996
1,350,000 SHARES
PURO WATER GROUP, INC.
Common Stock
UNDERWRITING AGREEMENT
New York, New York
________, 1996
Xxxxxxx Equities, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, Puro Water Group, Inc., a Delaware corporation (the
"Company"), hereby confirms its agreement with you (the "Underwriter" or "you")
as follows:
1. Purchase and Sale of Securities.
1.1 Firm Shares.
1.1.1 Purchase of Firm Shares. On the basis of the representations
and warranties and subject to the terms and conditions contained herein, the
Company agrees to issue and sell to the Underwriter 1,350,000 shares (the "Firm
Shares") of the Company's Common Stock, [$.003125] par value per share (the
"Common Stock"), and the Underwriter agrees to purchase from the Company the
Firm Shares, at a purchase price of [ ] per Firm Share.
1.1.2 Delivery and Payment. Delivery and payment for the Firm Shares
shall be made at 10:00 A.M., New York time, on or before the third full business
day following the effective date (the "Effective Date") of the Registration
Statement (as hereinafter defined), or at such other time as shall be agreed
upon by the Underwriter and the Company, at the offices of Xxxxxxx Equities,
Inc. or at such other place as shall be agreed upon by the Underwriter and the
Company. The date of delivery and payment for the Firm Shares is called the
"Closing Date." Payment for the Firm Shares shall be made on the Closing Date by
certified or bank cashier's check(s) in New York Clearing House (next day)
funds, payable to the order of the Company upon delivery to the Underwriter of
certificates (in form and substance complying with applicable law) representing
the Firm Shares. The Firm Shares shall be registered in such names and shall be
in such denominations as the Underwriter may request in writing at least
two (2) full business days prior to the Closing Date. The Company shall permit
the Underwriter to examine and package the Firm Shares for delivery, at least
one (1) full business day prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Shares, except upon tender of payment by
the Underwriter for all the Firm Shares.
1.2 Overallotment Option.
1.2.1 Grant of Option. For the purposes of covering any
overallotments in connection with the distribution and sale of the Firm Shares,
the Underwriter is hereby granted an option (the "Overallotment Option") to
purchase up to an additional 202,500 shares of Common Stock (the "Option
Shares") from the Company. The Firm Shares and the Option Shares are hereinafter
collectively referred to as the "Shares." The purchase price to be paid for each
Option Share shall be the same as the price paid for each Firm Share pursuant to
Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Overallotment Option may be exercised
by the Underwriter as to all or any part of the Option Shares at any time, from
time to time, within forty-five (45) days after the Effective Date. The
Underwriter shall not be under any obligation to purchase any Option Shares
prior to the exercise of the Overallotment Option. The Overallotment Option
granted hereby may be exercised by the giving of written or telegraphic notice
to the Company by the Underwriter setting forth the number of Option Shares to
be purchased, the date and time for delivery of and payment for the Option
Shares and stating that the Option Shares referred to therein are to be used for
the purpose of covering overallotments in connection with the distribution and
sale of the Firm Shares. If such notice is given two (2) full business days
prior to the Closing Date, the date set forth therein for such delivery and
payment shall be the Closing Date. If such notice is given thereafter, the date
set forth therein for such delivery and payment shall not be earlier than three
(3) full business days after the date of the notice. If such delivery and
payment for the Option Shares does not occur on the Closing Date, the date and
time of the closing for such Option Shares shall be as set forth in the notice
(the "Option Closing Date"). Upon exercise of the Overallotment Option, the
Company shall become obligated to convey to the Underwriter the number of Option
Shares specified in such notice.
1.2.3 Delivery and Payment. Payment for the Option Shares shall be
made by certified or bank cashier's check(s) in New York Clearing House (next
day) funds, payable to the order of the Company and shall be made at the offices
of Xxxxxxx Equities, Inc. or at such other place as shall be agreed upon by the
Underwriter and the Company, upon delivery to you of certificates representing
the Option Shares being purchased. The certificates representing the Option
Shares to be delivered shall be in such denominations
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and registered in such names as the Underwriter requests not less than two (2)
full business days prior to the Closing Date or the Option Closing Date, as the
case may be, and shall be made available to the Underwriter for inspection,
checking and packaging at the aforesaid office of the Company's transfer agent
or correspondent not less than one (1) full business day prior to such Closing
Date.
1.3 Underwriter's Warrants.
1.3.1 Purchase and Sale. The Company hereby agrees to issue and to
sell to you and/or to such persons as you may designate, on the Closing Date,
warrants for the purchase of an aggregate of 135,000 shares of Common Stock (the
"Underwriter's Warrants") for an aggregate purchase price of $135.00. The
Underwriter's Warrants and the shares of Common Stock issuable upon exercise of
the Underwriter's Warrants are hereinafter referred to collectively as the
"Underwriter's Securities." The Shares and the Underwriter's Securities are
hereinafter referred to collectively as the "Securities."
1.3.2 Delivery and Payment. Delivery and payment for the
Underwriter's Warrants shall be made on the Closing Date. The Company shall
deliver to the Underwriter, upon payment therefor, certificates for the
Underwriter's Warrants in the name or names and in such denominations as the
Underwriter may request. The Underwriter's Warrants shall be exercisable for a
period of four (4) years commencing one (1) year after the Effective Date at an
initial exercise price per share of 120% of the per share initial public
offering price for the Shares and shall be substantially in the form of the
Underwriter's common stock purchase warrant filed as an exhibit to the
Registration Statement.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriter that:
2.1 Filings under Securities Laws.
2.1.1 Pursuant to the Act. The Company has filed with the Securities
and Exchange Commission (the "Commission") a registration statement and an
amendment or amendments thereto, on Form SB-2 (Registration No. ________),
including any related preliminary prospectus (a "Preliminary Prospectus"), for
the registration of the Securities under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations of the Commission under the Act (the "Regulations").
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a
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part thereof or incorporated therein and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the
Regulations), is hereinafter called the "Registration Statement," and the form
of the final prospectus dated the Effective Date (or, if applicable, the form of
final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus."
2.1.2 Pursuant to the Exchange Act. The Company has filed with the
Commission a Form 8-A Registration Statement (File No. _______) providing for
the registration under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of the shares of Common Stock. The registration of the Common
Stock has been or will be declared effective by the Commission on the date
hereof.
2.2 No Stop or Other Orders. Neither the Commission, nor any state
regulatory authority, has issued any order preventing or suspending the use of
any Preliminary Prospectus or has instituted or threatened to institute any
proceedings with respect to such an order.
2.3 Disclosures in Registration Statement.
2.3.1 Representation as to Contents. At the time the Registration
Statement became effective and at all times subsequent thereto up to the Closing
Date and any Option Closing Date, the Registration Statement and the Prospectus
shall contain all material statements that are required to be stated therein in
accordance with the Act and the Regulations, and shall in all material respects
conform to the requirements of the Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, 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, in light of the circumstances under which they were
made, not misleading. The representation and warranty made in this Section 2.3.1
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto. The Company acknowledges that such information
consists solely of the information under the heading "Underwriting" in the
Prospectus.
2.3.2 Disclosure Regarding Contracts. The description in the
Registration Statement and the Prospectus of contracts, instruments and other
documents is accurate in all material respects. There are no contracts,
instruments or other documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed with the Commission as
exhibits to the Registration Statement, which have
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not been so described or filed. Each contract, instrument and other document
(however characterized or described) to which the Company is a party or by which
its property or business is or may be bound or affected and which is referred to
in the Prospectus, or is material to the Company's business, has been duly and
validly executed, is in full force and effect and is enforceable against the
parties thereto in accordance with its terms. Neither the Company nor, to the
best knowledge of the Company, any other party thereto is in default thereunder
and no event has occurred which, with the lapse of time or the giving of notice,
or both, would constitute a default by the Company thereunder.
2.3.3 Prior Securities Transactions. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by, or under common control with the
Company, within three (3) years prior to the date hereof, except as disclosed in
the Registration Statement.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or in the results of
operations, assets, properties, business or business prospects of the Company,
including, but not limited to, any material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, whether or not arising in the ordinary course of business, and
(ii) there have been no transactions entered into by the Company, other than
those in the ordinary course of business, which are material with respect to the
condition, financial or otherwise, or to the results of operations, business or
business prospects of the Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock.
2.5 Independent Accountants. To the best knowledge of the Company, Xxxxxx
Xxxxxxxx LLP, whose report is filed with the Commission as part of the
Registration Statement, are independent accountants as required by the Act and
the Regulations. The
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statements included in the Registration Statement with respect to such
accountants are true and correct in all material respects.
2.6 Financial Statements. The financial statements, including the notes
thereto and supporting schedules, if any, included in the Registration Statement
and Prospectus fairly present the financial position, the results of operations
and cash flows of the Company at the dates and for the periods to which they
apply; and, except as otherwise indicated in the Registration Statement, such
financial statements have been prepared in conformity with United States
generally accepted accounting principles, consistently applied throughout the
periods involved; and the supporting schedules, if any, included in the
Registration Statement present fairly the information required to be stated
therein. No other financial statements or schedules are required to be included
in the Registration Statement. The selected financial data set forth in the
Prospectus under the captions "Summary Financial Information," "Capitalization",
"Pro Forma Financial Information" and "Selected Financial and Operating Data"
fairly present the information set forth therein on the basis stated in the
Registration Statement.
2.7 Capitalization. The Company had at the date or dates indicated in the
Registration Statement and Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date and
any Option Closing Date, there will be no options, warrants, or other rights to
purchase or otherwise acquire any authorized but unissued shares of Common
Stock, preferred stock of the Company, if any, or any security convertible into
shares of Common Stock or preferred stock, or any contracts or commitments to
issue or sell shares of Common Stock or preferred stock or any such options,
warrants, rights or convertible securities.
2.8 Representations Regarding Securities.
2.8.1 Outstanding Securities. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holder of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and warrants,
if any, to purchase shares of Common Stock constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. The
authorized Common
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Stock and any outstanding options and warrants to purchase shares of Common
Stock conform to all statements relating thereto contained in the Registration
Statement and the Prospectus. The offers and sales of the outstanding Common
Stock, and any options and warrants to purchase shares of Common Stock, were at
all relevant times either registered under the Act and applicable state
securities or Blue Sky Laws or were exempt from such registration requirements.
2.8.2 Securities Sold Hereunder. The Securities have been duly
authorized and, when issued and paid for, will be validly issued, fully paid and
non-assessable and the holders thereof are not and will not be subject to
personal liability by reason of being such holders; the Securities are not and
will not be subject to the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company; and all
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken. When issued, the
Underwriter's Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and the
Underwriter's Warrants are enforceable against the Company in accordance with
their respective terms.
2.9 No Registration Rights. No holder of any securities of the Company or
of any options or warrants of the Company exercisable for or convertible or
exchangeable into securities of the Company has the right to require the Company
to register any such securities of the Company under the Act or to include any
such securities in a registration statement to be filed by the Company,
including the Registration Statement, except as disclosed in the Prospectus.
2.10 Representations Regarding This Agreement and the Underwriter's
Warrant Agreement. The Company has full power and authority, corporate and
otherwise, to enter into this Agreement and the agreement governing the
Underwriter's Warrants (the "Underwriter's Warrant Agreement") and to carry out
the provisions and conditions hereof and thereof. This Agreement and the
Underwriter's Warrant Agreement have been duly and validly authorized by the
Company and constitute, or when executed and delivered, will constitute valid
and binding agreements of the Company, enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws offering
creditors' rights generally, (b) as enforceability of any indemnification and
contribution provision may be limited under the federal and state securities
laws, and (c) that, the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
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The execution, delivery and performance by the Company of this Agreement and the
Underwriter's Warrant Agreement, the consummation by the Company of the
transactions herein and therein contemplated and the compliance by the Company
with the terms and conditions hereof and thereof have been duly authorized by
all necessary corporate action and do not and will not, with or without the
giving of notice or the lapse of time or both, (i) result in a breach of, or
conflict with any of the terms and provisions of, or constitute a default under,
or result in the creation, modification, termination or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any indenture, mortgage, deed of trust, note, loan or credit agreement
or any other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets of
the Company is subject; (ii) result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business; or (iv) have a material adverse
effect on any permit, license, certificate, registration, approval, consent or
franchise concerning the Company.
2.11 No Improper Payments. Neither the Company nor, to the Company's
knowledge, any director, officer, employee or agent of the Company has made any
payment of funds of the Company or received or retained any funds in violation
of any law, rule or regulation or of a character required to be disclosed in the
Prospectus.
2.12 No Defaults; Violations. Except as set forth in the Prospectus, no
default exists in the due performance and observance of any term, covenant or
condition of any license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation or By-Laws. The
Company is not in violation of any franchise, license, permit, applicable law,
rule, regulation, judgment or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business, which violation would result in a material adverse
change in the condition (financial or other), business, prospects or properties
of the Company.
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2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite corporate
power and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies to own or lease its properties and conduct its business as
described in the Prospectus, and the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates and permits and all federal, state and local laws, rules and
regulations.
2.13.2 Required Consents. The Company has obtained all consents,
authorizations, approvals and orders required in connection with the execution
and delivery of this Agreement and the Underwriter's Warrant Agreement and the
performance of its obligations hereunder and thereunder. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the valid issuance, sale and delivery of the
Securities pursuant to this Agreement and the Underwriter's Warrant Agreement
and as contemplated by the Prospectus, except those required under applicable
federal and state securities laws.
2.14 Title to Property; Insurance. The Company has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus. The Company has adequately insured its properties against loss
or damage by fire or other casualty and maintains such other insurance as is
usually maintained by companies engaged in the same business or in similar
businesses.
2.15 Litigation; Governmental Proceedings. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or threatened
against, or involving the properties or business of, the Company which might
materially and adversely affect the financial position, prospects, value or the
operation or the properties or the business of the Company, or which question
the validity of the capital stock of the Company or this Agreement or of any
action taken or to be taken by the Company pursuant to, or in connection with,
this Agreement. There are no outstanding orders, judgments or decrees of any
court, governmental agency or other tribunal naming the Company and enjoining
the Company from taking, or requiring the Company to take, any action, or to
which the Company, its properties or business, is bound or subject.
2.16 Organization; Good Standing. The Company has been duly organized and
is validly existing as a corporation and is in good
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standing under the laws of its state of incorporation. The Company is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which ownership or leasing of any properties or the character of
its operations requires such qualification or licensing.
2.17 Taxes. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof. The Company has paid
all taxes (as hereinafter defined) shown as due on such returns that were filed
and has paid all taxes imposed on or assessed against the Company. No issues
have been raised (and are currently pending) by any taxing authority in
connection with any of the returns or taxes asserted as due from the Company,
and no waivers of statutes of limitation with respect to the returns or
collection of taxes have been given by or requested from the Company or any
subsidiary. The term "taxes" means all federal, state, local, foreign, and other
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or charges or any
kind whatever, together with any interest and any penalties, additions to tax,
or additional amounts with respect thereto. The term "returns" means all
returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.
2.18 Transactions Affecting Disclosure to NASD.
2.18.1 Finders' Fees. Except as described in the Prospectus, there
are no claims, payments, issuances, arrangements or understandings for services
in the nature of finders' or origination fees with respect to the sale of the
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company that may affect the
Underwriter's compensation, as determined by the National Association of
Securities Dealers, Inc. (the "NASD").
2.18.2 Payments Within Twelve (12) Months. The Company has not made
any direct or indirect payments (in cash, securities or otherwise) to (i) any
person, as a finder's fee, investing fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
provided capital to the Company, (ii) to any NASD member, or (iii) to any person
or entity that has any direct or indirect affiliation within the twelve month
period to ___________, 1996, the date on which the Registration Statement was
filed with the Commission (the "Filing Date") or thereafter, other than payments
to the Underwriter.
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2.18.3 Use of Proceeds. None of the net proceeds of the offering
will be paid by the Company to any participating NASD member or any of its
affiliates.
2.18.4 Insiders' NASD Affiliation. No officer, director or holder of
five percent (5%) or more of any class of securities of the Company has any
direct or indirect affiliation or association with any NASD member. No
beneficial owner of the Company's unregistered securities has any direct or
indirect affiliation or association with any NASD member.
2.19 Internal Accounting Controls. The Company maintains a system of
internal accounting control sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
2.20 AMEX Listing. As of the Effective Date, the Shares have been approved
for listing on the American Stock Exchange ("AMEX").
2.21 Intangibles. The Company owns or possesses the requisite licenses or
rights to use all trademarks, service marks, service names, trade names, patents
and patent applications, copyrights and other rights (collectively, the
"Intangibles") owned or used by it. The Company's Intangibles which have been
registered in the United States Patent and Trademark Office and/or the United
States Copyright office have been fully maintained and are in full force and
effect. There is no claim or action by any person, or proceeding pending or, to
the Company's knowledge, threatened, and the Company has not received any notice
of conflict with the asserted rights of others, which challenges the exclusive
right of the Company with respect to any Intangibles used in the conduct of the
Company's business. Neither the Company's Intangibles, nor the Company's current
products, services and processes infringe on any Intangibles held by any third
party. No others have infringed or are infringing upon the Intangibles of the
Company.
2.22 Employee Matters.
2.22.1 Relations With Employees. The Company has generally enjoyed a
satisfactory relationship with its employees and is in compliance with all
federal, state and local laws and regulations respecting the employment of its
employees and employment practices, terms and conditions of employment and wages
and hours relating thereto. There are no pending investigations
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involving the Company by the U.S. Department of Labor or any other governmental
agency responsible for the enforcement of such federal, state or local laws and
regulations. There is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or any predecessor entity, and none has ever occurred.
No issue concerning representation exists respecting the employees of the
Company and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending or threatened under any expired or existing collective
bargaining agreement of the Company, if any.
2.22.2 Employee Benefit Plans. Other than as set forth in the
Registration Statement, the Company neither maintains, sponsors nor contributes
to, nor is it required to maintain, sponsor or contribute to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multi-employer plan" (each, an "ERISA Plan") as such terms
are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Company does
not, and has at no time, maintained or contributed to a defined benefit plan, as
defined in Section 3(35) of ERISA. If the Company does maintain or contribute to
a defined benefit plan, any termination of the plan on the date hereof would not
give rise to liability under Title IV of ERISA. No ERISA Plan (or any trust
created thereunder) has engaged in a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), which could subject the Company to any tax penalty for
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan that is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multi-employer
plan."
2.23 Investment Company Representations. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
2.24 Officers' Certificate. Any Certificate signed by any duly authorized
officer or the Company and delivered to you or to your counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
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2.25 Lock-Up Agreements With Insiders. The Company has caused to be duly
executed a legally binding and enforceable agreement pursuant to which all
officers, all directors, all stockholders who own 5% or more of the outstanding
Common Stock of the Company or options, warrants or other securities convertible
into 5% or more of the Company's Common Stock and Xxxxxx Associates, LP and
their family members and affiliates (as defined in the securities laws),
(collectively, the "Insiders") agree not to sell any shares of Common Stock or
warrants or options to purchase Common Stock or securities convertible into
Common Stock owned by them (either pursuant to Rule 144 of the Regulations or
otherwise) for a period of eighteen (18) months following the Effective Date,
except with the consent of the Underwriter (other than by the laws of descent
and distribution). In order to enforce such agreements, the Company shall impose
stop transfer instructions with respect to all such shares of Common Stock or
warrants or options to purchase Common Stock or securities convertible into
Common Stock until the end of such period.
2.26 No Stabilization or Manipulation. Neither the Company, nor any of its
officers, directors or controlling persons, has taken or will take, directly or
indirectly, any action designed, or which reasonably might be expected, to cause
or result, under the Act or otherwise, in, or that has constituted,
stabilization or manipulation of the price of any Security or to facilitate the
sale or resale of the Shares.
2.27 Subsidiaries. The representations and warranties made by the Company
in this Agreement shall, in the event that the Company has one or more
subsidiaries (the "subsidiaries") also apply and be true with respect to each
subsidiary, individually (except as the context otherwise requires) and taken as
a whole with the Company and all other subsidiaries, as if each representation
and warranty contained herein made specific reference to each subsidiary each
time the term "Company" was used. Except as described in the Prospectus, the
Company does not own any interest in any corporation, partnership, joint
venture, trust or other business entity.
3. Covenants of the Company. The Company hereby covenants and agrees with the
Underwriter as follows:
3.1 Amendments to Registration Statement. The Company shall deliver to the
Underwriter, prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective Date and shall
not file any such amendment or supplement to which the Underwriter shall
reasonably object.
3.2 Federal Securities Laws.
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3.2.1 Compliance. During the time when a Prospectus is required to
be delivered under the Act, the Company shall use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Shares in accordance with the provisions hereof and the Prospectus. If at
any time when a Prospectus relating to the Shares is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or counsel for the Underwriter, the
Prospectus, as then amended or supplemented, includes any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to amend
the Prospectus to comply with the Act, the Company shall notify the Underwriter
promptly and prepare and file with the Commission, subject to Section 3.1
hereof, an appropriate amendment or supplement in accordance with Section 10 of
the Act.
3.2.2 Filing of Final Prospectus. The Company shall file the Final
Prospectus (in form and substance satisfactory to the Underwriter) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years from the
Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock under the provisions of the Exchange Act.
3.3 Blue Sky Filings. The Company shall endeavor in good faith, in
cooperation with the Underwriter and its counsel, at or prior to the time the
Registration Statement becomes effective, to qualify the Shares for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or would be required to qualify to do business as a
foreign corporation. In each jurisdiction where such qualification shall be
effected, the Company shall, unless the Underwriter agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may be required by the
laws of such jurisdiction.
3.4 Delivery of Filings to Underwriter. The Company shall deliver to the
Underwriter, without charge, from time to time during the period when the
Prospectus is required to be delivered under the Act, such number of copies of
each Preliminary Prospectus and the Prospectus as the Underwriter may reasonably
request and, immediately after the Registration Statement or any amendment or
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supplement thereto is filed, deliver to the Underwriter two (2) original
executed Registration Statements, including exhibits, and all post-effective
amendments thereto and copies of documents filed therewith or incorporated
therein by reference and all original executed consents of certified experts.
3.5 Effectiveness and Events Requiring Notice to the Underwriter. The
Company shall cause the Registration Statement to remain effective until the
later of the completion by the Underwriter of the distribution of the Shares
(but in no event more than 9 months after the date on which the Registration
Statement shall have been declared effective) or 25 days after the date on which
the Registration Statement shall have been declared effective and shall notify
the Underwriter immediately and shall promptly confirm the notice in writing of
(i) the effectiveness of the Registration Statement and any amendment thereto,
(ii) the issuance by the Commission of any stop order or of the initiation, or
the threatening, of any proceeding for that purpose, (iii) the issuance by any
state securities commission of any proceedings for the suspension of the
qualification of the Shares for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (iv) the
mailing and delivery to the Commission for filing of any amendment or supplement
to the Registration Statement or Prospectus, (v) the receipt of any comments or
request for any additional information from the Commission, and (vi) the
happening of any event during the period described in Section 3.4 hereof that
makes any statement of a material fact made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the Commission
or any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company shall make every reasonable effort to
obtain promptly the lifting of such order.
3.6 Unaudited Financials. The Company shall furnish to the Underwriter as
early as practicable prior to the date hereof and the Closing Date, but no later
than two (2) full business days prior thereto, a copy of the latest available
unaudited interim financial statements (the "Unaudited Financials") of the
Company (which in no event shall be as of a date more than ninety (90) days
prior to the Effective Date) which have been read by the Company's independent
accountants, as stated in their letter to be furnished pursuant to Section 4.3
hereof.
3.7 Reports to the Underwriter.
3.7.1 Periodic Reports, Etc.. For a period of five years from the
Effective Date, the Company will furnish to the Underwriter copies of such
financial statements and other periodic and special reports as the Company from
time to time furnishes
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generally to holders of any class of its securities, and promptly furnish to the
Underwriter (i) a copy of each periodic report the Company shall be required to
file with the Commission, (ii) a copy of every press release and every news item
and article with respect to the Company or its affairs which was released by the
Company, (iii) copies of each Form SR, (iv) a copy of each Form 8-K or Schedules
13D, 13G, 14D-1 or 13E-4 received or prepared by the Company, and (v) such
additional documents and information with respect to the Company and the affairs
of any future subsidiaries of the Company as the Underwriter may from time to
time reasonably request.
3.7.2 Transfer Sheets. For a period of three years from the Closing
Date, the Company will furnish to the Underwriter, at the Company's sole expense
such transfer sheets of the Company's securities as the Underwriter may request,
including the daily, weekly and monthly consolidated transfer sheets of the
transfer agent of the Company.
3.8 Delivery of Underwriter's Warrants. On the Closing Date, the Company
shall execute and deliver to the Underwriter the Underwriter's Warrants
substantially in the form filed as an exhibit to the Registration Statement.
3.9 Payment of Expenses.
3.9.1 General Expenses. The Company shall pay on each of the Closing
Date and any Option Closing Date to the extent not paid at the Closing Date, all
expenses incident to the performance of the obligations of the Company under
this Agreement, including, but not limited to, (i) the preparation, printing,
filing and mailing (including the payment of postage with respect to such
mailing) of the Registration Statement, the Preliminary Prospectuses and the
Prospectus and the printing and mailing of this Agreement and related documents,
including the cost of all copies thereof and any amendments or supplements
thereto supplied to the Underwriter in quantities as may be required by the
Underwriter, (ii) the printing, engraving, issuance and delivery of the Shares
and the Underwriter's Warrants, including any transfer taxes and other taxes
payable thereon, (iii) the qualification of the Shares under state or foreign
securities or Blue Sky laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," and all amendments and supplements thereto,
fees and disbursements for the Underwriter's counsel and fees and disbursements
of local counsel, if any, retained for such purpose, (iv) costs associated with
applications for assignments of a rating of the Shares by qualified rating
agencies, (v) filing fees incurred in registering the offering with the NASD,
(vi) costs of placing "tombstone" advertisements in publications that shall be
selected by the Underwriter, (vii) fees and disbursements of the transfer agent,
(viii) the Company's expenses associated with "due diligence" meetings arranged
by the Underwriter and "road show"
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expenses; (ix) the preparation, binding and delivery of five (5) transaction
"bibles" for the Underwriter, (x) any listing of the Shares on the AMEX or any
listing in Standard & Poor's, and (xi) all other costs and expenses incident to
the performance of its obligations hereunder that are not otherwise specifically
provided for in this Section 3.9.1. Since an important part of the public
offering process is for the Company to appropriately and accurately describe
both the background of the principals of the Company and the Company's
competitive position in its industry, the Company has engaged and will pay for
an investigative search firm of the Underwriter's choice to conduct an
investigation of principals of the Company mutually selected by the Underwriter
and the Company. The Underwriter may deduct from the net proceeds of the
offering payable to the Company on the Closing Date or any Option Closing Date
the expenses set forth herein to be paid by the Company to the Underwriter
and/or to third parties. If this Agreement shall not be carried out for any
reason whatsoever, the Company shall remain liable for all of its actual
out-of-pocket expenses pursuant to this Section 3.9.1.
3.9.2 Underwriter's Expenses. The Company further agrees that, in
addition to the expenses payable pursuant to Section 3.9.1, upon the sale of the
Firm Shares or any of the Option Shares, it shall pay to the Underwriter, as a
non-accountable expense allowance, an amount equal to 3% of the gross proceeds
payable to the Company from the sale of the Firm Shares and the Option Shares,
if any are sold to the Underwriter, of which $50,000 has been paid to date, and
it shall pay the balance on the Closing Date as to the Firm Shares and any
Option Closing Date as to Option Shares, by certified or bank cashier's check
or, at the election of the Underwriter, by deduction from the proceeds of the
offering contemplated hereby. If the offering contemplated by this Agreement is
not consummated for any reason, the Company shall be liable for the accountable
expenses of the Underwriter, including, but not limited to, legal fees, Blue Sky
counsel fees, "road show" and due diligence expenses. The Underwriter shall
retain such part of the non-accountable expense allowance previously paid as
shall equal its actual out-of-pocket expenses. If the amount previously paid is
insufficient to cover such actual out-of-pocket expenses, the Company shall
remain liable for and promptly pay any other actual out-of-pocket expenses. If
the amount previously paid exceeds the amount of the actual out-of-pocket
expenses, the Underwriter shall promptly remit to the Company any such excess.
3.10 Application of Net Proceeds. The Company shall apply the net proceeds
from the offering received by it in a manner consistent with the application
described under the caption "Use of Proceeds" in the Prospectus and shall file
such reports with the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required pursuant to Rule 463
under the Act.
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3.11 Delivery of Earnings Statements to Security Holders. The Company
shall make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve (12)
consecutive months beginning on the date immediately after the Effective Date.
3.12 Reservation of Shares. The Company shall reserve and keep available
that maximum number of its authorized but unissued shares of Common Stock as is
issuable upon the exercise of the Underwriter's Warrants.
3.13 Board of Directors. For a period of three (3) years after the
Effective Date, the Underwriter shall have the right to appoint a designee as an
observer to the Company's Board of Directors. Such observer shall have the right
to attend all meetings of the Board of Directors. Such observer shall be
entitled to receive reimbursement for all reasonable out-of-pocket expenses
incurred in attending such meetings, including, but not limited to, food,
lodging, transportation, and any fees paid to a non-management director for
attending meetings. The Underwriter shall be given notice of such meetings at
the same time and in the same manner as Directors of the Company are informed.
Subject to the provisions of applicable law, the Underwriter and such observer
shall be indemnified to the same extent as the other Directors. The Company
shall purchase Directors and Officers insurance in an amount of not less than
$2,000,000, with a deductible of not more than $250,000 and maintain such
insurance for a period of four years, provided, however, that the Company shall
not be required to pay more than $30,000 per year after the first year in order
to maintain such insurance, and if insurance in such amount is not available at
such cost, the Company shall purchase that amount of such insurance that is
available at a cost of $30,000 per year.
3.14 Press Releases. The Company shall not issue a press release or engage
in any other publicity until twenty-five (25) days after the Effective Date,
without the Underwriter's prior written consent, which consent shall not be
unreasonably withheld.
3.15 Secondary Market Trading and Standard & Poor's. The Company will take
all necessary and appropriate actions to be included in Standard and Poor's
Daily News and Corporation Records Corporate Descriptions for a period of five
years from the Effective Date, including the payment of any necessary fees and
expenses. The Company shall take such action as may be reasonably requested by
the Underwriter to obtain a secondary market trading exemption in such States as
may be requested by the Underwriter, including the payment of any necessary fees
and expenses and the
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filing of a Form (e.g., 25101(b)) for secondary market trading in the State of
California on the Effective Date.
3.16 AMEX Maintenance. For a period of five years from the date hereof,
the Company will use its best efforts to maintain the listing by AMEX of the
Common Stock.
3.17 Key Person Life Insurance. The Company will maintain key person life
insurance with an insurance company which is reasonably satisfactory to the
Underwriter in an amount no less than $2,000,000 on the lives of each of Messrs.
Xxxxx Xxxxx, Xxxx Xxxx and Xxxxx Xxxx, naming the Company as the sole
beneficiary thereof, for at least three years following the Effective Date.
3.18 Disqualification on Form S-1 (or other appropriate form). For a
period equal to seven years from the date hereof, the Company will not take any
action or actions which may prevent or disqualify the Company's use of Form S-1
(or other appropriate form) for the registration of the shares underlying
Underwriter's Warrants under the Act.
3.19 Accountants. For a period of three years from the Effective Date, the
Company will not effect a change in its accounting firm without the prior
written consent of the Underwriter, which consent will not be unreasonably
withheld, except that no such consent is required if the new firm is a member of
the so-called "Big-Six."
3.20 Sale of Securities. The Company agrees not to permit or cause a
private or public sale or private or public offering of any of its securities
(in any manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for a period of 18 months following the Effective
Date without obtaining the prior written consent of the Underwriter.
3.21 Exercise Price of Options/Warrants. For a period of 24 months after
the Effective Date, the Company will not grant or issue options or warrants
except for options to purchase up to 400,000 shares of the Company's Common
Stock pursuant to the Company's Stock Option Plan, and the exercise price of
such options shall not be less than the fair market value of the Common Stock on
the date of the grant.
3.22 Right of First Refusal. During the eighteen (18) month period after
the Effective Date of the Registration Statement, the Underwriter shall have the
right of first refusal (the "Right of First Refusal") to act as lead manager,
placement agent or investment banker for any and all public or private offerings
of securities of the Company, or of any successor to or subsidiary of the
Company or other entity in which the Company has as equity interest (herein
referred to collectively as the "Company"), by the Company, or any merger,
acquisition or disposition of assets of the
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Company, if the Company uses an underwriter, placement agent or investment
banker or person performing such functions for a fee (the "Subsequent Company
Offering") or any secondary offering of the Company's securities by shareholders
(the "Principal Shareholders") owning five percent (5%) or more of the
outstanding Common Stock on the Effective Date (the "Secondary Offering") in
which an underwriter or placement agent is engaged. Accordingly, if during such
period, the Company intends to make a Subsequent Company Offering or the Company
receives notification from any of such Principal Shareholders of such holder's
intention to make a Secondary Offering, the Company shall notify the Underwriter
in writing of such intention and of the proposed terms of the transaction. The
Company shall thereafter promptly furnish the Underwriter with such information
concerning the business, condition and prospects of the Company as the
Underwriter may reasonably request. If within ten (10) business days after the
receipt of such notice of intention and statement of terms the Underwriter does
not accept in writing such offer to act as underwriter, agent or investment
banker with respect to such transaction upon the terms proposed, the Company and
each of the Principal Shareholders shall be free to negotiate terms with other
underwriters, agents or investment bankers with respect to such transaction and
to effect such transaction on such proposed terms within six (6) months after
the end of such ten (10) business days. Before the Company and/or any of the
Principal Shareholders shall accept any proposal modified in any material
respect from such underwriter, agent or investment banker, the Underwriter's
preferential right shall be reinstated and the same procedure with respect to
such modified proposal, as provided above, shall be adopted. The failure by the
Underwriter to exercise its Right of First Refusal in any particular instance
shall not affect in any way such right with respect to any other Subsequent
Company Offering or Secondary Offering. By execution and delivery of agreements
in form and substance satisfactory to the Underwriter, each of the Principal
Shareholders agrees to be held bound by the terms of this Section 3.22
concerning any proposed Secondary Offering of the Company's securities.
4. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Shares, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and any Option
Closing Date to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof and to the performance by the Company of its
obligations hereunder and to the following conditions:
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4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The Registration
Statement shall have become effective not later than 5:00 P.M., New York time,
on the date of this Agreement or such later date and time as shall be consented
to in writing by you, and, at each of the Closing Date and any Option Closing
Date, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for the purpose shall have been
instituted or shall be pending or contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Xxxxxx Xxxxxxxx Frome &
Xxxxxxxxxx LLP, counsel to the Underwriter.
4.1.2 NASD Clearance. On or before the Effective Date, the
Underwriter shall have received clearance from the NASD as to the amount of
compensation allowable or payable to the Underwriter as described in the
Registration Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of the
Shares in any jurisdiction designated by you pursuant to Section 3.3 hereof
shall have been issued either on the Closing Date or any Option Closing Date,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.2 Company Counsel Matters.
4.2.1 Closing Date Opinion of Counsel. On the Closing Date, the
Underwriter shall have received the favorable opinion of Lev, Berlin & Xxxx,
P.C., counsel to the Company, dated the Closing Date, addressed to the
Underwriter and in form and substance satisfactory to Xxxxxx Xxxxxxxx Frome &
Xxxxxxxxxx LLP, counsel to the Underwriter, to the effect that:
(i) The Company and each of its subsidiaries has been duly
organized and is validly existing as a corporation and is in good standing under
the laws of its respective state of incorporation. The Company and each of its
subsidiaries is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any of its
respective properties or the character of its respective operations requires
such qualification or licensing (except where the failure to be so qualified or
licensed would not have a material adverse effect on the Company and its
subsidiaries (taken as a whole).
(ii) The Company and each of its subsidiaries has all
requisite corporate power and authority and has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental or regulatory officials and bodies to own or lease its properties
and to conduct its business
-21-
as described in the Prospectus, and the Company and each of its subsidiaries is
in compliance with all such authorizations, approvals, orders, licenses,
certificates and permits and all federal, state and local laws, rules and
regulations. The Company has all requisite corporate power and authority to
enter into this Agreement and to carry out the terms and conditions hereof. No
consents, approvals, authorizations or orders of, and no filing with any court
or governmental agency or body (other than such as may be required under the Act
and applicable Blue Sky laws), is required for the valid authorization,
issuance, sale and delivery of the Securities, and the consummation of the
transactions and agreements contemplated by this Agreement and the Underwriter's
Warrants, and as contemplated by the Prospectus or, if required, all such
authorizations, approvals, consents, orders, registrations, licenses and permits
have been duly obtained and are in full force and effect and have been disclosed
to the Underwriter.
(iii) All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The outstanding options and warrants, if any, to
purchase shares of Common Stock constitute the valid and binding obligations of
the Company, enforceable in accordance with their respective terms, except (a)
as such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, (b) as enforceability of
any indemnification and contribution provision may be limited under the federal
and state securities laws, and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The offers and sales of the outstanding Common Stock and, if
any, options and warrants to purchase shares of Common Stock, have been at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky Laws or exempt from such registration requirements. The
authorized and outstanding capital stock of the Company is as set forth under
the caption "Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized and when issued
and delivered in accordance herewith will be, validly issued, fully paid and
non-assessable; the holders thereof are not and will not be subject to personal
liability by reason of being such holders. The Securities are not and will not
be subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company. All corporate
action required to be taken for the authorization,
-22-
issuance and sale of the Securities has been duly and validly taken. When
issued, the Underwriter's Warrants will constitute valid and binding obligations
of the Company to issue and sell, upon exercise thereof and payment therefor,
the number and type of securities of the Company called for thereby and the
Underwriter's Warrants, when issued, will be enforceable against the Company in
accordance with their terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification and contribution
provision may be limited under federal and state securities laws, and (c) that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The certificates
representing the Securities are in due and proper form.
(v) Except as set forth in the Prospectus, no holders of any
securities of the Company or of any options, warrants or securities of the
Company exercisable for or convertible or exchangeable into securities of the
Company have the right to require the Company to register any such securities of
the Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
(vi) The Shares have been approved for listing on AMEX.
(vii) This Agreement and the Underwriter's Warrants have each
been duly and validly authorized and when executed and delivered by the Company
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except (a) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification provisions may be limited under federal and state securities
laws and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(viii) The execution, delivery and performance of this
Agreement and the Underwriter's Warrants, the issuance and sale of the
Securities, the consummation of the transactions contemplated hereby and thereby
and the compliance by the Company with the terms and provisions hereof and
thereof, do not and will not, with or without the giving of notice or the lapse
of time, or both, (a) conflict with, or result in a breach of, any of the terms
or provisions of, or constitute a default under, or result in the creation or
modification of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company
-23-
pursuant to the terms of, any material mortgage, deed of trust, note, indenture,
loan, contract, commitment or other material agreement or instrument, to which
the Company is a party or by which the Company or any of its properties or
assets may be bound, (b) result in any violation of any of the provisions of the
Certificate of Incorporation or the By-Laws of the Company, (c) violate any
statute or any judgment, order or decree, rule or regulation applicable to the
Company of any court, domestic or foreign, or of any federal, state or other
regulatory authority or other governmental body having jurisdiction over the
Company, its properties or assets, or (d) have a material effect on any permit,
certification, registration, approval, consent, license or franchise of the
Company.
(ix) The Registration Statement, each Preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements thereto
(other than the financial statements and notes thereto and other financial data
included therein or omitted therefrom, as to which no opinion need be rendered)
comply as to form in all material respects with the requirements of the Act and
the Regulations. The Securities and all other securities issued or issuable by
the Company conform in all respects to the description thereof contained in the
Registration Statement and the Prospectus. All statements in the Prospectus
(other than those set forth under the caption "Underwriting"), insofar as they
refer to statements of law, descriptions of statutes, licenses, rules or
regulations have been reviewed by such counsel and are correct in all material
respects. No statute or regulation or legal or governmental proceeding required
to be described in the Prospectus is not described as required, nor are any
contracts, instruments or other documents of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement not so described or filed as required.
(x) Such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the independent
public accountants for the Company, the Underwriter and counsel to the
Underwriter at which the contents of the Registration Statement and Prospectus
and related matters were discussed and, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as otherwise expressly set forth in its opinion), on the
basis of the foregoing (relying as to the factual matters upon the statements of
officers and other representatives of the Company and state officials) no facts
have come to the attention of such counsel that caused it to believe that the
Registration Statement as amended or supplemented (other than the financial
statements and notes thereto and other financial data included therein, or
omitted therefrom, as to which no opinion is requested or need be rendered) at
the time such
-24-
Registration Statement became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading (other than
information omitted therefrom in reliance on Rule 430A under the Act) or the
Prospectus (other than the financial statements and notes thereto and other
financial data included therein, or omitted therefrom, as to which no opinion is
requested or need be rendered) as amended or supplemented, as of its date, the
date of this Agreement and as of the date of its opinion, contained an untrue
statement of material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(xi) The Registration Statement is effective under the Act and
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Act or applicable state securities laws.
(xii) There is no claim or action by any person pertaining to,
or proceeding, pending or threatened, which challenges the exclusive rights of
the Company with respect to any Intangibles used in the conduct of its business
(including, but not limited to, any such licenses or rights described in the
Prospectus as being owned or possessed by the Company).
(xiii) Except as described in the Prospectus, no default
exists in the due performance and observance of any term, covenant or condition
of any material license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other material agreement, instrument or other
document evidencing an obligation for borrowed money, or any other material
agreement, instrument or other document to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries may
be bound or to which any of the properties or assets of the Company or any of
its subsidiaries is subject. Neither the Company nor any of its subsidiaries is
in violation of any term or provision of its respective Certificate of
Incorporation or By-Laws, or any material franchise, license, permit, applicable
law, rule, regulation, judgment or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or businesses, except as
described in the Prospectus.
(xiv) There are no claims, payments, issuances, arrangements
or understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or financial consulting
arrangements or any other arrangements, agreements, understandings, payments or
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issuances that may affect the Underwriter's compensation, as determined by the
NASD.
(xv) Except as described in the Prospectus, the Company does
not own any interest in any corporation, partnership, joint venture, trust or
other business entity.
(xvi) Except as set forth in the Prospectus, there is no
action, suit or proceeding before or by any court of governmental agency or
body, domestic or foreign, now pending, or threatened against the Company or any
of its subsidiaries, which would have a material adverse effect on the Company.
(xvii) The Company and each of its subsidiaries owns or
possesses, free and clear of all liens or encumbrances and rights thereto or
therein by third parties, other than as described in the Prospectus, the
requisite licenses or other rights to use Intangibles owned or used by the
Company and each of its subsidiaries (including, but not limited to, any such
licenses or right described in the prospectus as being owned or possessed by the
Company); except as set forth in the Prospectus, there is no action, suite or
proceeding before or by any court or governmental agency or body, domestic or
foreign, now pending, or threatened against the Company or any of its
subsidiaries, that might result in any material adverse change in the condition
(financial or other), business, prospects or properties of the Company and its
subsidiaries taken as a whole.
The opinion of counsel for the Company and any opinion relied
upon by such counsel shall include a statement to the effect that it may be
relied upon by counsel for the Underwriter in their opinion delivered to the
Underwriter.
4.2.2 Option Closing Date Opinion of Counsel. On the Option Closing
Date, if any, the Underwriter shall have received the favorable opinion of Lev,
Berlin & Xxxx, P.C., counsel to the Company, and dated the Option Closing Date,
addressed to the Underwriter and in form and substance reasonably satisfactory
to Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP, counsel to the Underwriter,
confirming, as of the Option Closing Date, the statements made by such counsel
for the Company in their opinion delivered on the Closing Date.
4.2.3 Reliance. In rendering such opinions, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States, the laws of the State of New York, the Delaware General
Corporation Law and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance satisfactory to Underwriter's
counsel) of other counsel reasonably acceptable to Underwriter's counsel,
familiar with the applicable
-26-
laws, and (ii) as to matters of fact, to the extent they deem proper, (a) on
certificates or other written statements of responsible officers of the Company
and (b) on certificates or other written statements of officers of departments
of various jurisdiction having custody of documents respecting the corporate
existence or good standing of the Company, provided that copies of any such
statements or certificates shall be delivered to Underwriter's counsel. Such
opinions of counsel shall include a statement to the effect that they may be
relied upon by counsel for the Underwriter. Such opinion may assume the due
authorization, execution and delivery of all documentation referred to therein
by the parties thereto other than the Company.
4.3 Cold Comfort Letter. At the time this Agreement is executed, and at
each of the Closing Date and any Option Closing Date, you shall have received a
letter, addressed to the Underwriter and in form and substance satisfactory in
all respects (including the non-material nature of the changes or decreases, if
any, referred to in clause (iii) below) to you and to Xxxxxx Xxxxxxxx Frome &
Xxxxxxxxxx LLP, counsel to the Underwriter, from Xxxxxx Xxxxxxxx LLP, dated,
respectively, as of the date of this Agreement, as of the Closing Date and as of
any Option Closing Date:
(i) Confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements of the
Act and the Regulations thereunder;
(iii) Stating that, based on the performance of procedures
specified by the American Institute of Certified Public Accountants for a review
of the latest available unaudited interim financial statements of the Company
(as defined in SAS No. 71 Interim Financial Interpretation) with an indication
of the date of such unaudited financial statements, a reading of the latest
available minutes of the stockholders and Board of Directors of the Company and
the various committees of the Board of Directors of the Company, consultations
with officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (a) the unaudited
financials of the Company included in the Registration Statement do not comply
as to form in all material respects with the applicable accounting requirements
of the Act and the Regulations or any material modification should be made to
the unaudited interim financial statements included in the Registration
Statement for them to be in conformity with generally accepted accounting
-27-
principles applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement, (b)
at a date not later than five (5) days prior to the Effective Date, Closing Date
or any Option Closing Date, as the case may be, there was any change in the
capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity of the Company as compared with amounts shown in the most
recent balance sheet included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or, if there was any
decrease, setting forth the amount of such decrease, and (c) during the period
from [January 1, 1996] to a specified date not later than five (5) days prior to
the Effective Date, Closing Date or Option Closing Date, if any, as the case may
be, there was any decrease in revenues, net earnings or net earnings per share
of Common Stock, in each case as compared with the corresponding period in the
preceding year, and as compared with the corresponding period in the preceding
quarter other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) Setting forth, at a date not later than five (5) days
prior to the Effective Date, the amount of liability of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(vi) Stating that they have not during the immediately
preceding five year period brought to the attention of the Company's management
any reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 -- "Communication of
Internal Control Structure Related Matters Noted in an Audit," in the Company's
internal controls; and
(vii) Statements as to such other matters incident to the
transactions contemplated hereby as you may reasonably request.
4.4 Certificates.
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4.4.1 Officers' Certificates. At each of the Closing Date and any
Option Closing Date the Underwriter shall have received a certificate of the
Company signed by each of the President and the Chief Financial Officer of the
Company, dated the Closing Date or any Option Closing Date, as the case may be,
respectively, to the effect that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or any Option
Closing Date, as the case may be, and that the conditions set forth in Section
4.5 hereof have been satisfied as of such date and that, as of Closing Date and
any Option Closing Date, as the case may be, the representations and warranties
of the Company set forth in Section 2 hereof are true and correct. In addition,
the Underwriter shall have received such other and further certificates of
officers of the Company as the Underwriter may reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Underwriter shall have received a certificate
of the Company signed by the Secretary of the Company, dated the Closing Date or
any Option Closing Date, as the case may be, respectively, certifying (i) that
the Certificate of Incorporation and By-Laws, as amended, of the Company are
true and complete, have not been modified and are in full force and effect, (ii)
that the resolutions relating to the offering contemplated by this Agreement are
in full force and effect and have not been modified, (iii) all correspondence
between the Company or its counsel and the Commission, (iv) all correspondence
between the Company or its counsel and AMEX and (v) as to the incumbency of the
officers of the Company. The documents referred to in such certificate shall be
attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and any
Option Closing Date, (i) there shall have been no material adverse change or
development involving a prospective material change in the condition or
prospects or the business activities, financial or otherwise, of the Company
from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and the Prospectus which is or might be
materially adverse to the Company, (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness
which default would have a material adverse effect on the Company, (iv) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus, (v)
no action, suit or proceeding, at law or in equity, shall be pending or
threatened against the Company or affecting any of its property or business
-29-
before or by any court or federal or state commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus, (vi) no stop order shall have been issued under the
Act and no proceedings therefor shall have been initiated or threatened by the
Commission, and (vii) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all material statements that are
required to be stated therein in accordance with the Act and the Regulations and
shall conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto 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, in light of the circumstances under
which they were made, not misleading.
4.6 Delivery of Underwriter's Warrants. The Company shall have delivered
to the Underwriter executed copies of the Underwriter's Warrants, registered in
such names and in such denominations as the Underwriter shall have requested.
4.7 Opinion of Counsel for the Underwriter. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP, counsel to the Underwriter, and you
shall have received from such counsel a favorable opinion, dated the Closing
Date and any Option Closing Date, with respect to such of these proceedings as
you may reasonably require. On or prior to the Effective Date, the Closing Date
and any Option Closing Date, as the case may be, counsel for the Underwriter
shall have been furnished with such documents, certificates and opinions as they
may reasonably require for the purpose of enabling them to review or pass upon
the matters referred to in this Section 4.7, or in order to evidence the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions herein contained.
5. Indemnification.
5.1 Indemnification of the Underwriter.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter, its directors,
officers and employees and each person, if any, who controls the Underwriter (a
"controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating,
-30-
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever) to which they or any of them may become subject under the Act,
the Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in (i) the Registration
Statement, any Preliminary Prospectus or the Prospectus (as from time to time
each may be amended or supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Underwriter's
Warrants; or (iii) any application or other document or written communication
(in this Section 5 collectively called "application") executed by the Company or
based upon written information furnished by the Company in any jurisdiction in
order to qualify the Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, or AMEX or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. The
Company agrees promptly to notify the Underwriter of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the Securities
or in connection with the Registration Statement or the Prospectus.
5.1.2 Procedure. If any action is brought against the Underwriter or
controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, the Underwriter shall promptly notify the
Company in writing of the institution of such action, but the failure to so
notify the Company shall not relieve it from any liability it may have
hereunder, unless such failure results in the forfeiture by the Company of
material substantive rights and defenses and the Company shall assume the
defense of such action, including the employment and fees of counsel (subject to
the reasonable approval of the Underwriter) and payment of actual expenses
incurred in connection therewith. The Underwriter or controlling person shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the Underwriter or such
controlling person unless (i) the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of such
action, (ii) the Company shall not have employed counsel to have charge of the
defense of such action, or (iii) such indemnified party or parties shall have
-31-
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events the fees
and expenses of not more than one additional firm of attorneys selected by such
Underwriter and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if the Underwriter or
controlling person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company. The Underwriter agrees to indemnify
and hold harmless the Company against any and all loss, liability, claim, damage
and expense described in the foregoing indemnity from the Company to the
Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriter in connection with this offering made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any amendment or supplement thereto or in any application in reliance upon, and
in strict conformity with, written information furnished to the Company by the
Underwriter expressly for use in such Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto or in any
such application. In case any action shall be brought against the Company or any
other person so indemnified based on any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
any application, and in respect of which indemnity may be sought against the
Underwriter, the Underwriter shall have the rights and duties given to the
Company, and the Company, and each other person so indemnified shall have the
rights and duties given to the Underwriter by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, liabilities,
-32-
claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by the Company and the Underwriter, as incurred, in such
proportions that the Underwriter is responsible for that portion represented by
that percentage that the underwriting discount appearing on the cover page of
the Prospectus bears to the initial offering price appearing thereon and the
Company is responsible for the balance; provided, however, that, no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Notwithstanding the provisions of this
Section 5.3, the Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which the Underwriter has otherwise been required to pay
in respect of such losses, liabilities, claims, damages and expenses. For
purposes of this Section 5, each respective director, officer and employee of
the Underwriter, and each respective person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act shall have the same
rights to contribution as such Underwriter.
5.3.2 Contribution Procedure. Within fifteen (15) days after receipt
by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party (the
contributing party), notify the contributing party of the commencement thereof,
but the omission to so notify the contributing party will not relieve it from
any liability which it may have to any other party other than for contribution
hereunder. In case any such action, suit or proceeding is brought against any
party, and such party notifies a contributing party or its representative of the
commencement thereof within the aforesaid (15) fifteen days, the contributing
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing party shall
not be liable to any party seeking contribution on account of any settlement of
any claim, action or proceeding effected by such party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The contribution provisions contained in this Section 5 are intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the Exchange Act or otherwise available.
6. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and
-33-
any Option Closing Date, and such representations, warranties and agreements of
the Underwriter and the Company, including the indemnity agreements contained in
Section 5 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Underwriter, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Shares to the Underwriter.
7. Effective Date of This Agreement and Termination Thereof.
7.1 Effective Date. This Agreement shall become effective upon its
execution, except that you may, at your option, delay its effectiveness until
11:00 A.M., New York time, on the first full business day following the
Effective Date or at the time of the initial public offering of the Shares,
whichever is earlier. The time of the initial public offering, for the purpose
of this Section 7 shall mean the time, after the Registration Statement becomes
effective, of the release by you for publication of the first newspaper
advertisement which is subsequently published relating to the Shares or the
time, after the Registration Statement becomes effective, when the Shares are
first released by you for offering by the Underwriter or dealers by letter or
telegram, whichever shall first occur. You may prevent this Agreement from
becoming effective without liability to any other party, except as noted below,
by giving the notice indicated below in this Section 7 before the time this
Agreement becomes effective. You agree to give the undersigned notice of the
commencement of the offering described herein.
7.2 Termination. You shall have the right to terminate this Agreement at
any time prior to the Closing Date, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in the United
States; (ii) if trading on the New York Stock Exchange or the American Stock
Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required in the over-the-counter
market by the NASD or by order of the Commission or any other government
authority having jurisdiction, (iii) if the United States shall have become
involved in a war or material hostilities, (iv) if a banking moratorium has been
declared by a New York State or federal authority, (v) if a moratorium on
foreign exchange trading has been declared which materially adversely impacts
the United States securities market, (vi) if the Company shall have sustained a
material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not such loss shall have
been insured, will, in your opinion, make it inadvisable to proceed with the
delivery of the Shares, (vii) if Xxxxx Xxxxx, Xxxx
-34-
West or Xxxxx Xxxx shall no longer serve the Company in their present
capacities, (viii) if the Company has breached any of its representations,
warranties or obligations hereunder, or failed to expeditiously proceed with the
offering or to cooperate with you in requesting effectiveness of the
Registration Statement at such time as you may deem appropriate, or (ix) if the
Underwriter shall have become aware after the date hereof of such a material
adverse change in the condition (financial or otherwise), business or prospects
of the Company, or such material adverse change in general market conditions as
in your judgment would make it impracticable to proceed with the offering, sale
and/or delivery of the Shares or to enforce contracts made by the Underwriter
for the sale of the Shares.
7.3 Notice. If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 7, the Company shall
be notified on the same day as such election is made by you by telephone or
telecopy, confirmed by letter.
7.4 Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.9 hereof.
7.5 Indemnification. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
8. Miscellaneous.
8.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed:
If to the Underwriter:
Xxxxxxx Equities, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Managing Director
Copy to: Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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Attention: Xxxxxxx Xxxxx, Esq.
If to the Company:
Puro Water Group, Inc.
00-00 00xx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx, President
Copy to: Lev, Berlin & Xxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
8.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
8.3 Amendment. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
8.4 Entire Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersede all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
8.5 Binding Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Underwriter, the Company, and the controlling
persons, directors and officers referred to in Section 5 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
8.6 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws rules of such State. Any action, proceeding or claim
against any of the parties hereto arising out of, relating in any way to, this
Agreement shall be brought and enforced in the courts of the State of New York
or the federal court for the Southern District of New York, and the parties
hereto irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. The parties hereto hereby waive any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Except as
otherwise provided in this Agreement, the prevailing party(ies) in any such
action shall be entitled to recover from the other party(ies) all of its
-36-
reasonable attorneys' fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
8.7 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
8.8 Waiver, Etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way effect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
If the foregoing correctly sets forth the understanding among the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
PURO WATER GROUP, INC.
By:________________________________
Name: Xxxx Xxxx
Title: President
Accepted as of the date first above written.
New York, New York
XXXXXXX EQUITIES, INC.
By:_________________________________
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
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TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Securities.......................................... 1
1.1 Firm Shares.................................................... 1
1.1.1 Purchase of Firm Shares........................................ 1
1.1.2 Delivery and Payment........................................... 1
1.2 Overallotment Option........................................... 2
1.2.1 Grant of Option................................................ 2
1.2.2 Exercise of Option............................................. 2
1.2.3 Delivery and Payment........................................... 2
1.3 Underwriter's Warrants......................................... 3
1.3.1 Purchase and Sale.............................................. 3
1.3.2 Delivery and Payment........................................... 3
2. Representations and Warranties of the Company............................ 3
2.1 Filings under Securities Laws.................................. 3
2.1.1 Pursuant to the Act............................................ 3
2.1.2 Pursuant to the Exchange Act................................... 4
2.2 No Stop or Other Orders........................................ 4
2.3 Disclosures in Registration Statement.......................... 4
2.3.1 Representation as to Contents.................................. 4
2.3.2 Disclosure Regarding Contracts................................. 4
2.3.3 Prior Securities Transactions.................................. 5
2.4 Changes After Dates in Registration Statement.................. 5
2.4.1 No Material Adverse Change..................................... 5
2.4.2 Recent Securities Transactions, Etc............................ 5
2.5 Independent Accountants........................................ 5
2.6 Financial Statements........................................... 6
2.7 Capitalization................................................. 6
2.8 Representations Regarding Securities........................... 6
2.8.1 Outstanding Securities......................................... 6
2.8.2 Securities Sold Hereunder...................................... 7
2.9 No Registration Rights......................................... 7
2.10 Representations Regarding This Agreement and the
Underwriter's Warrant Agreement................................ 7
2.11 No Improper Payments........................................... 8
2.12 No Defaults; Violations........................................ 8
2.13 Corporate Power; Licenses; Consents............................ 9
2.13.1 Conduct of Business............................................ 9
2.13.2 Required Consents.............................................. 9
2.14 Title to Property; Insurance................................... 9
2.15 Litigation; Governmental Proceedings........................... 9
2.16 Organization; Good Standing.................................... 9
2.17 Taxes.......................................................... 10
2.18 Transactions Affecting Disclosure to NASD...................... 10
2.18.1 Finders' Fees.................................................. 10
2.18.2 Payments Within Twelve (12) Months............................. 10
2.18.3 Use of Proceeds................................................ 11
2.18.4 Insiders' NASD Affiliation..................................... 11
2.19 Internal Accounting Controls................................... 11
2.20 AMEX Listing................................................... 11
2.21 Intangibles.................................................... 11
2.22 Employee Matters............................................... 11
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2.22.1 Relations With Employees....................................... 11
2.22.2 Employee Benefit Plans......................................... 12
2.23 Investment Company Representations............................. 12
2.24 Officers' Certificate.......................................... 12
2.25 Lock-Up Agreements With Insiders............................... 13
2.26 No Stabilization or Manipulation............................... 13
2.27 Subsidiaries................................................... 13
3. Covenants of the Company................................................. 13
3.1 Amendments to Registration Statement........................... 13
3.2 Federal Securities Laws........................................ 13
3.2.1 Compliance..................................................... 14
3.2.2 Filing of Final Prospectus..................................... 14
3.2.3 Exchange Act Registration...................................... 14
3.3 Blue Sky Filings............................................... 14
3.4 Delivery of Filings to Underwriter............................. 14
3.5 Effectiveness and Events Requiring Notice to the
Underwriter.................................................... 15
3.6 Unaudited Financials........................................... 15
3.7 Reports to the Underwriter..................................... 15
3.7.1 Periodic Reports, Etc.......................................... 15
3.7.2 Transfer Sheets................................................ 16
3.8 Delivery of Underwriter's Warrants............................. 16
3.9 Payment of Expenses............................................ 16
3.9.1 General Expenses............................................... 16
3.9.2 Underwriter's Expenses......................................... 17
3.10 Application of Net Proceeds.................................... 17
3.11 Delivery of Earnings Statements to Security Holders............ 18
3.12 Reservation of Shares.......................................... 18
3.13 Board of Directors............................................. 18
3.14 Press Releases................................................. 18
3.15 Secondary Market Trading and Standard & Poor's................. 18
3.16 AMEX Maintenance............................................... 19
3.17 Key Person Life Insurance...................................... 19
3.18 Disqualification on Form S-1 (or other appropriate
form).......................................................... 19
3.19 Accountants.................................................... 19
3.20 Sale of Securities............................................. 19
3.21 Exercise Price of Options/Warrants............................. 19
3.22 Right of First Refusal......................................... 19
4. Conditions of the Underwriter's Obligations.............................. 20
4.1 Regulatory Matters............................................. 21
4.1.1 Effectiveness of Registration Statement........................ 21
4.1.2 NASD Clearance................................................. 21
4.1.3 No Blue Sky Stop Orders........................................ 21
4.2 Company Counsel Matters........................................ 21
4.2.1 Closing Date Opinion of Counsel................................ 21
4.2.2 Option Closing Date Opinion of Counsel......................... 26
4.2.3 Reliance....................................................... 26
4.3 Cold Comfort Letter............................................ 27
4.4 Certificates................................................... 28
4.4.1 Officers' Certificates......................................... 28
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4.4.2 Secretary's Certificate........................................ 29
4.5 No Material Changes............................................ 29
4.6 Delivery of Underwriter's Warrants............................. 30
4.7 Opinion of Counsel for the Underwriter......................... 30
5. Indemnification.......................................................... 30
5.1 Indemnification of the Underwriter............................. 30
5.1.1 General........................................................ 30
5.1.2 Procedure...................................................... 31
5.2 Indemnification of the Company................................. 32
5.3 Contribution................................................... 32
5.3.1 Contribution Rights............................................ 32
5.3.2 Contribution Procedure......................................... 33
6. Representations and Agreements to Survive Delivery....................... 33
7. Effective Date of This Agreement and Termination Thereof................. 34
7.1 Effective Date................................................. 34
7.2 Termination.................................................... 34
7.3 Notice......................................................... 35
7.4 Expenses....................................................... 35
7.5 Indemnification................................................ 35
8. Miscellaneous............................................................ 35
8.1 Notices........................................................ 35
8.2 Headings....................................................... 36
8.3 Amendment...................................................... 36
8.4 Entire Agreement............................................... 36
8.5 Binding Effect................................................. 36
8.6 Governing Law.................................................. 36
8.7 Execution in Counterparts...................................... 37
8.8 Waiver, Etc.................................................... 37
(iii)
INDEX OF DEFINITIONS
Term Section
---- -------
Act...................................................................... 2.1.1
AMEX..................................................................... 2.2.0
Application.............................................................. 5.1.1
Closing Date............................................................. 1.1.2
Code..................................................................... 2.22.2
Commission............................................................... 2.1.1
Common Stock............................................................. 1.1.1
Company.................................................. Introductory Paragraph
Controlling Person....................................................... 5.1.1
Effective Date........................................................... 1.1.2
ERISA.................................................................... 2.22.2
ERISA Plan............................................................... 2.22.2
Exchange Act............................................................. 2.1.2
Filing Date.............................................................. 2.18.2
Firm Shares.............................................................. 1.1.1
Insiders................................................................. 2.25
Intangibles.............................................................. 2.21
NASD..................................................................... 2.18.1
Option Closing Date...................................................... 1.2.2
Option Shares............................................................ 1.2.1
Overallotment Option..................................................... 1.2.1
Preliminary Prospectus................................................... 2.1.1
Principal Shareholders................................................... 3.22
Prospectus............................................................... 2.1.1
Registration Statement................................................... 2.1.1
Regulations.............................................................. 2.1.1
Returns.................................................................. 2.17
Right of First Refusal................................................... 3.22
Secondary Offering....................................................... 3.22
Subsequent Company Offering.............................................. 3.22
Underwriter.............................................. Introductory Paragraph
Underwriter's Securities................................................. 1.3.1
Underwriter's Warrant Agreement.......................................... 2.10
Underwriter's Warrants................................................... 1.3.1
Securities............................................................... 1.3.1
Shares................................................................... 1.2.1
Subsidiaries............................................................. 2.27
Taxes.................................................................... 2.17
Unaudited Financials..................................................... 3.6
You...................................................... Introductory Paragraph
(iv)
