Exhibit 1
OHS DRAFT
6/10/98
[Form of Underwriting Agreement - Subject to Additional Review]
3,000,000 Shares of Common Stock
NORTON MOTORS INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1998
XXXXX & COMPANY, INC.
As Representative of the
several Underwriters named
in Schedule A to Exhibit A
annexed hereto
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Norton Motors International, Inc., a Minnesota corporation (the
"Company"), confirms its agreement with Xxxxx & Company, Inc. ("Xxxxx") and each
of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom Xxxxx is acting as Representative
(in such capacity, Xxxxx shall hereinafter be referred to as "you" or the
"Representative"), with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective number of
shares ("Shares") of the Company's common stock, $0.01 par value per share
("Common Stock"). The aggregate 3,000,000 shares of Common Stock are hereinafter
referred to as the "Firm Securities".
Upon your request, as provided in Section 2(b) of this Agreement,
the Company shall also issue and sell to the Underwriters, acting severally and
not jointly, up to an additional 450,000 shares of Common Stock for the purpose
of covering over-allotments, if any. Such 450,000 shares of Common Stock are
hereinafter collectively referred to as the "Option
Securities." The Company also proposes to issue and sell to you warrants (the
"Representative's Warrants") pursuant to the Representative's Warrant Agreement
(the "Representative's Warrant Agreement") for the purchase of an additional
450,000 shares of Common Stock. The shares of Common Stock issuable upon
exercise of the Representative's Warrants are hereinafter referred to as the
"Representative's Securities." The Firm Securities, the Option Securities, the
Representative's Warrants and the Representative's Securities (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date (as hereinafter defined) and each Option
Closing Date (as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. 333-_________), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Firm Securities, the Option Securities and the Representative's
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 (the "Regulations") of the Commission under the Act. The Company
will promptly file a further amendment to said registration statement in the
form heretofore delivered to the Underwriters and will not file any other
amendment thereto to which the Underwriters shall have objected in writing after
having been furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein (including, but not limited to those
documents or information incorporated by reference therein) and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430(A) of the Regulations), is hereinafter called the "Registration Statement",
and the form of prospectus in the form first filed with the Commission pursuant
to Rule 424(b) of the Regulations, is hereinafter called the "Prospectus." For
purposes hereof, "Rules and Regulations" mean the rules and regulations adopted
by the Commission under either the Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part of any thereof
and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed
with the requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement or Prospectus at the time of
filing thereof contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
statements made in reliance upon
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and in conformity with written information furnished to the Company with respect
to the Underwriters by or on behalf of the Underwriters expressly for use in
such Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date (as defined herein) and each
Option Closing Date (as defined herein), if any, and during such longer period
as the Prospectus may be required to be delivered in connection with sales by
the Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in strict conformity with information
furnished to the Company in writing by or on behalf of any Underwriter expressly
for use in the Preliminary Prospectus, Registration Statement or Prospectus or
any amendment thereof or supplement thereto.
(d) Each of the Company and the Company's wholly-owned
subsidiary, March Motors Limited, a Minnesota corporation ("March") (such
subsidiary is hereinafter referred to as the "Subsidiary"), has been duly
organized and is validly existing as a corporation in good standing under the
laws of the state of its incorporation. Except as set forth in the Prospectus,
neither Company nor the Subsidiary owns an interest in any corporation,
partnership, trust, joint venture or other business entity. Each of the Company
and the Subsidiary is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing of
any properties or the character of its operations requires such qualification or
licensing. The Company owns, directly or indirectly, one hundred percent (100%)
of the outstanding capital stock of the Subsidiary, and all of such shares have
been validly issued, are fully paid and non-assessable, were not issued in
violation of any preemptive rights and are owned free and clear of any liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever. Each of the Company and the
Subsidiary has all requisite power and authority (corporate and other), and has
obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; each of the Company and the
Subsidiary is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all applicable federal, state, local and foreign laws, rules and
regulations; and neither the Company nor the Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state, local, and
foreign laws, rules and regulations on the
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Company's and the Subsidiary's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and each Option Closing Date, if any, based upon the
assumptions set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement,
the Representative's Warrant Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company conform
or, when issued and paid for, will conform, in all respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable and the holders thereof
have no rights of rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none of such securities
were issued in violation of the preemptive rights of any holders of any security
of the Company or similar contractual rights granted by the Company. The
Securities are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and will conform to the description thereof contained in
the Prospectus; the holders thereof will not be subject to any liability solely
as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and validly taken;
and the certificates representing the Securities will be in due and proper form.
Upon the issuance and delivery pursuant to the terms hereof of the Securities to
be sold by the Company hereunder, the Underwriters or the Representative, as the
case may be, will acquire good and marketable title to such Securities free and
clear of any lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever.
(f) The consolidated financial statements of the Company and
the Subsidiary, together with the related notes and schedules thereto, included
in the Registration Statement, each Preliminary Prospectus and the Prospectus
fairly present the financial position, income, changes in cash flow, changes in
stockholders' equity and the results of operations of the Company and the
Subsidiary at the respective dates and for the respective periods to which they
apply and such financial statements have been prepared in conformity with
generally accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved and such financial
statements as are audited have been examined by Xxxxxx Xxxxxxxx Xxxxxx Xxxxxx &
Larter and Xxxxxxx Xxxx Xxxxxx, P.C., who are independent certified public
accountants within the meaning of the Act and the Rules and Regulations, as
indicated in their respective reports filed therewith. There has been no adverse
change or development involving a prospective adverse change in the condition,
financial or otherwise, or in the earnings, position, prospects, value,
operation, properties, business, or results of operations of the Company or the
Subsidiary, whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and intangible,
and the business of the Company
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and the Subsidiary, conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. Financial
information (including, without limitation, any pro forma financial information)
set forth in the Prospectus under the headings "Summary Financial Data,"
"Selected Financial Data," "Capitalization," and "Management's Discussion and
Analysis of Financial Condition and Plan of Operation," fairly present, on the
basis stated in the Prospectus, the information set forth therein, and have been
derived from or compiled on a basis consistent with that of the audited
financial statements included in the Prospectus; and, in the case of pro forma
financial information, if any, the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein. The amounts shown as
accrued for current and deferred income and other taxes in such financial
statements are sufficient for the payment of all accrued and unpaid federal,
state, local and foreign income taxes, interest, penalties, assessments or
deficiencies applicable to the Company and the Subsidiary, whether disputed or
not, for the applicable period then ended and periods prior thereto; adequate
allowance for doubtful accounts has been provided for unindemnified losses due
to the operations of the Company and the Subsidiary; and the statements of
income do not contain any items of special or nonrecurring income not earned in
the ordinary course of business, except as specified in the notes thereto.
(g) Each of the Company and the Subsidiary (i) has paid all
federal, state, local, and foreign taxes for which it is liable, including, but
not limited to, withholding taxes and amounts payable under Chapters 21 through
24 of the Internal Revenue Code of 1986, as amended (the "Code"), and has
furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriters of the
Firm Securities and the Option Securities from the Company and the purchase by
the Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Firm Securities and the Option Securities in connection with
the distribution contemplated hereby.
(i) Each of the Company and the Subsidiary maintains insurance
policies, including, but not limited to, general liability, and property
insurance, which insures each of the Company, the Subsidiary and their
respective employees, against such losses and risks generally insured against by
comparable businesses. Neither the Company nor the Subsidiary (A) has failed to
give notice or present any insurance claim with respect to any matter, including
but not limited to the Company's business, property or employees, under any
insurance policy or surety bond in a due and timely manner, (B) has any disputes
or claims against any underwriter of such insurance policies or surety bonds or
has failed to pay any premiums due and payable thereunder, or (C) has failed to
comply with all conditions contained in such insurance policies and surety
bonds. There are no facts or circumstances under any such insurance policy or
surety bond which would relieve any insurer of its obligation to satisfy in full
any valid claim of the Company or the Subsidiary.
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(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or circumstances
that may give rise to the same), or involving the properties or business of, the
Company or the Subsidiary which (i) questions the validity of the capital stock
of the Company, this Agreement or the Representative's Warrant Agreement, or of
any action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representative's Warrant Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (iii) might materially and adversely
affect the condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties, business or
results of operations of the Company or the Subsidiary.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this Agreement and
the Representative's Warrant Agreement and to consummate the transactions
provided for in this Agreement and the Representative's Warrant Agreement; and
this Agreement and the Representative's Warrant Agreement have each been duly
and properly authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement constitutes a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, and none of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Representative's
Warrant Agreement, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, or the conduct of its business
as described in the Registration Statement, the Prospectus, and any amendments
or supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company or the Subsidiary pursuant to
the terms of (i) the certificate of incorporation or by-laws of the Company or
the Subsidiary, (ii) any license, contract, collective bargaining agreement,
indenture, mortgage, deed of trust, lease, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or instrument
to which the Company or the Subsidiary is a party or by which the Company or the
Subsidiary is or may be bound or to which its or assets (tangible or intangible)
is or may be subject, or any indebtedness, or (iii) any statute, judgment,
decree, order, rule or regulation applicable to the Company or the Subsidiary of
any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or the Subsidiary or any of its or their
respective activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this Agreement
and the Representative's Warrant Agreement and the transactions contemplated
hereby and thereby, including without limitation, any waiver of any preemptive,
first refusal or other rights that any entity or person may have for the issue
and/or sale of any of
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the Securities, except such as have been or may be obtained under the Act or may
be required under state securities or Blue Sky laws in connection with the
Underwriters' purchase and distribution of the Firm Securities and the Option
Securities, and the Representative's Warrants to be sold by the Company
hereunder.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company or the Subsidiary is a party or
by which it or they may be bound or to which its or their respective assets,
properties or business may be subject have been duly and validly authorized,
executed and delivered by the Company or the Subsidiary and constitute the
legal, valid and binding agreements of the Company or the Subsidiary, as the
case may be, enforceable against it in accordance with its terms. The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate and fairly present the information required to be shown
with respect thereto by Form SB-2, and there are no contracts or other documents
which are required by the Act to be described in the Registration Statement or
filed as exhibits to the Registration Statement which are not described or filed
as required, and the exhibits which have been filed are complete and correct
copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the Company
nor the Subsidiary has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into any
transaction other than in the ordinary course of business, or (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any change in the capital stock, or
any change in the debt (long or short term) or liabilities or material adverse
change in or affecting the general affairs, management, financial operations,
stockholders' equity or results of operations of the Company or the Subsidiary.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, collective bargaining
agreement, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company or the Subsidiary is a party or by
which the Company or the Subsidiary may be bound or to which the property or
assets (tangible or intangible) of the Company or the Subsidiary is subject or
affected.
(p) Each of the Company and the Subsidiary has generally
enjoyed a satisfactory employer-employee relationship with its employees and is
in compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
the Company or the Subsidiary by the U.S. Department of Labor, or any other
governmental agency responsible for the enforcement of such federal, state,
local, or foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company or the Subsidiary pending before the National
Labor Relations Board or any lockout, strike,
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picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or the Subsidiary, or any predecessor entity, and none
has ever occurred. No representation question exists respecting the employees of
the Company or the Subsidiary, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or the
Subsidiary. No grievance or arbitration proceeding is pending under any expired
or existing collective bargaining agreements of the Company or the Subsidiary.
No labor dispute with the employees of the Company or the Subsidiary exists, or,
is imminent.
(q) Neither the Company nor the Subsidiary maintains, sponsors
or contributes to any program or arrangement that is an "employee pension
benefit plan," an "employee welfare benefit plan," or a "multiemployer plan" as
such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). Neither the Company nor the Subsidiary maintains or contributes, now or
at any time previously, to a defined benefit plan, as defined in Section 3(35)
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 Code, which could subject the Company or the Subsidiary to any tax
penalty on prohibited transactions and which has not adequately been corrected.
Each ERISA Plan is in compliance with all reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
Neither the Company nor the Subsidiary has never completely or partially
withdrawn from a "multiemployer plan."
(r) Neither the Company, the Subsidiary nor any of its or
their respective employees, directors, stockholders, partners, or affiliates
(within the meaning of the Rules and Regulations) of any of the foregoing has
taken or will take, directly or indirectly, any action designed to or which has
constituted or which might be expected to cause or result in, under the Exchange
Act, or otherwise, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of
the patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held by
the Company or the Subsidiary, are in dispute so far as known by the Company or
are in any conflict with the right of any other person or entity. Each of the
Company and the Subsidiary (i) owns or has the right to use, free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, defects
or other restrictions or equities of any kind whatsoever, all patents,
trademarks, service marks, trade names and copyrights, technology and licenses
and rights with respect to the foregoing, used in the conduct of its business as
now conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing and (ii) is not
obligated or under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service xxxx, trade name, copyright, know-how, technology
or other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
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(t) Each of the Company and the Subsidiary owns and has the
unrestricted right to use all trade secrets, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "intellectual
property") that are material to the development, manufacture, operation and sale
of all products and services sold or proposed to be sold by the Company, free
and clear of and without violating any right, lien, or claim of others,
including without limitation, former employers of its employees; provided,
however, that the possibility exists that other persons or entities, completely
independent of the Company or the Subsidiary, or its or their respective
employees or agents, could have developed trade secrets or items of technical
information similar or identical to those of the Company or the Subsidiary.
Neither the Company nor the Subsidiary is aware of any such development of
similar or identical trade secrets or technical information by others.
(u) Each of the Company and the Subsidiary has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus to be owned or leased by it,
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not yet due
and payable.
(v) Xxxxxx Bernards Xxxxxx Xxxxxx & Larter and Xxxxxxx Xxxx
Xxxxxx, P.C., whose reports are filed with the Commission as a part of the
Registration Statement, are independent certified public accountants as required
by the Act and the Rules and Regulations.
(w) The Company has caused to be duly executed legally binding
and enforceable agreements pursuant to which each of the Company's officers,
directors, stockholders and holders of securities exchangeable or exercisable
for or convertible into shares of Common Stock (except for the holders of the
Company's 10% Convertible Subordinated Notes Due September 30, 2000) has agreed
not to, directly or indirectly, issue, offer, offer to sell, sell, grant any
option for the sale or purchase of, assign, transfer, pledge, hypothecate or
otherwise encumber or dispose of any shares of Common Stock or securities
convertible into, exercisable or exchangeable for or evidencing any right to
purchase or subscribe for any shares of Common Stock (either pursuant to Rule
144 of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of not less than thirteen (13) months following
the effective date of the Registration Statement (the "Lock-Up Period") without
the prior written consent of the Representative and the Company. During the 13
month period commencing on the effective date of the Registration Statement, the
Company shall not, without the prior written consent of the Representative,
sell, contract or offer to sell, issue, transfer, assign, pledge, distribute, or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
options, rights or warrants with respect to any shares of Common Stock, except
pursuant to (i) options granted and available to be granted pursuant to the
Company's 1997 Incentive and Stock Option Plan and (ii) warrants issued in
connection with the sale of the Company's Series A 1998 10% Notes. In the case
of the holders of the Company's 10% Convertible Subordinated Notes Due September
30, 2000, the Lock-Up Period shall be 12 months following the effective date of
the Registration Statement. The Company will cause the Transfer Agent (as
hereinafter defined) to xxxx an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop transfer"
orders on the Company's stock ledgers.
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(x) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company, or any of its officers, directors, stockholders,
partners, employees or affiliates, that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(y) The Common Stock has been approved for listing on the
American Stock Exchange ("Amex").
(z) Neither the Company, the Subsidiary nor any of their
respective officers, employees, agents or any other person acting on behalf of
the Company or the Subsidiary has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company or the Subsidiary (or assist the Company or
the Subsidiary in connection with any actual or proposed transaction) which (a)
might subject the Company or the Subsidiary, or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might have had a
material adverse effect on the assets, business or operations of the Company or
the Subsidiary, or (c) if not continued in the future, might adversely affect
the assets, business, condition, financial or otherwise, earnings, position,
properties, value, operations or prospects of the Company or the Subsidiary. The
Company's internal accounting controls are sufficient to cause the Company to
comply with the Foreign Corrupt Practices Act of 1977, as amended.
(aa) Except as set forth in the Prospectus, no officer,
director, stockholder or partner of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the Rules
and Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company or the Subsidiary, or (B)
purchases from or sells or furnishes to the Company or the Subsidiary any goods
or services, or (ii) a beneficial interest in any contract or agreement to which
the Company or the Subsidiary is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing agreements, arrangements, understandings or transactions,
or proposed agreements, arrangements, understandings or transactions, between or
among the Company or the Subsidiary, and any officer, director, or 5% or greater
securityholder of the Company, or any partner, affiliate or associate of any of
the foregoing persons or entities.
(bb) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to Underwriters' Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
10
(cc) The minute books of the Company have been made available
to the Underwriters and contain a complete summary of all meetings and actions
of the directors (including committees thereof) and stockholders of the Company,
since the time of its incorporation, and reflect all transactions referred to in
such minutes accurately in all material respects.
(dd) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(ee) The Company has as of the effective date of the
Registration Statement entered into an employment agreement with each of Xxxxxx
Xxxxxxxxx and Xxxxx Xxxxx in the form filed as Exhibits ____ and ____,
respectively, to the Registration Statement.
(ff) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
further agrees that if it or any affiliate commences engaging in business with
the government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's,
or any affiliate's, business with Cuba or with any person or affiliate located
in Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to the
Department.
(gg) The Company is not, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus under the caption "Use of Proceeds"
will not be, an "investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
(hh) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparations 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 authorizations; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
11
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$_______ [91% of the initial public offering price per share of Common Stock]
per share of Common Stock, that number of Firm Securities set forth in Schedule
A opposite the name of such Underwriter, subject to such adjustment as the
Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional number of Firm Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 450,000 shares of Common Stock at a price of $_________ per share of
Common Stock [10% of the initial public offering price per share of Common
Stock]. The option granted hereby will expire forty-five (45) days after (i) the
date the Registration Statement becomes effective, if the Company has elected
not to rely on Rule 430A under the Rules and Regulations, or (ii) the date of
this Agreement if the Company has elected to rely upon Rule 430A under the Rules
and Regulations, and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection with
the offering and distribution of the Firm Securities upon notice by the
Representative to the Company setting forth the number of Option Securities as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for any such Option Securities. Any such time
and date of delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than three (3) full business days after
the exercise of said option, nor in any event prior to the Closing Date, as
hereinafter defined, unless otherwise agreed upon by the Representative and the
Company. Nothing herein contained shall obligate the Underwriters to make any
over-allotments. No Option Securities shall be delivered unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of Xxxxx at
000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place
as shall be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on ________, 1998 or at
such other time and date as shall be agreed upon by the Representative and the
Company, but not less than three (3) nor more than five (5) full business days
after the effective date of the Registration Statement (such time and date of
payment and delivery being herein called the "Closing Date"). In addition, in
the event that any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above-mentioned office of the
Representative or at such other place as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in the
notice from the Representative to the Company. Delivery of the certificates for
the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not jointly,
12
of the purchase price for the Firm Securities and the Option Securities, if any,
to the order of the Company for the Firm Securities and the Option Securities,
if any, by New York Clearing House funds. In the event such option is exercised,
each of the Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Securities then being purchased which
the number of Firm Securities set forth in Schedule A hereto opposite the name
of such Underwriter bears to the total number of Firm Securities, subject in
each case to such adjustments as the Representative in its discretion shall make
to eliminate any sales or purchases of fractional shares. Certificates for the
Firm Securities and the Option Securities, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriters may request in
writing at least two (2) business days prior to the Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Firm
Securities and the Option Securities, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to the Closing Date or the relevant Option Closing Date,
as the case may be.
(d) On the Closing Date, the Company shall issue and sell to
the Representative Representative's Warrants at a purchase price of $.0001 per
warrant, which Representative's Warrants shall entitle the holders thereof to
purchase an aggregate of 300,000 shares of Common Stock. The Representative's
Warrants shall be exercisable for a period of four (4) years commencing one (1)
year from the effective date of the Registration Statement at a price equaling
one hundred twenty percent (120%) of the respective initial public offering
price of the Shares. The Representative's Warrant Agreement and form of Warrant
Certificate shall be substantially in the form filed as Exhibit [___] to the
Registration Statement. Payment for the Representative's Warrants shall be made
on the Closing Date.
3. Public Offering of the Shares. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Shares (other than to residents
of or in any jurisdiction in which qualification of the Securities is required
and has not become effective) at the price and upon the other terms set forth in
the Prospectus. The Representative may from time to time increase or decrease
the public offering price after distribution of the Shares has been completed to
such extent as the Representative, in its sole discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Shares
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
13
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose; (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Representative,
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifth business day after the effective date of
the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Representative or Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP ("Underwriters'
Counsel") shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information as may be required for such purpose;
provided, however, the Company shall not be required to qualify as a foreign
corporation or file a general or limited consent to service of process in any
such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such
14
statements or reports at such times as are or may reasonably be required by the
laws of such jurisdiction to continue such qualification.
(f) During the time when 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 and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
(g) As soon as practicable, but in any event not later than
forty-five (45) days after the end of the 12-month period beginning on the day
after the end of the fiscal quarter of the Company during which the effective
date of the Registration Statement occurs (ninety (90) days in the event that
the end of such fiscal quarter is the end of the Company's fiscal year), the
Company shall make generally available to its security holders, in the manner
specified in Rule 158(b) of the Rules and Regulations, and to the
Representative, an earnings statement which will be in the detail required by,
and will otherwise comply with, the provisions of Section 11(a) of the Act and
Rule 158(a) of the Rules and Regulations, which statement need not be audited
unless required by the Act, covering a period of at least twelve (12)
consecutive months after the effective date of the Registration Statement.
(h) During a period of seven (7) years after the date hereof,
the Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Representative:
(i) concurrently with furnishing such quarterly reports
to its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and
certified by the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports
to its stockholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
15
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the
Commission, the NASD or any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the
Company, or its affairs, which was released or prepared by or on behalf
of the Company; and
(vi) any additional information of a public nature
concerning the Company (and any future subsidiary) or its businesses
which the Representative may request.
During such seven-year period, if the Company has an active subsidiary,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiary(ies) are consolidated, and
will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent and warrant
agent ("Transfer Agent") and, if necessary under the jurisdiction of
incorporation of the Company, a Registrar (which may be the same entity as the
Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true original
copies of duly executed, legally binding and enforceable agreements pursuant to
which, for a period of thirteen (13) months from the effective date of the
Registration Statement, each of the Company's stockholders and holders of
securities exchangeable or exercisable for or convertible into shares of Common
Stock (except for the holders of the Company's 10% Convertible Subordinated
Notes Due September 30, 2000) agrees that it or he or she will not, directly or
indirectly, issue, offer to sell, sell, grant an option for the sale or purchase
of, assign, transfer, pledge, hypothecate or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein without the prior
consent of the Representatives (collectively, the "Lock-up Agreements"). During
the 13 month period commencing on the effective date of the Registration
Statement, the Company shall not, without the prior written consent of the
Representative, sell, contract or offer to sell, issue, transfer, assign,
pledge, distribute, or otherwise dispose of,
16
directly or indirectly, any shares of Common Stock or any options, rights or
warrants with respect to any shares of Common Stock except pursuant to (i)
options granted and available to be granted pursuant to the Company's 1997
Incentive and Stock Option Plan and (ii) warrants issued in connection with the
sale of the Company's Series A 1998 10% Notes. In the case of the holders of the
Company's 10% Convertible Subordinated Notes Due September 30, 2000, the Lock-up
Agreement shall be for a period of 12 months following the effective date of the
Registration Statement. On or before the Closing Date, the Company shall deliver
instructions to the Transfer Agent authorizing it to place appropriate legends
on the certificates representing the securities subject to the Lock-up
Agreements and to place appropriate stop transfer orders on the Company's
ledgers.
(l) Neither the Company, the Subsidiary, nor any of their
respective officers, directors, stockholders, nor any of their respective
affiliates (within the meaning of the Rules and Regulations) will take, directly
or indirectly, any action designed to, or which might in the future reasonably
be expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be
used, directly or indirectly, to acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(o) The Company shall furnish to the Representative as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in their letters to be
furnished pursuant to Sections 6(k) and 6(l) hereof.
(p) The Company shall cause the Common Stock to be quoted on
Amex and, for a period of seven (7) years from the date hereof, use its best
efforts to maintain the Amex quotation of the Common Stock to the extent
outstanding.
(q) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock, (ii) the list
of holders of all of the Company's securities and (iii) a Blue Sky "Trading
Survey" for secondary sales of the Company's securities prepared by counsel to
the Company.
17
(r) As soon as practicable, (i) but in no event more than five
(5) business days before the effective date of the Registration Statement, file
a Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than thirty (30) days after
the effective date of the Registration Statement, take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions and Xxxxx'x OTC Manual and to continue such inclusion for a period
of not less than seven (7) years.
(s) The Company hereby agrees that it will not, for a period
of thirteen (13) months from the effective date of the Registration Statement,
adopt, propose to adopt or otherwise permit to exist any employee, officer,
director, consultant or compensation plan or similar arrangement permitting (i)
the grant, issue, sale or entry into any agreement to grant, issue or sell any
option, warrant or other contract right (x) at an exercise price that is less
than the greater of the public offering price of the Shares set forth herein and
the fair market value on the date of grant or sale or (y) to any of its
executive officers or directors or to any holder of 5% or more of the Common
Stock; (ii) the maximum number of shares of Common Stock or other securities of
the Company purchasable at any time pursuant to options or warrants issued by
the Company to exceed the aggregate 500,000 shares reserved for future issuance
under the Company's 1997 Incentive and Stock Option Plan; (iii) the payment for
such securities with any form of consideration other than cash; or (iv) the
existence of stock appreciation rights, phantom options or similar arrangements.
(t) Until the completion of the distribution of the
Securities, the Company shall not, without the prior written consent of the
Representative and Underwriters' Counsel, issue, directly or indirectly, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering contemplated hereby, other than
trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations.
(u) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form SB-2 (or other appropriate form) for the
registration under the Act of the Representative's Securities.
(v) For a period of three (3) years from the effective date of
the Registration Statement, the Company hereby agrees to grant the
Representative a preferential right of first refusal on the terms and subject to
the conditions set forth in this paragraph, to purchase for its account, or to
sell for the account of the Company, or of any present or future subsidiaries,
any securities issued or to be issued by the Company, or any present or future
subsidiaries, with respect to which the Company, or any present or future
subsidiaries may seek a sale of such securities and the Company will consult,
and will cause any such present or future subsidiaries to consult with the
Representative with regard to any such offering or placement and will offer, or
cause any of its present or future subsidiaries to offer, to the Representative
the opportunity, on terms not more favorable to the Company, or any present or
future subsidiary than they can secure elsewhere, to purchase or sell any such
securities. If the Representative fails to accept in writing such proposal made
by the Company, or any present or future subsidiaries within thirty (30)
business days after receipt of a notice containing such proposal (which notice
may be
18
delivered to the Representative simultaneously), then the Representative shall
have no further claim or right with respect to the proposal contained in such
notice. If, thereafter such proposal is modified, the Company shall again
consult, and cause any present or future subsidiary to consult, with the
Representative in connection with such modification and shall in all respects
have the same obligations and adopt the same procedures with respect to such
proposal as are provided hereinabove with respect to the original proposal,
except that the thirty (30) business day period provided hereinabove shall
instead be twenty (20) business days.
(w) For a period of five (5) years after the effective date of
the Registration Statement, the Company shall cause one (1) individual selected
by the Representative to be elected to the board of directors of the Company, if
requested by the Representative. In the event that the Representative shall not
have designated such individual at the time of any meeting of the Company's
board of directors or in the event that such individual has not been elected or
is unavailable to serve, the Company shall notify the Representative of each
meeting of its board of directors and, in such event, an individual selected by
the Representative shall be permitted to attend all meetings of the Company's
board of directors as a non-voting advisor and to receive all notices and other
correspondence and communications sent by the Company to the members of its
board of directors. Such board member or non-voting advisor shall receive no
more or less director compensation than is paid to other non-officer directors
of the Company for attendance at meetings of the Company's board of directors
and such board member or non-voting advisor shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings,
including, but not limited to, food, lodging and transportation. The Company
hereby agrees to indemnify and hold such director or non-voting advisor
harmless, to the maximum extent permitted by law, against any and all actions,
suits, proceedings, inquiries, arbitrations, investigations, litigation,
governmental or other proceedings, domestic or foreign, and awards and judgments
arising out of such individual's service as a director or non-voting advisor
and, in the event that the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, and/or in the
event that the Company has entered into an indemnification agreement with any of
its officers or directors, the Company agrees to include such director or
non-voting advisor as an insured under such insurance policy and/or to enter
into an indemnification agreement with such director or non-voting advisor which
is at least as favorable to such individual as any indemnification agreement
that the Company has entered into with any of its officers or directors. The
rights and benefits of such indemnification and the benefits of such insurance
shall, to the maximum extent possible, extend to the Representative insofar as
it may be or may be alleged to be responsible for such director or non-voting
advisor. The Company agrees to provide its outside directors with compensation
as deemed appropriate and customary for similar companies.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement and the Representative's Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the
19
Prospectus and any amendments and supplements thereto and the printing, mailing
(including the payment of postage with respect thereto) and delivery of this
Agreement, the Representative's Warrant Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreements, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities including, but not limited to, (x) the purchase by the Underwriters
of the Firm Securities and the Option Securities and the purchase by the
Representative of the Representative's Warrants from the Company, (y) the
consummation by the Company of any of its obligations under this Agreement and
the Representative's Warrant Agreement, and (z) resale of the Firm Securities
and the Option Securities by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum", the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) costs and expenses incurred by the
Company in connection with the "road show", (vi) fees and expenses of the
Transfer Agent and registrar and all issue and transfer taxes, if any, (vii)
applications for assignment of a rating of the Securities by qualified rating
agencies, (viii) the fees payable to the Commission and the NASD, and (ix) the
fees and expenses incurred in connection with the quotation of the Securities on
Amex and any other exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 12, the Company shall
reimburse and indemnify the Underwriters for all of their actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering of the Firm Securities, a non-accountable expense allowance equal to 3%
of the gross proceeds received by the Company from the sale of the Firm
Securities, $35,000 of which has been paid to date. In the event the
Representative elects to exercise the overallotment option described in Section
2(b) hereof, the Company further agrees to pay to the Representative on each
Option Closing Date, by certified or bank cashier's check, or at the
Representative's election, by deduction from the proceeds of the Option
Securities purchased on such Option Closing Date, a non-accountable expense
allowance equal to 3% of the gross proceeds received by the Company from the
sale of such Option Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Option Closing Date, if any,
of the statements of the officers of the Company made pursuant to the provisions
hereof; and the
20
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of its covenants and obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 P.M., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Representative,
and, at the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Shares and
any price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period and, prior to the Closing Date, the Company
shall have provided evidence satisfactory to the Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to each of the Closing Date and each Option
Closing Date, if any, the Representative shall have received from Underwriters'
Counsel, such opinion or opinions with respect to the organization of the
Company, the validity of the Securities, the Registration Statement, the
Prospectus and other related matters as the Representative may request and
Underwriters' Counsel shall have received such papers and information as they
request to enable them to pass upon such matters.
(d) At the Closing Date, the Underwriters shall have received
the favorable opinion of Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP, counsel to the
Company, dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) each of the Company and the Subsidiary (A) has been
duly organized and is validly existing as a corporation in good
standing under the laws of its jurisdiction, (B) is duly qualified and
licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing,
and (C) has all requisite corporate power and authority, and has
obtained any and all necessary
21
authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; each of the
Company and the Subsidiary is and has been doing business in compliance
with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state and local
laws, rules and regulations; and, neither the Company nor the
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially adversely affect the business, operations,
condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results
of operations of the Company or the Subsidiary. The disclosures in the
Registration Statement concerning the effects of federal, state and
local laws, rules and regulations on the Company's business as
currently conducted and as contemplated are correct in all material
respects and do not omit to state a fact required to be stated therein
or necessary to make the statements contained therein not misleading in
light of the circumstances in which they were made.
(ii) the Company owns, directly or indirectly, one
hundred percent (100%) of the outstanding capital stock of the
Subsidiary, and all such shares have been validly issued, are fully
paid and non-assessable, were not issued in violation of any preemptive
rights and are owned free and clear of any liens, charges, claims,
encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever.
(iii) except as described in the Prospectus, the
Company does not own an interest in any other corporation, partnership,
joint venture, trust or other business entity;
(iv) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "CAPITALIZATION", and neither
the Company nor the Subsidiary is a party to or bound by any
instrument, agreement or other arrangement providing for it to issue,
sell, transfer, purchase or redeem any capital stock, rights, warrants,
options or other securities, except for this Agreement and the
Representative's Warrant Agreement and as described in the Prospectus.
The Securities and all other securities issued or issuable by the
Company conform in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable;
the holders thereof 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 any
similar rights granted by the Company. The Securities to be sold by the
Company hereunder and under the Representative's Warrant Agreement are
not and will not be subject to any preemptive or other similar rights
of any stockholder, have been duly authorized and, when issued, paid
for and delivered in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable and conform to the
22
description thereof contained in the Prospectus; the holders thereof
will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue and
sale of the Securities has been duly and validly taken; and the
certificates representing the Securities are in due and proper form.
The Representative's Warrants 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. Upon the issuance and delivery pursuant to this Agreement of
the Firm Securities and the Option Securities and the Representative's
Warrants to be sold by the Company, the Underwriters and the
Representative, respectively, will acquire good and marketable title to
the Firm Securities and the Option Securities and the Representative's
Warrants free and clear of any pledge, lien, charge, claim,
encumbrance, pledge, security interest, or other restriction or equity
of any kind whatsoever. No transfer tax is payable by or on behalf of
the Underwriters in connection with (A) the issuance by the Company of
the Securities, (B) the purchase by the Underwriters of the Firm
Securities and the Option Securities from the Company, and the purchase
by the Representative of the Representative's Warrants from the Company
(C) the consummation by the Company of any of its obligations under
this Agreement or the Representative's Warrant Agreement, or (D)
resales of the Firm Securities and the Option Securities in connection
with the distribution contemplated hereby.
(v) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has been
timely made in the appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the Registration
Statement or Prospectus or any part of any thereof or suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or, to
the best of such counsel's knowledge, threatened or contemplated under
the Act;
(vi) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments or
supplements thereto (other than the financial statements and other
financial and statistical data included therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations.
(vii) to the best of such counsel's knowledge, (A)
there are no agreements, contracts or other documents required by the
Act to be described in the Registration Statement and the Prospectus
and filed as exhibits to the Registration Statement other than those
described in the Registration Statement (or required to be filed under
the Exchange Act if upon such filing they would be incorporated, in
whole or in part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to
which the Company or the Subsidiary is a party or by which it is bound,
including any document to which the Company or the Subsidiary is a
party or by which it is bound, incorporated by reference into the
Prospectus and any supplement or amendment thereto, are accurate and
fairly represent the information required to be shown by Form SB-2; (C)
there is not
23
pending or threatened against the Company or the Subsidiary any action,
arbitration, suit, proceeding, inquiry, investigation, litigation,
governmental or other proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that may give
rise to the same), or involving the properties or business of the
Company or the Subsidiary which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings
as are summarized in the Registration Statement are accurately
summarized in all respects), (y) questions the validity of the capital
stock of the Company or this Agreement or the Representative's Warrant
Agreement, or of any action taken or to be taken by the Company
pursuant to or in connection with any of the foregoing; (D) no statute
or regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and (E) there
is no action, suit or proceeding pending, or threatened, against or
affecting the Company or the Subsidiary before any court or arbitrator
or governmental body, agency or official (or any basis thereof known to
such counsel) in which there is a reasonable possibility of a decision
which may result in a material adverse change in the condition,
financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results
of operations of the Company or the Subsidiary, which could adversely
affect the present or prospective ability of the Company to perform its
obligations under this Agreement or the Representative's Warrant
Agreement or which in any manner draws into question the validity or
enforceability of this Agreement or the Representative's Warrant
Agreement;
(viii) the Company has full legal right, power and
authority to enter into each of this Agreement and the Representative's
Warrant Agreement, and to consummate the transactions provided for
therein; and each of this Agreement and the Representative's Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement and the Representative's Warrant
Agreement, assuming due authorization, execution and delivery by each
other party thereto constitutes a legal, valid and binding agreement of
the Company enforceable against the Company in accordance with its
terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action, legal
or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or
delivery of this Agreement and the Representative's Warrant Agreement,
its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its
business as described in the Registration Statement, the Prospectus,
and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company or the Subsidiary
pursuant to the terms of, (A) the certificate of incorporation or
by-laws of the Company or the Subsidiary, (B) any license, contract,
collective bargaining agreement, indenture, mortgage, deed of trust,
lease, voting trust agreement, stockholders agreement, note, loan or
credit agreement or any other agreement or instrument to which
24
the Company or the Subsidiary is a party or by which it is or they are
or may be bound or to which any of its or their respective properties
or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (C) any statute, judgment, decree, order, rule or
regulation applicable to the Company or the Subsidiary of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Company or the Subsidiary or any
of their respective activities or properties.
(ix) no consent, approval, authorization or order, and
no filing with, any court, regulatory body, government agency or other
body (other than such as may be required under Blue Sky laws, as to
which no opinion need be rendered) is required in connection with the
issuance of the Firm Securities and the Option Securities pursuant to
the Prospectus and the Registration Statement, the issuance of the
Representative's Warrants, the performance of this Agreement and the
Representative's Warrant Agreement, and the transactions contemplated
hereby and thereby;
(x) the properties and business of the Company conforms
in all material respects to the description thereof contained in the
Registration Statement and the Prospectus; and each of the Company and
the Subsidiary has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, in each
case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities
of any kind whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable;
(xi) neither the Company nor the Subsidiary is in
breach of, or in default under, any term or provision of any license,
contract, collective bargaining agreement, indenture, mortgage,
installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders' agreement, partnership agreement, note, loan
or credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to
which the Company or the Subsidiary is a party or by which the Company
or the Subsidiary may be bound or to which the properties or assets
(tangible or intangible) of the Company or the Subsidiary is subject or
affected; and neither the Company nor the Subsidiary is in violation of
any term or provision of its Articles of Incorporation or By-Laws or in
violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation;
(xii) the statements in the Prospectus under "RISK
FACTORS," "THE COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL
STOCKHOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION OF SECURITIES," and
"SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed by such counsel,
and insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions, are
correct in all material respects;
(xiii) the Securities have been accepted for quotation
on Amex;
25
(xiv) the persons listed under the caption "PRINCIPAL
STOCKHOLDERS" in the Prospectus are the respective "beneficial owners"
(as such phrase is defined in regulation 13d-3 under the Exchange Act)
of the securities set forth opposite their respective names thereunder
as and to the extent set forth therein;
(xv) neither the Company nor the Subsidiary, nor any of
their respective officers, stockholders, employees or agents, nor any
other person acting on behalf of the Company or the Subsidiary has,
directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or
agent of a customer or supplier, or official or employee of any
governmental agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or
foreign) or other person who is or may be in a position to help or
hinder the business of the Company or the Subsidiary (or assist it in
connection with any actual or proposed transaction) which (A) might
subject the Company or the Subsidiary to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (B) if not
given in the past, might have had an adverse effect on the assets,
business or operations of the Company or the Subsidiary, as reflected
in any of the financial statements contained in the Registration
Statement, or (C) if not continued in the future, might adversely
affect the assets, business, operations or prospects of the Company or
the Subsidiary;
(xvi) no person, corporation, trust, partnership,
association or other entity has the right to include and/or register
any securities of the Company in the Registration Statement, require
the Company to file any registration statement or, if filed, to include
any security in such registration statement;
(xvii) except as described in the Prospectus, there are
no claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect to
the sale of the Securities hereunder or financial consulting
arrangements or any other arrangements, agreements, understandings,
payments or issuances that may affect the Underwriters' compensation,
as determined by the NASD;
(xviii) assuming due execution by the parties thereto
other than the Company, the Lock-up Agreements are legal, valid and
binding obligations of the parties thereto, enforceable against the
party and any subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement
of creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law);
(xix) except as described in the Prospectus, neither
the Company nor the Subsidiary (A) maintains, sponsors or contributes
to any ERISA Plans, (B) maintains or contributes, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of
ERISA, and (C) has ever completely or partially withdrawn from a
"multiemployer plan";
26
(xx) the Company is in compliance with all provisions
of Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to
Disclosure of Doing Business with Cuba;
(xxi) neither the Company, the Subsidiary or any of
their affiliates shall be subject to the requirements of or shall be
deemed an "Investment Company," pursuant to and as defined under,
respectively, the Investment Company Act.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company, and
representatives of the independent public accountants for the Company, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters 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
Preliminary Prospectus, the Registration Statement and Prospectus, on the basis
of the foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or the Prospectus). Such counsel shall
further state that its opinions may be relied upon by Underwriters' Counsel in
rendering its opinion to the Underwriters.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States 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 Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and that the Representative,
Underwriters' Counsel and they are each justified in relying thereon. Any
opinion of counsel for the Company and the Subsidiary shall not state that it is
to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991) or any comparable state accord.
(e) At the Closing Date, the Underwriters shall have received
the favorable opinion of __________________ , patent counsel to the Company and
the Subsidiary, dated the Closing Date, addressed to the Underwriters, in form
and substance satisfactory to Underwriters' Counsel and in substantially the
form of Schedule B hereto.
27
(f) At each Option Closing Date, if any, the Underwriters
shall have received the favorable opinions of each of Xxxxxx Xxxxxxxx Frome &
Xxxxxxxxxx LLP, counsel to the Company and the Subsidiary, and
__________________, patent counsel to the Company and the Subsidiary dated such
Option Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel confirming as of such Option Closing Date
the statements made by each of Xxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP, and
__________________, in their respective opinions delivered on the Closing Date.
(g) On or prior to each of the Closing Date and each Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company herein contained.
(h) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, earnings, position, value, properties, results of operations,
prospects, stockholders' equity or the business activities of the Company or the
Subsidiary, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company or the Subsidiary, from the
latest date as of which the financial condition of the Company is set forth in
the Registration Statement and Prospectus which is adverse to the Company; (iii)
neither the Company nor the Subsidiary shall be in default under any provision
of any instrument relating to any outstanding indebtedness; (iv) the Company
shall not have issued any securities (other than the Securities) or declared or
paid any dividend or made any distribution in respect of its capital stock of
any class and there has not been any change in the capital stock or any material
change in the debt (long or short term) or liabilities or obligations of the
Company (contingent or otherwise); (v) no material amount of the assets of the
Company or the Subsidiary shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company or the Subsidiary, or
affecting any of its or their respective properties or businesses before or by
any court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may adversely affect
the business, operations, earnings, position, value, properties, results of
operations, prospects or financial condition or income of the Company or the
Subsidiary; and (vii) no stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission.
(i) At each of the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
28
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the
Company has complied with all agreements and covenants and satisfied
all conditions contained in this Agreement on its part to be performed
or satisfied at or prior to such Closing Date or Option Closing Date,
as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or, to
the best of each of such person's knowledge, are contemplated or
threatened under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all
statements and information required to be included therein, and none of
the Registration Statement, the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and neither the
Preliminary Prospectus or any supplement thereto included any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(a) the Company has not incurred up to and including the Closing Date
or the Option Closing Date, as the case may be, other than in the
ordinary course of its business, any material liabilities or
obligations, direct or contingent; (b) the Company has not paid or
declared any dividends or other distributions on its capital stock; (c)
neither the Company nor the Subsidiary has entered into any
transactions not in the ordinary course of business; (d) there has not
been any change in the capital stock or long-term debt or any increase
in the short-term borrowings (other than any increase in the short-term
borrowings in the ordinary course of business) of the Company; (e)
neither the Company nor the Subsidiary has sustained any loss or damage
to its properties or assets, whether or not insured; (f) there is no
litigation which is pending or threatened (or circumstances giving rise
to same) against the Company or the Subsidiary or any affiliated party
which is required to be set forth in an amended or supplemented
Prospectus which has not been set forth; and (g) there has occurred no
event required to be set forth in an amended or supplemented Prospectus
which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(i) are to such documents as amended and supplemented at the date of such
certificate.
(j) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
29
(k) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from Xxxxxxx Xxxx Xxxxxx, P.C.:
(i) confirming that they are independent certified
public accountants with respect to the Company and the Subsidiary
within the meaning of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company included
in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations thereunder and that the Representative may rely
upon the opinion of Xxxxxxx Xxxx Xxxxxx, P.C. with respect to the
financial statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim
financial statements of the Company, a reading of the latest available
minutes of the stockholders and board of directors 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 financial statements and supporting schedules of
the Company included in the Registration Statement do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration
Statement, or (B) at a specified date not more than five (5) days prior
to the effective date of the Registration Statement, there has been any
change in the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity or net current assets or net
assets of the Company as compared with amounts shown in the March 31,
1998 balance sheet included in the Registration Statement, other than
as set forth in or contemplated by the Registration Statement, or, if
there was any change or decrease, setting forth the amount of such
change or decrease, and (C) during the period from March 31, 1998 to a
specified date not more than five (5) days prior to the effective date
of the Registration Statement, there was any decrease in net revenues,
net earnings or increase in net earnings per common share of any of the
Company or the Subsidiary, in each case as compared with the
corresponding period beginning March 31, 1997, other than as set forth
in or contemplated by the Registration Statement, or, if there was any
such decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5)
days prior to the date of the Registration Statement, the amount of
liabilities of the Company and the Subsidiary taken as a whole
(including a break-down of commercial paper and notes payable to
banks);
30
(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;
(vi) statements as to such other matters incident to
the transaction contemplated hereby as the Representatives may request.
(l) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory in all respects to the Underwriters and
Underwriters' Counsel from Xxxxxx Xxxxxxxx Xxxxxx Xxxxxx & Larter:
(i) confirming that they are independent certified
public accountants with respect to the Company within the meaning of
the Act and the applicable rules and regulations; and
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company included
in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations thereunder and that the Representative may rely
upon the opinion of Xxxxxx Bernards Xxxxxx Xxxxxx & Larter with respect
to the financial statements and supporting schedules included in the
Registration Statement.
(m) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from each of Xxxxxxx Xxxx Xxxxxx, P.C. and
Xxxxxx Xxxxxxxx Xxxxxx Xxxxxx & Larter a letter, dated as of the Closing Date or
the Option Closing Date, as the case may be, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (k) and
subsection (l) of this Section, except that the specified date referred to shall
be a date not more than five (5) days prior to the Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of subsection (k) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Representative and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(n) On each of the Closing Date and each Option Closing Date,
if any, there shall have been duly tendered to the Representative for the
several Underwriters' accounts the appropriate number of Securities.
31
(o) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(p) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement substantially in the form filed as Exhibit [___] to the Registration
Statement, in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(q) On or before the Closing Date, the Firm Securities and
Option Securities shall have been duly approved for quotation on Amex, subject
to official notice of issuance.
(r) On or before the Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, in form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 11 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, suits and litigation in respect
thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such claim, action, proceeding, investigation, inquiry, suit or litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon (A) any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Securities; or
(iii) in any application or other document or written communication (in this
Section 7 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, Amex or any other
securities exchange; (B) the omission or alleged
32
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of the Prospectus, in
the light of the circumstances under which they were made), or (C) any breach of
any representation, warranty, covenant or agreement of the Company contained
herein or in any certificate by or on behalf of the Company or any of its
officers delivered pursuant hereto, unless, in the case of clause (A) or (B)
above, such statement or omission was made in reliance upon and in strict
conformity with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company to the Underwriters but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
any Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Firm Securities and the Option Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any claim, action, suit,
investigation, inquiry, proceeding or litigation, such indemnified party shall,
if a claim in respect thereof is to be made against one or more indemnifying
parties under this Section 7, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may have
otherwise). In case any such claim, action, suit, investigation, inquiry,
proceeding or litigation is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of
33
such counsel shall be at the expense of such indemnified party or parties unless
(i) the employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of thereof at the expense of
the indemnifying party, (ii) the indemnifying parties shall not have employed
counsel reasonably satisfactory to such indemnified party to have charge of the
defense thereof within a reasonable time after notice of commencement thereof,
or (iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense thereof on behalf of the indemnified party or parties), in any of which
events such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one claim, action, suit, investigation, inquiry, proceeding or litigation or
separate but similar or related claims, actions, suits, investigations,
inquiries, proceedings or litigation in the same jurisdiction arising out of the
same general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim, action, suit, investigation, inquiry, proceeding or
litigation effected without its written consent; provided, however, that such
consent was not unreasonably withheld. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle, compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit, investigation, inquiry, proceeding or litigation in respect
of which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim, action,
suit, investigation, inquiry, proceeding or litigation), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit, investigation,
inquiry, proceeding or litigation and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Firm Securities and the Option Securities or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each of the contributing parties, on the
one hand, and the party to be indemnified on the other hand in connection with
the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
In any case where the Company is the contributing party and the Underwriters are
the indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Firm Securities
and the Option Securities (before
34
deducting expenses) bear to the total underwriting discounts received by the
Underwriters hereunder, in each case as set forth in the table on the Cover Page
of the Prospectus. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Firm Securities and the Option
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company or the Underwriter within the meaning of the Act,
each officer of the Company who has signed the Registration Statement, and each
director of the Company shall have the same rights to contribution as the
Company or the Underwriter, as the case may be, subject in each case to this
subsection (d). Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect to which a claim for contribution may be made against another party
or parties under this subsection (d), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have hereunder or otherwise than under this
subsection (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters and the Representative, as the case may be.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.,
New York City time, on the next full business day following the date hereof, or
at such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such securities for offering or the
35
release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has materially adversely
disrupted, or in the Representative's opinion will in the immediate future
materially adversely disrupt, the financial markets; or (ii) if any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
NASD, the Boston Stock Exchange, the Commission or any governmental authority
having jurisdiction over such matters; or (iv) if trading of any of the
securities of the Company shall have been suspended, or any of the securities of
the Company shall have been delisted, on any exchange or in any over-the-counter
market; (v) if the United States shall have become involved in a war or major
hostilities, or if there shall have been an escalation in an existing war or
major hostilities or a national emergency shall have been declared in the United
States; or (vi) if a banking moratorium has been declared by a state or federal
authority; or (vii) if a moratorium in foreign exchange trading has been
declared; or (viii) if the Company or the Subsidiary shall have sustained a loss
material or substantial to the Company 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 the Representative's opinion,
make it inadvisable to proceed with the offering, sale and/or delivery of the
Securities; or (ix) if there shall have been such a material adverse change in
the conditions or prospects of the Company, or such material adverse change in
the general market, political or economic conditions, in the United States or
elsewhere, that, in each case, in the Representative's judgment, would make it
inadvisable to proceed with the offering, sale and/or delivery of the Securities
or (x) if either Xxxxxx Xxxxxxxxx, Xx Xxxxxxx or Xxxxx Xxxxx shall no longer
serve the Company in their respective present capacities.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted to the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied (including, without limitation, pursuant to
Section 6 or Section 12) then, the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and disbursements,
expenses and filing fees. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6, 10, 11 and 12 hereof),
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not
36
be in any way affected by such election or termination or failure to carry out
the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Firm Securities to be purchased on
such date, the non-defaulting Underwriters shall be obligated to
purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10%
of the total number of Firm Securities, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriters (or,
if such default shall occur with respect to any Option Securities to be
purchased on an Option Closing Date, the Underwriters may at the
Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option
Securities from the Company on such date).
No action taken pursuant to this Section 11 shall relieve any
defaulting Underwriter from liability in respect of any default by such -------
Underwriter under this Agreement.
In the event of any such default which does not result in a termination
of this Agreement, the Representative shall have the right to postpone the
Closing Date for a period not exceeding seven (7) days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
Date or at any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section 12
shall relieve the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be
37
directed to the Representative at Xxxxx & Company, Inc., 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxx, Chairman, with
a copy to Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Xxxxxxxx X. Xxxxxx, Esq. Notices to the Company shall be
directed to the Company at 00000 00xx Xxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxx
00000-0000, Attention: Xxxxxx Xxxxxxxxx, Co-Chairman of the Board of Directors,
with a copy to: Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxxx, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
38
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
NORTON MOTORS INTERNATIONAL, INC.
By:
-------------------------------------
Xxxxxx Xxxxxxxxx
Co-Chairman
Confirmed and accepted as of
the date first above written.
XXXXX & COMPANY, INC.
For itself and as Representative of the
several Underwriters named in
Schedule A hereto.
By:
--------------------------------
Name:
Title:
39
SCHEDULE A
Number of Shares
Name of Underwriters to be Purchased
-------------------- ---------------
Xxxxx & Company, Inc...................................
Total..................................................
--------------------
====================
A-1
SCHEDULE B
[FORM OF INTELLECTUAL PROPERTY OPINION]
___________________, 1998
XXXXX & COMPANY, INC.
As Representative of the
several Underwriters named
in Schedule A to Exhibit A
annexed hereto
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Initial Public Offering of 3,000,000 Shares of
Common Stock of Norton Motors International, Inc.
-------------------------------------------------
Gentlemen:
We have acted as special counsel to Norton Motors International,
Inc. a Minnesota corporation (the "Company"), in connection with the entering
into by the Company of that certain Underwriting Agreement by and between Xxxxx
& Company, Inc. (as Representative of the several underwriters named therein)
(the "Representative") and the Company, dated _______________, 1998 (the
"Underwriting Agreement"). This opinion is provided to you pursuant to Section
6(e) of the Underwriting Agreement.
For the purpose of rendering the opinions set forth below we have
reviewed the following (collectively, the "Documents"):
(i) the Underwriting Agreement;
(ii) that certain Form SB-2 as filed by the Company with the
Securities and Exchange Commission on ______, 1998, together with
any and all exhibits and schedules and all heretofore filed
amendments thereto (collectively, the "Registration Statement");
(iii) the Company's prospectus dated _______________, 1998 (the
"Prospectus");
(iv) a search of the United States Patent and Trademark Office
records relevant to ownership of any and all:
patents and patent applications (including, without
limitation, the patents and patent applications listed on
Schedule A annexed hereto and hereby incorporated by reference
herein (collectively, the "Patents")), and trademarks,
trademark
B-1
applications, service marks and service xxxx applications
(collectively, the "Marks") (including, without limitation,
the Marks listed on Schedule B annexed hereto and hereby
incorporated by reference herein (collectively, the
"Trademarks")),
owned, purportedly owned or licensed by the Company (including, those patents,
patent applications and Marks licensed, without limitation, pursuant to the
licenses listed on Schedule C annexed hereto and hereby incorporated by
reference herein (collectively, the "Licenses")), conducted by
______________________________ and certified as true and correct as of
_______________________, 1998 (no earlier than 5 days prior to the effective
date of the Registration Statement);
(v) a search of the United States Copyright Office records relevant
to ownership of any and all copyrighted material (including, without
limitation, the copyright in, or license permitting the Company's
actual use of, the material licensed or otherwise distributed by
either the Company and listed on Schedule D annexed hereto and
hereby incorporated by reference herein (collectively, the
"Copyrighted Material")), owned, purportedly owned or licensed by
the Company conducted by _____________________ and certified as true
and correct as of __________________, 1998 (no earlier than 5 days
prior to the effective date of the Registration Statement);
(vi) an intellectual property litigation search with respect to all
Patents, Trademarks, Licenses and Copyrighted Material, listed on
Schedules A, B, C and D, respectively;
(i) a search of the Uniform Commercial Code ("UCC") recordation
offices, in the following jurisdictions - Minnesota, Delaware and
New York, with respect to the following two categories of general
intangibles:
(a) the intellectual property general intangibles of the Company,
including, without limitation, the Company's patents, patent
applications, inventions, know how, trademarks, service marks,
copyrights, service and trade names, intellectual property licenses
and other rights, and
(b) the intellectual property general intangibles licensed to the
Company, including, without limitation, the patents, patent
applications, inventions, know how, trademarks, service marks,
copyrights, service and trade names and other intellectual property
rights licensed to the Company pursuant to the Licenses (listed on
Schedule C),
said search certified to us as complete and accurate by
________________ and current through ________________________, 1998 (no
earlier than 5 days prior to the effective date of the Registration
Statement) and said jurisdictions being the only jurisdictions in which
filing of UCC financing statements or other documents may be filed to
effectively evidence a security or other interest in said general
intangibles; and
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(viii) any and all records, documents, instruments and agreements in
our possession or under our control relating to the Company.
We have also examined such corporate records, documents, instruments
and agreements, and inquired into such other matters, as we have deemed
necessary or appropriate as a basis for the opinions set forth herein. Whenever
our opinion herein is qualified by the phrase "to the best of our knowledge" or
"to the best of our knowledge, after due inquiry," such language means that,
based upon (i) our inquiries of officers of the Company, (ii) our review of the
Documents, and (iii) our review of such other corporate records, documents,
instruments and agreements described in the first sentence of this paragraph, we
believe that such opinions are factually correct.
To the best of our knowledge, as to all matters of fact represented
to you by the Company, we advise you that nothing has come to our attention that
would cause us to believe that such facts are incorrect, incomplete or
misleading or that reliance thereon is not warranted under the circumstances. We
call to your attention that our opinion is limited to such facts as they exist
on the date hereof and do not take into account any change of circumstances,
fact or law subsequent thereto.
Based upon and subject to the foregoing, we are of the opinion that:
1. To the best of our knowledge, after due inquiry, except as
described in the Prospectus, the Company owns or has the right to use,
free and clear of all liens, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever,
(i) all patents and patent applications (including, without
limitation, the Patents),
(ii) all trademarks and service marks (including, without
limitation, the Trademarks),
(iii) all copyrights (including, without limitation, the
Copyrighted Material),
(iv) all service and trade names, and
(v) all intellectual property licenses (including, without
limitation, the Licenses),
used in, or required for, the conduct of the Company's business.
2. To the best of our knowledge, after due inquiry, the
Company possesses all material intellectual property licenses or rights
used in, or required for, the conduct of its respective business
(including, the Licenses and without limitation, any such licenses or
rights described in the Prospectus as being owned, possessed or
licensed by the Company) and such licenses and rights are in full force
and effect.
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3. To the best of our knowledge, after due inquiry, there is
no claim or action, pending, threatened or potential, which affects or
could affect the rights of the Company with respect to any trademarks,
service marks, copyrights, service names, trade names, patents, patent
applications or licenses used in, or required for, the conduct of the
Company's business.
4. To the best of our knowledge, after due inquiry, there is
no intellectual property based claim or action, pending, threatened or
potential, which affects or could affect the rights of the Company with
respect to any products, services, processes or licenses, including,
without limitation, the Licenses used in the conduct of the Company's
business.
5. To the best of our knowledge, after due inquiry, except as
described in the Prospectus, the Company is not under any obligation to
pay royalties or fees to any third party with respect to any material,
technology or intellectual properties developed, employed, licensed or
used by the Company.
6. To the best of our knowledge, after due inquiry, the
statements in the Prospectus under the headings, "Risk Factors -
Uncertainty Regarding Patents and Proprietary Rights," and "Business -
Patents and Proprietary Rights", are accurate in all material respects,
fairly represent the information disclosed therein and do not omit to
state any fact necessary to make the statements made therein complete
and accurate.
7. To the best of our knowledge, after due inquiry, the
statements in the Registration Statement and Prospectus do not contain
any untrue statement of a material fact with respect to the
intellectual property position of the Company, or omit to state any
material fact relating to the intellectual property position of the
Company which is required to be stated in the Registration Statement
and the Prospectus or is necessary to make the statements therein not
misleading.
We call your attention to the fact that the members of this firm are
licensed to practice law in the State of ______________ and before the United
States Patent and Trademark Office as Registered Patent Attorneys. Accordingly,
we express no opinion with respect to the laws, rules and regulations of any
jurisdictions other than the State of ___________ and the United States of
America.
The opinions expressed herein are for the sole benefit of, and may be
relied upon only by, the several Underwriters named in Schedule A to the
Underwriting Agreement and Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP.
Very truly yours,
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