1,666,667 Shares
INTELLICELL CORP.
Common Stock
UNDERWRITING AGREEMENT
November , 1996
Sands Brothers & Co., Ltd.
As Representative of the Several Underwriters
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Intellicell Corp., a Delaware corporation (the "Company"), proposes to
issue and sell to the underwriters named in Schedule A (the "Underwriters") of
this Underwriting Agreement (the "Agreement"), for whom you are acting as
representative (the "Representative"), 1,666,667 shares (the "Firm Shares") of
Common Stock, par value $.01 per share of the Company (the "Common Stock"). In
addition, the Company has agreed to grant to the Underwriters an option (which
may be exercised by the Representative, individually) to purchase an additional
250,000 shares of Common Stock (the "Option Shares") for the purposes set forth
in Section 3 hereof. The Firm Shares and the Option Shares are hereinafter
collectively referred to as the "Shares."
The Company also proposes to issue and sell to you (for your own account
and not as Representative of the Several Underwriters) and/or your designees,
warrants (the "Representative's Warrants") to purchase an aggregate of 166,667
shares of Common Stock at an exercise price of $7.20 per share, which sale will
be consummated in accordance with the terms and conditions of the form of
Representative's Warrant Agreement filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the
Representative's Warrants are hereinafter sometimes referred to as the "Warrant
Shares." The Shares, the Representative's Warrants and the Warrant Shares
(collectively, the "Securities") are more fully described in the Registration
Statement and the Prospectus, as defined below.
You have advised the Company that you and the other Underwriters desire to
purchase, severally, the Firm Shares and that you have been authorized by the
Underwriters to execute this agreement on their behalf. The Company confirms the
agreements
made by it with respect to the purchase of the Firm Shares by the several
Underwriters on whose behalf you are signing this Agreement, as follows:
1. Purchase and Sale of Firm Shares. (a) Subject to the terms and
conditions of this Agreement, and upon the basis of the representations,
warranties, and agreements herein contained, the Company agrees to issue and
sell to the Underwriters, and each such Underwriter agrees, severally and not
jointly, to buy from the Company at $5.52 for each Firm Share, at the place and
time hereinafter specified, the number of Firm Shares set forth opposite the
names of the Underwriters in Schedule A attached hereto plus any additional Firm
Shares which such Underwriters may become obligated to purchase pursuant to the
provisions of Section 9 hereof.
2. Payment and Delivery; Representative's Warrants.
(a) Delivery to the Underwriters of and payment for the Firm Shares shall
take place at 10:00 a.m., New York Time, on the third full business day (or, if
the Firm Shares are priced, as contemplated in Rule 15c6-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), after 4:30
p.m., New York Time, the fourth full business day) following the date of the
initial public offering, at the offices of the Representative, 00 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 or at such time on such other date, as may be agreed
upon by the Company and the Underwriters (such date hereinafter is referred to
as the "Closing Date").
(b) The Company will make the certificates for the Shares to be purchased
by the Underwriters hereunder available to you for inspection at least 24 hours
prior to the Closing Date or the Option Closing Date (which are collectively
referred to herein as the "Closing Dates"). The certificates shall be in such
names and denominations as you may request, at least two (2) full business days
prior to the Closing Dates. Time shall be of the essence and delivery at the
time and place specified in this Agreement is a further condition to the
obligations of each Underwriter.
Definitive certificates in negotiable form for the Firm Shares to be
purchased by the Underwriters hereunder will be delivered by the Company to you
for the accounts of the several Underwriters against payment of the respective
purchase prices therefor by the several Underwriters, by federal wire transfer
to the Company. The Representative's written confirmation of the effectuation of
such federal wire transfer, detailing the specific federal wire number, shall be
satisfactory evidence that payment of the purchase price for the Firm Shares has
been made for purposes of the Closing Date and, upon presentation of such
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confirmation, the Company shall be required to deliver certificates in
negotiable form for the Firm Shares at such time.
In addition, in the event the Underwriters (or the Representative,
individually) exercise the option to purchase from the Company all or any
portion of the Option Shares pursuant to the provisions of Section 3 hereof,
payment for such securities shall be made to the Company by the effectuation of
a federal wire transfer at the date of delivery of such securities as required
by the provisions of Section 3 hereof.
It is understood that you, individually and not as Representative of the
several Underwriters, may (but shall not be obligated to) make any and all
payments required pursuant to this Section 2 on behalf of any Underwriters whose
check or checks shall not have been received by the Representative at the time
of delivery of the Firm Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder. It is also understood
that you individually rather than all of the Underwriters may (but shall not be
obligated to) purchase the Option Shares (as hereinafter defined).
It is understood that the several Underwriters propose to offer the Firm
Shares to be purchased hereunder to the public upon the terms and conditions set
forth in the Registration Statement, after the Registration Statement becomes
effective.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Shares by the Company to the Underwriters shall be
borne by the Company. The Company will pay and save each Underwriter and any
subsequent holder of the Shares harmless from and any and all liabilities with
respect to or resulting from any failure or delay in paying Federal and state
stamp and other transfer taxes, if any, which may be payable or determined to be
payable in connection with the original issuance or sale to such Underwriter of
Shares sold by such entity.
(b) On the Closing Date, the Company will sell the Representative's
Warrants to Sands Brothers, for its own account and not as Representative of the
several Underwriters, or to its designees. The Representative's Warrants will be
in the form of, and in accordance with, the provisions of the Representatives
Ordinary Share Purchase Warrant attached as an exhibit to the Registration
Statement. The aggregate purchase price for the Representative's Warrants is
$100.00. The Representative's Warrants will be restricted from sale, transfer,
assignment or hypothecation for a period of one year from the Effective Date,
except to officers and shareholders of Sands Brothers. Payment for the
Representative's Warrants will be made to the Company by
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check or checks payable to its order on the Closing Date against delivery of the
certificates representing the Representative's Warrants. The certificates
representing the Representative's Warrants will be in such denominations and
such names as Sands Brothers may request prior to the Closing Date.
3. Option to Purchase Option Shares.
(a) For the purposes of covering any over-allotments in connection with the
distribution and sale of the Firm Shares as contemplated by the Prospectus, the
Company hereby grants an option to the several Underwriters (which may be
exercised, at its option, by the Representative, individually) to purchase all
or any part of the Option Shares from the Company. This option may be exercised
in whole or in part at anytime and from time to time within 45 days after the
effective date of the Registration Statement upon written notice (each, an
"Option Share Notice") by the Representative to the Company setting forth the
aggregate number of Option Shares to be purchased, the names and denominations
in which the certificates for such Option Shares are to be registered and the
time and date for such purchase. Such time and date shall be determined by the
Representative but shall be at least two and no more than five full business
days before the date specified for closing in the Option Share Notice (each an
"Option Closing Date"). Delivery of the Option Shares against payment therefor
shall take place at the offices of the Representative, 00 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000. The number of Option Shares to be purchased by each Underwriter,
if any, shall bear the same percentage to the total number of Option Shares
being purchased by the several Underwriters pursuant to this subsection (a) as
the number of Firm Shares such Underwriter is purchasing bears to the total
number of Firm Shares being purchased pursuant to subsection (a) of Section 1,
as adjusted, in each case by the Representative in such manner as the
Representative may deem appropriate. The purchase price to be paid for the
Option Shares will be the same price per Option Share as the price per Firm
Share set forth in Section ! hereof.
(b) Payment for any Option Shares purchased will be made to the Company by
the effectuation of a federal wire transfer, against receipt of the certificates
for such securities by the Representative for the respective accounts of the
several Underwriters registered in such names and in such denominations as the
Representative may request. The Representatives' written confirmation of the
effectuation of such federal wire transfer, detailing the specific federal wire
number, shall be satisfactory evidence that payment of the purchase price for
the Option Shares has been made for purposes of the Option Closing Date and,
upon presentation of such confirmation, the Company shall be required to deliver
certificates in negotiable form for the Option Shares at such time.
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(c) The obligation of the Underwriters to purchase and pay for any of the
Option Shares is subject to the accuracy and completeness (as of the date hereof
and as of the Option Closing Date) in all material respects of the
representations and warranties of the Company herein, to the accuracy and
completeness of the statements of the Company or its officers made in any
certificate or other document to be delivered by the Company pursuant to this
Agreement, to the performance in all material respects by the Company of its
obligations hereunder, to the satisfaction by the Company of the conditions, as
of the date hereof and as of the Option Closing Date, and to the delivery to the
Underwriters of opinions, certificates and letters dated the Option Closing Date
substantially similar in scope to those specified in Section 5, 6(b), (c), (d)
and (e) hereof, but with each reference to "Firm Shares," and "Closing Date" to
be, respectively, to the Option Shares and the Option Closing Date.
4. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with full power
and authority, corporate and other, to own or lease and operate its
properties and to conduct its business as described in the Registration
Statement and to execute, deliver and perform this Agreement and the
Representative's Warrant Agreement and to consummate the transactions
contemplated hereby and thereby. The Company is duly qualified to do
business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and failure so to
qualify could have a material adverse effect on the financial condition,
results of operations, business or properties of the Company. The Company
has no subsidiaries (as defined in the Rules and Regulations) that are
required to be listed as subsidiaries in Exhibit 21 to the Registration
Statement. Except as set forth in the Prospectus, the Company (i) does not
own, and at the Closing Date and, if later, the Option Closing Date will
not own, directly or indirectly, any shares of stock or any other equity or
long-term debt securities of any corporation or have any equity interest in
any corporation, firm, partnership, joint venture, association or other
entity and (ii) is not, and at the Closing Date and, if later, the Option
Closing Date will not be, engaged in any discussions or a party to any
agreement or understanding, written or oral, regarding the acquisition of
an interest in any corporation, firm, partnership, joint venture,
association or other entity. Complete and correct copies of the certificate
of incorporation, the bylaws or other organizational documents of the
Company and all amendments thereto have been delivered to the
Representative, and no changes therein will be made subsequent to
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the date hereof and prior to Closing Date or, if later, the Option Closing
Date.
(b) The Company has full corporate power and authority to enter into
this Agreement and the Representative's Warrants. This Agreement has been
duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, and the Representative's Warrant
Agreement, when executed and delivered by the Company on the Closing Date,
will be valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, in each case subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally. The execution, delivery and performance of this
Agreement and the Representative's Warrant Agreement by the Company, the
consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms of this
Agreement and the Representative's Warrant Agreement do not and will not,
with or without the giving of notice or the lapse of time, or both, (i)
result in any violation of the certificate of incorporation, by-laws or
other organizational documents of the Company; (ii) result in a breach of
or conflict with any of the terms or provisions of, or constitute a default
under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant to
any indenture, mortgage, note, contract, commitment or other agreement or
instrument to which the Company is a party or by which the Company or any
of its properties or assets is or may be bound or affected; (iii) violate
any existing applicable law, rule, regulation, judgment, order or decree of
any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of their respective properties or business which,
in the case of clause (ii) or (iii), would have a material adverse effect
on the financial condition, results of operations, business or properties
of the Company or the ability of the Company to consummate the transactions
contemplated hereby.
(c) The Company has prepared in conformity with the requirements of
the Act and the rules and regulations (the "Regulations") of the Securities
and Exchange Commission (the "Commission") and filed with the Commission a
registration statement (File No. 333- ______) on Form S-1 and has filed one
or more amendments thereto, covering the registration of the Shares under
the Act, including the related preliminary prospectus or preliminary
prospectuses (each thereof being herein called a "Preliminary Prospectus")
and a proposed final prospectus. Each Preliminary Prospectus was endorsed
with the legend required by Item 501(c)(5) of Regulation S-K of the
Regulations, including, if applicable, Rule 430A of the Regulations. Such
registration
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statement including any documents incorporated by reference therein and all
financial schedules and exhibits thereto, as amended at the time it becomes
effective, and the final prospectus included therein are herein,
respectively, called the "Registration Statement" and the "Prospectus",
except that, (i) if the prospectus filed by the Company pursuant to Rule
424(b) of the Regulations differs from the Prospectus, the term
"Prospectus" will also include the prospectus filed pursuant to Rule 424
(b), and (ii) if the Registration Statement is amended or such Prospectus
is supplemented after the effective date of the Registration Statement (the
"Effective Date") and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include
the Registration Statement as amended or supplemented.
(d) Neither the Commission, nor to the best of the Company's
knowledge, any state regulatory authority has issued any order preventing
or suspending the use of any Preliminary Prospectus or has instituted or,
to the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
(e) The Registration Statement when it becomes effective, the
Prospectus (and any amendment or supplement thereto) when it is filed with
the Commission pursuant to Rule 424(b), and both documents as of the
Closing Date, as the case may be, will comply as to form with the Act and
the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on
such dates, 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, except that this representation and warranty does not
apply to statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of the
Underwriters in connection with the Registration Statement or Prospectus
or any amendment or supplement thereto by the Underwriters expressly for
use therein.
(f) Xxxxxxx X. Xxxxxx & Company, LLP, the accountants who have
certified certain of the financial statements filed and to be filed with
the Commission as part of the Registration Statement and the Prospectus,
are independent public accountants within the meaning of the Act and
Regulations. The financial statements and schedules and the notes thereto
and the selected financial statements and summary financial statements
filed as part of the Registration Statement and included in the Prospectus
present fairly in all material respects the financial
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position of the Company as of the dates thereof, and the results of
operations and changes in financial position of the Company for the periods
indicated therein, in conformity with generally accepted accounting
principles (which, as applied to the Company for the periods involved, are
substantially identical in all material respects) applied on a
substantially consistent basis throughout the periods involved except as
otherwise stated in the Registration Statement and the Prospectus.
(g) The descriptions in the Registration Statement and the Prospectus
of contracts and other documents are accurate and present fairly the
information required to be disclosed, and there are no contracts or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement under
the Act or the Regulations which have not been so described or filed as
required.
(h) The Company has filed with the appropriate federal, state and
local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns, including, without limitation,
franchise tax and sales tax returns, which are required to be filed or has
duly obtained extensions of time for the filing thereof and has paid all
taxes shown on such returns and all assessments received by it to the
extent that the same have become due except where the failure to file tax
returns, obtain extensions of time for filing or pay such taxes and
assessment would not have a material adverse effect on the financial
position, results of operations, properties or business of the Company; and
the provisions for income taxes payable, if any, shown on the financial
statements filed with or as part of the Registration Statement are
sufficient for all accrued and unpaid foreign and domestic taxes, whether
or not disputed, and for all periods to and including the dates of such
financial statements. All payroll withholdings required to be made by the
Company with respect to employees have been made. Except as disclosed in
writing to the Underwriters, the Company has not executed or filed with any
taxing authority, foreign or domestic, any agreement extending the period
for assessment or collection of any income taxes and is not a party to any
pending action or proceeding by any foreign or domestic governmental agency
for assessment or collection of taxes; and no claims for assessment or
collection of taxes have been asserted against the Company.
(i) The Company has authorized, issued and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus. All of
the outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, were
issued in compliance with all applicable state and Federal securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase
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securities and conform to the description set forth in the Prospectus; the
Shares have been duly authorized and when issued and paid for as
contemplated herein will be validly issued, fully paid and nonassessable
and the Shares will conform to the description thereof contained in the
Prospectus; the Warrant Shares have been duly authorized, and, when issued
and paid for in accordance with the terms of the Representative's Warrants,
will be validly issued, fully paid and nonassessable; and no preemptive
rights or other rights to subscribe for or purchase exist with respect to
the issuance and sale of the Shares or with respect to the Warrant Shares.
The Company has reserved and will keep available for the exercise of the
Representative's Warrants such number of authorized but unissued shares of
Common Stock to permit the exercise in full of the Representative's
Warrants. The description of the capital stock of the Company in the
Registration Statement and the Prospectus is and at the Closing Date and,
if later, the Option Closing Date will be, complete and accurate in all
respects. Except as set forth in the Prospectus, the Company does not have
outstanding, and at the Closing Date, and, if later, the Option Closing
Date will not have outstanding, any options to purchase, or any rights or
warrants to subscribe for, any securities or obligations convertible into,
or any contracts or commitments to issue or sell, any shares of Common
Stock, or any such warrants, convertible securities or obligations. The
description of the Company's stock option and other stock plans or
arrangements, and the options or other rights granted or exercised
thereunder, set forth in the Prospectus, accurately and fairly presents the
information required to be shown with respect to such plans, arrangements
options and rights. No further approval or authority of the stockholders or
the Board of Directors of the Company will be required for sale of the
Shares by the Company as contemplated herein. No holder of any security of
the Company has any right to require registration of shares of Common Stock
or any other security of the Company because of the filing of the
Registration Statement or consummation of the transactions contemplated by
this Agreement. Except as set forth in the Prospectus, no holders of any of
the Company's securities have any rights, "demand," "piggyback" or
otherwise, to have such securities registered under the Act.
(j) The Company is not in violation of, or in default under, (i) any
term or provision of its certificate of incorporation, by-laws, or any
other organizational documents; (ii) any material term or provision or any
financial covenants of any indenture, mortgage, contract, commitment or
other agreement or instrument to which it is a party or by which it or any
of its property or business is or may be bound or affected; or (iii) any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over
the Company or any of its properties or business, which, in the case of
clause (ii) and (iii), would have
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a material adverse effect on the financial condition, results of
operations, business or properties of the Company or the ability of the
Company to consummate the transactions contemplated hereby. The Company
own, possess or have obtained all governmental and other licenses, permits,
certifications, registrations, approvals or consents and other
authorizations ("Permits") necessary to own or lease, as the case may be,
and to operate their properties, and to conduct their respective business
or operations as presently conducted, except where the failure to own,
possess or obtain such Permits would not have a material adverse effect on
the financial condition, results of operations, business or properties of
the Company. All such Permits are outstanding and in good standing, and
there are no proceedings pending or, to the best of the Company's
knowledge, threatened, or any basis therefor, seeking to cancel, terminate
or limit such Permits.
(k) Except as set forth in the Prospectus, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries
before any governmental agency, court or tribunal, domestic or foreign, or
before any private arbitration tribunal, pending, or, to the best of the
Company's knowledge, threatened against the Company or involving the
Company's properties or business which, if determined adversely to the
Company, would, individually or in the aggregate, have a material adverse
effect on the financial position, results of operations, properties, or
business of the Company or which question the validity of the capital stock
of the Company or this Agreement or of any action taken or to be taken by
the Company pursuant to, or in connection with, this Agreement; nor, to the
best of the Company's knowledge, except as disclosed in the Prospectus, is
there any reasonable basis for any such claim, action, suit, proceeding,
arbitration, investigation or inquiry. There are no outstanding orders,
judgments or decrees of any court, governmental agency or other tribunal
naming the Company and enjoining the Company from taking, or requiring the
Company to take, any action, or to which the Company, or the Company's
properties or business is bound or subject which would be material to the
Company.
(1) The Company has not incurred any liability for any finder's fees
or similar payments in connection with the transactions herein contemplated
other than payments previously made to the Representative.
(m) (i) The Company has sufficient title and ownership of, or license
or other rights to, or have applied for, all patents, patent applications,
trademarks, trademark applications, service marks, service xxxx
applications, trade names, copyrights, trade secrets, information,
proprietary rights, technologies, know-how and processes
(collectively, "Intellectual Property") necessary for its business as now
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conducted and as proposed to be conducted, as described in the Prospectus.
(ii) Except as disclosed in the Prospectus, no claims have been
asserted by any person to the ownership or use of any Intellectual
Property or challenging or questioning the validity or effectiveness
of any such license or agreement and the Company have no knowledge of
any valid basis for any such claim. The use of the Intellectual
Property by the Company does not infringe on the rights of any person
and there are no pending or, to the knowledge of the Company,
threatened claims nor has it been alleged that the Intellectual
Property is engaged in such infringements. All of the trademark and
trade name registrations, patents and copyrights are in full force and
effect. Other than potential sublicensees of the Company, no other
person has any right to use any Intellectual Property for similar or
related products in competition with the products of the Company and
no other person is infringing any of the Intellectual Property.
(iii) The Company has taken reasonable steps sufficient to
safeguard and maintain the secrecy and confidentiality of, or their
respective proprietary rights in, all of the unpatented know how,
technology, proprietary processes, formulae, and other information
owned by it. Without limiting the generality of the foregoing, the
Company has obtained confidentiality and secrecy agreements from all
past and present employees and independent third parties involved in
the invention or creation of their respective Intellectual Properties.
(n) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, the Company has not incurred any
material liability or obligation (absolute or contingent), except
liabilities and obligations incurred in the ordinary course of business,
and has not sustained any material loss or interference with its business
from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree; and since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there have not been, and prior to the Closing Date referred to below there
will not be, any changes in the capital stock or any material increases in
the long-term debt of the Company or any material adverse change in or
affecting the general affairs, management, financial condition,
shareholders' equity, results of operations or prospects of the Company,
other than as set forth or contemplated in the Prospectus.
(o) The Company owns no real property. The Company has good title to
all material personal property
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(tangible and intangible) owned by it, free and clear of all security
interests, charges, mortgages, liens, encumbrances and defects, except such
as are described in the Registration Statement and Prospectus or such as do
not materially affect the value or transferability of such property and do
not interfere with the use of such property made, or proposed to be made,
by the Company. The leases, licenses or other contracts or instruments
under which the Company leases, holds or is entitled to use any property,
real or personal, are valid and subsisting and neither the Company, nor, to
the best of the Company's knowledge, any other party is in default
thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the passage of time or the giving of notice, or both,
would constitute a default thereunder. The Company has not received any
notice of any violation of any applicable law, ordinance, regulation, order
or requirement relating to its owned or leased properties the violation of
which would have a material adverse effect on the Company.
(p) Each material contract or other instrument (however characterized
or described) to which the Company is a party or by which its properties or
business is or may be bound or affected and to which reference is made in
the Prospectus has been duly and validly executed by the Company and,
assuming that such contracts or other instruments have been properly
executed by parties other than the Company, is in full force and effect in
all material respects and is enforceable against the parties thereto in
accordance with its terms, in each case subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally; and none of such
contracts or instruments has been assigned by the Company, and neither the
Company nor, to the best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's knowledge, no event
has occurred which, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder.
(q) The employment agreements between the Company and its officers and
employees, described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance
with their respective terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to
principles of equity and public policy and subject to the possible finding
by a court of competent jurisdiction that the scope, time period or
geographic range of any post-employment non-competition restriction exceeds
that required to protect the Company's legitimate interests.
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(r) Except as set forth in the Prospectus, the Company has no employee
benefit plans (including, without limitation, profit sharing and welfare
benefit plans) or deferred compensation arrangements that are subject to
the provisions of the Employee Retirement Income Security Act of 1974. To
the best of the Company's knowledge, no labor problem exists with any of
the Company's employees or is imminent which could have a material adverse
affect on the Company.
(s) The Company has filed a registration statement pursuant to Section
12(g) of the Exchange Act to register the Common Stock, has filed an
application to list the Shares on the NASDAQ SmallCap Market, and has
received notification that the listing has been approved, subject to notice
of issuance.
(t) The Company has adequately insured its properties against loss or
damage by fire or other casualty and maintains, in amounts which it deems,
in good faith, to be adequate, such other insurance, including but not
limited to, liability insurance, as is usually maintained by companies
engaged in the same or similar businesses located in its geographic area.
(u) Neither the Company nor, to its knowledge, any of its officers,
employees, agents or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or
foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company (or to assist the Company in connection
with any actual or proposed transaction) which (a) might subject the
Company or any other such person, to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign);
(b) if not given in the past, might have had a material adverse effect on
the assets, business or operations of the Company; or (c) if not continued
in the future, might adversely affect the assets, business, operations or
prospects of the Company, taken as a whole. The Company believes that its
international accounting controls are sufficient to cause the Company to
comply with the Foreign Corrupt Practices Act of 1977, as amended.
(v) The Company, in all material respects, has provided to Xxxxxxx
Xxxxxx & Xxxx, P.C., counsel to the Representative ("Representative's
Counsel") all agreements certificates, correspondence and other items and
documents
-13-
requested by such counsel's due diligence letter dated May 6, 1996.
Any certificate signed by an officer of the Company and delivered to
the Representative or to counsel for the Representative shall be deemed to
be a representation and warranty by the Company to the Representative as to
the matters covered thereby.
5. Certain Covenants of the Company. The Company covenants with the several
Underwriters as follows:
(a) The Company will not at any time, whether before the Effective
Date or thereafter during such period as the Prospectus is required by law
to be delivered in connection with the sales of the Firm Shares by the
several Underwriters, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Representative has not
been previously advised and furnished a copy, or to which the
Representative shall object in writing.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective and will advise the Representative
immediately, and, if requested by the Representative, confirm such advice
in writing, (i) when the Registration Statement, or any post-effective
amendment to the Registration Statement or any supplemented Prospectus is
filed with the Commission; (ii) of the receipt of any comments from the
Commission; (iii) of any request of the Commission for amendment or
supplementation of the Registration Statement or Prospectus or for
additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any Preliminary Prospectus,
or of the suspension of the qualification of the Firm Shares for offering
or sale in any jurisdiction, or of the initiation of any proceedings for
any of such purposes. The Company will make every reasonable effort to
prevent the issuance of any such stop order or of any order preventing or
suspending such use and to obtain as soon as possible the lifting thereof,
if any such order is issued.
(c) The Company will deliver to the several Underwriters, without
charge, from time to time until the Effective Date, as many copies of each
Preliminary Prospectus as the Underwriters may reasonably request, and the
Company hereby consents to the use of such copies for purposes permitted by
the Act. The Company will deliver to the several Underwriters, without
charge, as soon as the Registration Statement becomes effective, and
thereafter from time to time as requested, such number of copies of the
Prospectus (as supplemented, if the Company makes any supplements to the
Prospectus) as the Underwriters may reasonably request. The Company has
furnished
-14-
or will furnish to the Representative two conformed copies of the
Registration Statement as originally filed and of all amendments thereto,
whether filed before or after the Registration Statement becomes effective,
two copies of all exhibits filed therewith and two conformed copies of all
consents and certificates of experts.
(d) The Company will comply with the Act, the Regulations, the
Exchange Act, and the rules and regulations thereunder so as to permit the
continuance of sales of and dealings in the Firm Shares, and in any Option
Shares which may be issued and sold. If, at any time when a prospectus
relating to such Securities is required to be delivered under the Act, any
event occurs as a result of which the Registration Statement and Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if it shall be necessary to amend or supplement
the Registration Statement and Prospectus to comply with the Act or the
regulations thereunder, the Company will promptly file with the Commission,
subject to Section 5(a) hereof, an amendment or supplement which will
correct such statement or omission or which will effect such compliance.
(e) The Company will furnish such proper information as may be
required and otherwise cooperate in qualifying the Securities for offering
and sale under the securities or Blue Sky laws relating to the offering or
for sale in such jurisdictions as the Representative may reasonably
designate, provided that no such qualification will be required in any
jurisdiction where, solely as a result thereof, the Company would be
subject to service of general process or to taxation or qualification as a
foreign corporation doing business in such jurisdiction.
(f) The Company will make generally available to its security holders,
in the manner specified in Rule 158(b) under the Act, and deliver to the
Representative and its counsel as soon as practicable and in any event not
later than 45 days after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement
occurs, an earning statement meeting the requirements of Rule 158(a) under
the Act covering a period of at least 12 consecutive months beginning after
the effective date of the Registration Statement.
(g) For a period of five years from the Effective Date, the Company
will deliver to the Representative and to Representative's Counsel on a
timely basis (i) a copy of each report or document, including, without
limitation, reports on Forms 8-K, 10-C, 10-KSB and 10-QSB and exhibits
thereto, filed or furnished to the Commission, any securities exchange or
the National Association of Securities Dealers, Inc. (the "NASD";
-15-
(ii) as soon as practicable, copies of any reports or communications
(financial or other) of the Company mailed to its security holders; (iii)
as soon as practicable, a copy of any Schedule 13D, 13G, 14D-1 or 13E-3 or
Form 3, 4 and 5 received or prepared by the Company from time to time; (iv)
monthly statements setting forth such information regarding the Company's
results of operations and financial position (including balance sheet,
profit and loss statements but excluding data regarding outstanding
purchase orders) as is regularly prepared by management of the Company; and
(v) such additional information concerning the business and financial
condition of the Company as the Representative may from time to time
reasonably request and which can be prepared or obtained by the Company
without unreasonable effort or expense. The Company will furnish to its
shareholders annual reports containing audited financial statements and
such other periodic reports as it may determine to be appropriate or as may
be required by law.
(h) Neither the Company nor any person that is controlled by the
Company will take any action designed to or which might be reasonably
expected to cause or result in the stabilization or manipulation of the
price of the Firm Shares.
(i) If the transactions contemplated by this Agreement are
consummated, the Representative shall retain the Fifty Thousand Dollars
($50,000) previously paid to it, and the Company will pay or cause to be
paid the following: all costs and expenses incident to the performance of
the obligations of the Company under this Agreement, including, but not
limited to, the fees and expenses of accountants and counsel for the
Company, the preparation, printing, mailing and filing of the Registration
Statement (including financial statements and exhibits), Preliminary
Prospectuses and the Prospectus, and any amendments or supplements thereto,
the printing and mailing of the Selected Dealer Agreement, the issuance and
delivery of the Shares to the several Underwriters; all taxes, if any, on
the issuance of the Shares; the fees, expenses and other costs of
qualifying the Shares for sale under the Blue Sky or securities laws of
those states in which the Shares are to be offered or sold, the cost of
printing and mailing the "Blue Sky Survey" and fees and disbursements of
counsel in connection therewith (such fees only not to exceed the sum of
$25,000), including those of such local counsel as may have been retained
for such purpose; the filing fees incident to securing any required review
by the NASD; the cost of furnishing to the Underwriters copies of the
Registration Statement, Preliminary Prospectuses and the Prospectus as
herein provided; the costs of "bound volumes" for the Representative and
its counsel, the costs of placing a "tombstone" advertisement in such
publication as the Representative determines (the cost of such "tombstone"
advertisement not to exceed $10,000) and all other costs and expenses
incident to the performance of its
-16-
obligations hereunder which are not otherwise specifically provided for in
this Section 5(i).
In addition, at the Closing Date or the Option Closing Date, as the
case may be, Sands Brothers will, in its individual rather than its
representative capacity, deduct from the payment for the Firm Shares or any
Option Shares purchased two and one half percent (2.5%) of the gross
proceeds of the offering (less the sum of Fifty Thousand Dollars ($50,000)
previously paid to the Representative), as payment for the Representative's
nonaccountable expense allowance relating to the transactions contemplated
hereby.
(j) In the event the transactions contemplated hereby are not
consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant,
representation or warranty contained herein or because any other condition
to the Underwriter's obligations hereunder required to be fulfilled by the
Company is not fulfilled) the Company shall be liable for the actual
accountable out-of-pocket expenses of the Underwriter, including legal
fees. In the event the transactions contemplated hereby are not consummated
by reason of any action of the Company or because of a breach by the
Company of any covenant, representation or warranty herein, the Company
shall be liable for the actual accountable out-of-pocket expenses of the
Underwriter, including legal fees. In the event the transactions
contemplated hereby are not consummated for any reason, should the
Underwriter's out-of-pocket expenses equal an amount that is less than the
$50,000 advance received, the remaining sum will be returned to the
Company. In addition, if the Company elects not to proceed with the
offering contemplated hereby for any reason and subsequently engages in any
public offering, private placement, merger, acquisition of securities,
joint venture or other similar transaction within twelve (12) months
following the Company's election not to proceed, Representative shall have
the right to act as investment banker for the Company and to receive a fee
in connection therewith equal to five percent (5%) of the consideration
paid or received in any such transaction.
(k) The Company will apply the net proceeds from the sale of the
Shares in the manner set forth in the Prospectus under "Use of Proceeds"
and shall file such reports with the commission with respect to the sale of
the Shares and the application of the proceeds therefrom as may be required
in accordance with Rule 463 under the Act.
(l) During the twelve month period following the date hereof, none of
the Company's officers, directors or holders of five percent (5%) or more
of the shares of Common Stock (the "Principal Shareholders") will offer for
sale or sell or otherwise dispose of any securities of the Company owned by
them,
-17-
directly or indirectly, in any manner whatsoever (including pursuant to
Rule 144 under the Act), and no holder of registration rights relating to
the securities of the Company will exercise any such registration rights,
in either case, without obtaining the prior written approval of the
Representative. The Company will deliver to the Representative the written
undertakings as of the date hereof of its officers, directors and Principal
Shareholders to this effect.
(m) The Company will not file any registration statement relating to
the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the twelve (12) months following
the date hereof without the Representative's prior written consent.
(n) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(o) The Company will maintain the listing of the Shares on the NASDAQ
SmallCap Market for so long as the Shares remain qualified for such
listing.
(p) Subject to the sale of the Firm Shares, the Company shall cause
its legal counsel to provide the several Underwriters with a list, to be
updated at least annually, of those states in which the shares of Common
Stock may be traded on non-issuer transactions under the Blue Sky laws of
the several states until such time as the shares of Common Stock are listed
on the New York Stock Exchange or the American Stock Exchange.
(q) Subject to the sale of the Firm Shares, for a period of not less
than three (3) years from the date hereof is received (the "Approval
Date"), the Company will, at Representative's option and if so requested by
Representative, recommend and use its best efforts to elect one designee of
Representative, at the option of Representative, either as a member of or
nonvoting advisor to its Board of Directors; such designee, if elected or
appointed, shall attend meetings of the Board and receive no more or less
compensation than is paid to other non-management directors of the Company
and shall be entitled to receive reimbursement for all reasonable costs
incurred in attending such meetings including, but not limited
-18-
to, food, lodging and transportation. Representative shall have the right
to elect one designee as an nonvoting advisor to the Board from the
Effective Date to the Approval Date. The Company agrees to indemnify and
hold Representative and its designee harmless, to the maximum extent
permitted by law, against any and all claims, actions, awards and judgments
arising out of such designee's service as a director or advisor and in the
event the Company maintains a liability insurance policy affording coverage
for the acts of its officers and directors, to include each of
Representative and its designee as an insured under such policy.
If Representative does not exercise its option to designate such
member of or advisor to the Company's Board of Directors, Representative
shall nonetheless have the right to send a representative (who need not be
the same individual from meeting to meeting) to observe each meeting of the
Board of Directors. The Company agrees to give Representative notice of
each such meeting and to provide Representative with an agenda and minutes
of the meeting no later than it gives such notice and provides such items
to the directors.
(r) Subject to the sale of the Firm Shares, the Representative shall
have the right of first refusal with respect to future public sales of debt
and equity securities of the Company, any subsidiary or successor to the
Company or any Company securities held by any Principal Shareholders for a
one year period following the date hereof. It is understood that if such a
proposed financing is offered to Representative, Representative shall have
twenty (20) days in which to determine whether or not to accept such offer
and, if Representative refuses, and provided that such a financing is
consummated (a) with another underwriter or placement agent upon the same
terms and conditions as those offered to Representative and (b) within six
months after the end of the aforesaid thirty (30) day period, this right of
first refusal shall thereafter be forfeited and terminated; provided,
however, if the financing is not consummated under the conditions of
clauses (a) and (b) above, then the right of first refusal shall once again
be reinstated under the same terms and conditions set forth in this
paragraph.
(s) The Company hereby agrees, at its sole cost and expense, to supply
and deliver to the Representative, within a reasonable period from the date
hereof, four (4) bound volumes, including the Registration Statement, as
amended or supplemented, all exhibits to the Registration Statement, the
Prospectus and all other underwriting documents.
(t) Intentionally Omitted.
(u) The Company shall retain a transfer agent for the shares of Common
Stock, reasonably acceptable to the Representative, for a period of five
(5) years following the
-19-
Effective Date. In addition, for a period of three (3) years from the
Effective Date, the Company, at its own expense, shall cause such transfer
agent to provide the Representative, if so requested in writing, with
copies of the Company's daily transfer sheets, and, when so requested by
the Representative, a current list of the Company's security holders,
including a list of the beneficial owners of securities held by a
depository trust company and other nominees.
(v) The Company hereby agrees, at its sole cost and expense, to supply
and deliver to the Representative, within a reasonable period from the date
hereof, four (4) bound volumes, including the Registration Statement, as
amended or supplemented, all exhibits to the Registration Statement, the
Prospectus and all other underwriting documents.
(w) The Company shall, as of the date hereof, have applied for listing
in Standard & Poor's Corporation Records Service (including annual report
information) or Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial Manual
not being sufficient for these purposes) and shall use its best efforts to
have the Company listed in such manual and shall maintain such listing for
a period of five (5) years from the Effective Date.
(x) For a period of two (2) years following the Effective Date, the
Company shall provide the Representative, on a not less than annual basis,
with internal forecasts setting forth projected results of operations for
each quarterly and annual period in the two (2) fiscal years following the
respective dates of such forecasts. Such forecasts shall be provided to the
Representative more frequently than annually if revised forecasts which
reflect more current information, and significantly revised assumptions or
indicate future results that differ materially from those set forth in the
forecasts.
(y) For a period of five (5) years following the Effective Date, or
until such earlier time as the shares of Common Stock are listed on the New
York Stock Exchange or the American Stock Exchange, the Company shall cause
its legal counsel to provide the Representative with a list, to be updated
at least annually, of those states in which the shares of Common Stock may
be traded in non-issuer transactions under the Blue Sky laws of the 50
states.
(z) For a period of five (5) years following the Effective Date, the
Company shall continue to retain Xxxxxxx X. Xxxxxx & Company, LLP (or a
nationally recognized accounting firm acceptable to the Representative) as
the Company's independent public accountants and shall promptly, upon the
Company's receipt thereof, submit to the Representative copies of such
accountants' management reports and similar correspondence between such
accountants and the Company.
-20-
(aa) For a period of five (5) years following the Effective Date, the
Company, at its expense, shall cause its then independent certified public
accountants, as described in Section 5(x) above, to review (but not audit)
the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-Q quarterly report and the mailing of quarterly
financial information to shareholders.
(ab) For a period of twenty-five (25) days following the Effective
date, the Company will not issue press releases or engage in any other
publicity without the Representative's prior written consent, other than
normal and customary releases issued in the ordinary course of the
Company's business or those releases required by law.
6. Conditions of the Underwriters' Obligation to Purchase Shares from the
Company. The obligation of the several Underwriters to purchase and pay for the
Firm Shares which it has agreed to purchase from the Company is subject (as of
the date hereof and the Closing Date) to the accuracy in all material respects
of the representations and warranties of the Company herein, to the accuracy of
the statements of the Company or its officers made pursuant hereto, to the
performance in all material respects by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement will have become effective not later
than 10:30 A.M., New York City time, on the day following the date of this
Agreement, or at such later time or on such later date as the
Representative may agree to in writing; prior to the Closing Date, no stop
order suspending the effectiveness of the Registration Statement will have
been issued and no proceedings for that purpose will have been initiated or
will be pending or, to the best of the Representative's or the Company's
knowledge, will be contemplated by the Commission; and any request on the
part of the Commission for additional information will have been complied
with to the satisfaction of Representative's Counsel.
(b) At the time that this Agreement is executed and at the Closing
Date, there will have been delivered to the Underwriters a signed opinion
of Xxxxxx Xxxxxxxxxx LLP, counsel for the Company, dated as of the date
hereof or the Closing Date, as the case may be (and any other opinions of
counsel referred to in such opinion of Company Counsel or relied upon by
Company Counsel in rendering their opinion), substantially as set forth in
Exhibit 6b.
(c) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements
-21-
thereto will conform in all material respects to the requirements of the
Act and the Regulations, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto 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; (ii) since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there will not have been any material adverse
change in the financial condition, results of operations or general affairs
of the Company from that set forth or contemplated in the Registration
Statement and the Prospectus, except changes which the Registration
Statement and the Prospectus indicates might occur after the Effective
Date; (iii) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
material transaction, contract or agreement entered into by the Company,
other than in the ordinary course of business, which would be required to
be set forth in the Registration Statement and the Prospectus, other than
as set forth therein; and (iv) no action, suit or proceeding at law or in
equity will be pending or, to the best of the Company's knowledge,
threatened against the Company which is required to be set forth in the
Registration Statement and the Prospectus, other than as set forth therein,
and no proceedings will be pending or, to the best of the Company's
knowledge, threatened against the Company before or by any federal, state
or other commission, board or administrative agency wherein an unfavorable
decision, ruling or finding would materially adversely affect the business,
property, financial condition or results of operations of the Company,
other than as set forth in the Registration Statement and the Prospectus.
At the Closing Date, there will be delivered to the several Underwriters a
certificate signed by the Chairman of the Board or the President or a Vice
President of the Company, dated the Closing Date, evidencing compliance
with the provisions of this Section 6(c) and stating that the
representations and warranties of the Company set forth in Section 4 hereof
were accurate and complete in all material respects when made on the date
hereof and are accurate and complete in all material respects on the
Closing Date as if then made; that the Company has performed all covenants
and complied with all conditions required by this Agreement to be performed
or complied with by the Company prior to or as of the Closing Date; and
that, as of the Closing Date, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been initiated or, to his knowledge, are contemplated or
threatened. In addition, the Representative will have received such other
and further certificates of officers of the Company as the Representative
or Representative's Counsel may reasonably request.
-22-
(d) At the time that this Agreement is executed and at the Closing
Date, the several Underwriters will have received a signed letter from
Xxxxxxx X. Xxxxxx & Company, LLP dated the date such letter is to be
received by the Underwriters and addressed to them, confirming that it is a
firm of independent public accountants within the meaning of the Act and
Regulations and stating that: (i) insofar as reported on by them, in their
opinion, the financial statements of the Company included in the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act and the applicable Regulations; (ii) on the basis
of procedures and inquiries (not constituting an examination in accordance
with generally accepted auditing standards) consisting of a reading of the
unaudited interim financial statements of the Company, if any, appearing in
the Registration Statement and the Prospectus and the latest available
unaudited interim financial statements of the Company, if more recent than
that appearing in the Registration Statement and Prospectus, inquiries of
officers of the Company responsible for financial and accounting matters as
to the transactions and events subsequent to the date of the latest audited
financial statements of the Company, and a reading of the minutes of
meetings of the shareholders, the Board of Directors of the Company and any
committees of the Board of Directors, as set forth in the minute books of
the Company, nothing has come to their attention which, in their judgment,
would indicate that (A) during the period from the date of the latest
financial statements of the Company appearing in the Registration Statement
and Prospectus to a specified date not more than three business days prior
to the date of such letter, there have been any decreases in net current
assets or net assets as compared with amounts shown in such financial
statements or decreases in net sales or increases in total or per share net
loss compared with the corresponding period in the preceding year or any
change in the capitalization or long-term debt of the Company, except in
all cases as set forth in or contemplated by the Registration Statement and
the Prospectus, and (B) the unaudited interim financial statements of the
Company, if any, appearing in the Registration Statement and the
Prospectus, do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Regulations or are
not fairly presented in conformity with generally accepted accounting
principles and practices on a basis substantially consistent with the
audited financial statements included in the Registration Statement or the
Prospectus; and (iii) they have compared specific dollar amounts, numbers
of shares, numerical data, percentages of revenues and earnings, and other
financial information pertaining to the Company set forth in the Prospectus
(with respect to all dollar amounts, numbers of shares, percentages and
other financial information contained in the Prospectus, to the extent that
such amounts, numbers, percentages and information may be derived from the
general accounting records of the Company, and excluding any questions
requiring an interpretation
-23-
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.
(e) There shall have been duly tendered to the Representative
certificates representing the Firm Shares to be sold on the Closing Date.
(f) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of the Shares by the
Underwriters.
(g) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing
Date or the Option Closing Date, as the case may be, for any member firm of
the NASD to execute transactions (as principal or as agent) in the Shares,
and no proceedings for the purpose of taking such action shall have been
instituted or shall be pending, or, to the best of the Underwriters' or the
Company's knowledge, shall be contemplated by the Commission or the NASD.
The Company represents at the date hereof, and shall represent as of the
Closing Date or Option Closing Date, as the case may be, that it has no
knowledge that any such action is in fact contemplated by the Commission or
the NASD.
(h) All proceedings taken at or prior to the Closing Date or the
Option Closing Date, as the case may be, in connection with the
authorization, issuance and sale of the Shares shall be reasonably
satisfactory in form and substance to the Representative and to
Representative's Counsel, and such counsel shall have been furnished with
all such documents, certificates and opinions as they may reasonably
request for the purpose of enabling them to pass upon the matters referred
to in Section 6(c) hereof and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company, or the compliance
by the Company with any of the conditions herein contained.
If any of the conditions specified in this Section 6 have not been
fulfilled, this Agreement may be terminated by the Representative on notice
to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each officer, director, partner, employee and agent of each Underwriter, and
each person, if any, who controls any Underwriter within the meaning of Section
15 of
-24-
the Act or Section 20(a) of the Exchange Act, from and against any losses,
claims, damages or liabilities, joint or several (which shall, for all purposes
of this Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all attorneys' fees), to which they or any of them
may become subject, under the Act or otherwise, and will reimburse, as incurred,
the Underwriters and such persons for any legal or other expenses reasonably
incurred in connection with investigating, defending against or appearing as a
third party witness in connection with any losses, claims, damages or
liabilities, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Securities under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such case to the extent, but only to the extent, that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Underwriters specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto. This indemnity will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally, but not jointly, will indemnify and hold
harmless the Company, each of its directors, each nominee (if any) for director
named in the Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, from and against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such
-25-
losses, claims damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by you or by any
Underwriter through you specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the indemnifying party and in the judgment of the
Representative, it is advisable for the Representative or such Underwriters or
controlling
-26-
persons to be represented by separate counsel (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
such Underwriter or such controlling person, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all
such Underwriters and controlling persons, which firm shall be designated in
writing by you). No settlement of any action against an indemnified party shall
be made without the consent of the indemnifying party, which shall not be
unreasonably withheld in light of all factors of importance to such indemnifying
party.
8. Contribution. In order to provide for just and equitable contribution
under the Act in any case in which (i) any Underwriter makes claim for
indemnification pursuant to Section 7 hereof but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that the express provisions of Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in either
such case (after contribution from others) in such proportions that all such
Underwriters are responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per share appearing on the cover page of the Prospectus
bears to the public offering price appearing thereon, and the Company shall be
responsible for the remaining portion, provided, however, that (a) if such
allocation is not permitted by applicable law then the relative fault of the
Company and the Underwriters and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if the respective
-27-
obligations of the Company and the Underwriters to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages (even if the Underwriters and their respective controlling
persons in the aggregate were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 7 and (b) that
the contribution of each contributing Underwriter shall not be in excess of its
proportionate share (based on the ratio of the number of Shares purchased by
such Underwriter to the number of Shares purchased by all contributing
Underwriters) of the portion of such losses, claims, damages or liabilities for
which the Underwriters are responsible. No person guilty of a fraudulent
misrepresentation (within the meaning of Section ll(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the term "Underwriter" includes
any officer, director, or other person who controls an Underwriter within the
meaning of Section 15 of the Act, the word "Company" includes any officer,
director, or person who controls the Company within the meaning of Section 15 of
the Act. If the full amount of the contribution specified in this paragraph is
not permitted by law, then any Underwriter and each person who controls any
Underwriter shall be entitled to contribution from the Company, its officers,
directors and controlling persons to the full extent permitted by law. The
foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the Act other
than the Company and the Underwriters. No contribution shall be requested with
regard to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
9. Substitution of Underwriters. If any Underwriters shall for any reason
not permitted hereunder cancel their obligations to purchase the Firm Shares
hereunder, or shall fail to take up and pay for the number of Firm Shares set
forth opposite their respective names in Schedule A hereto upon tender of such
Firm Shares in accordance with the terms hereof, then:
(a) If the aggregate number of Firm Shares which such Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
number of Firm Shares, the other Underwriters shall be obligated severally,
in proportion to their respective commitments hereunder, to purchase the
Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase.
(b) If any Underwriter or Underwriters so default and the agreed
number of Firm Shares with respect to which such
-28-
default or defaults occurs is more than 10% of the total number of Firm
Shares, the remaining Underwriters shall have the right to take up and pay
for (in such proportion as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters agreed but failed to
purchase. If such remaining Underwriters do not, at the First Closing Date,
take up and pay for the Firm Shares which the defaulting Underwriter or
Underwriters agreed but failed to purchase, the time for delivery of the
Firm Shares shall be extended to the next business day to allow the several
Underwriters the privilege of substituting within twenty-four hours
(including nonbusiness hours) another underwriter or underwriters
satisfactory to the Company. If no such underwriter or underwriters shall
have been substituted as aforesaid, within such twenty-four hour period,
the time of delivery of the Firm Shares may, at the option of the Company,
be again extended to the next following business day, if necessary, to
allow the Company the privilege of finding within twenty-four hours
(including nonbusiness hours) another underwriter or underwriters to
purchase the Firm Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted Underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section, (i) the
Company or the Representative shall have the right to postpone the time of
delivery for a period of not more than seven business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and
the Company agrees promptly to file any amendments to the Registration
Statement or supplements to the Prospectus which may thereby be made
necessary, and (ii) the respective numbers of Firm Shares to be purchased
by the remaining Underwriters or substituted Underwriters shall be taken at
the basis of the underwriting obligation for all purposes of this
Agreement.
If in the event of a default by one or more Underwriters and the remaining
Underwriters shall not take up and pay for all the Firm Shares agreed to be
purchased by the defaulting Underwriters or substitute another underwriter or
underwriters as aforesaid, and the Company shall not find or shall not elect to
seek another underwriter or underwriters for such Firm Shares as aforesaid, then
this Agreement shall terminate.
If, following exercise of the option provided in Section 3(a) hereof, any
Underwriter or Underwriters shall for any reason not permitted hereunder cancel
their obligations to purchase Option Shares at the Option Closing Date, or shall
fail to take up and pay for the number of Option Shares, which they become
obligated to purchase at the Option Closing Date upon tender of such Option
Shares in accordance with the terms hereof, then the remaining Underwriters or
substituted Underwriters may take up and pay for the Option Shares of the
defaulting Underwriters in
-29-
the manner provided in Section 9(b) hereof. If the remaining Underwriters or
substituted Underwriters shall not take up and pay for all such Option Shares,
then the Underwriters shall be entitled to purchase the number of Option Shares
for which there is no default or, at their election, the option shall terminate,
the exercise thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any nondefaulting Underwriter to the
Company, provided that the provisions of this Section 9 shall not in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
10. Survival of Indemnities, Contribution, Warranties and Representations.
The respective indemnity and contribution agreements of the Company and the
Underwriters contained in Sections 7 and 8 hereof, and the representations and
warranties of the Company contained herein shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriters, the Company or any of its directors and officers, or any
controlling person referred to in said Sections, and shall survive the delivery
of, and payment for, the Shares.
11. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the Underwriter, or
the Underwriter, by written or telegraphic notice to the Company, may terminate
this Agreement prior to the earlier of (i) 11:00 A.M., New York City time, on
the first full business day after the Effective Date; or (ii) the time when the
Underwriter, after the Registration Statement becomes effective, releases the
Firm Shares for public offering. The time when the Underwriter "releases the
Firm Shares for public offering" for the purposes of this Section 10 means the
time when the Underwriter releases for publication the first newspaper
advertisement, which is subsequently published, relating to the Firm Shares or
the time when the Underwriter releases for delivery to members of a selling
group copies of the Prospectus and an offering letter or an offering telegram
relating to the Firm Shares, whichever will first occur.
(b) This Agreement, including without limitation, the obligation to
purchase the Firm Shares and the obligation to purchase the Option Shares after
exercise of the option referred to in Section 3 hereof, are subject to
termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and payment for all the Firm Shares or the
Option Shares, as the case may be, if, prior to such time, any of the following
shall have occurred: (i) the Company withdraws the
-30-
Registration Statement from the Commission or the Company does not or cannot
expeditiously proceed with the public offering; (ii) the representations and
warranties in Section 4 hereof are not materially correct or covenants in
Section 5 hereof cannot be complied with; (iii) trading in securities generally
on the New York Stock Exchange or the American Stock Exchange will have been
suspended; (iv) limited or minimum prices will have been established on either
such Exchange; (v) a banking moratorium will have been declared either by United
States federal or New York State authorities; (vi) any other restrictions on
transactions in securities materially affecting the free market for securities
or the payment for such securities, including the Firm Shares or the Option
Shares, will be established by NASDAQ, by the Commission, by any other United
States federal or state agency, by action of the Congress or by Executive Order;
(vii) trading in any securities of the Company shall have been suspended or
halted by any national securities exchange, the NASD or the Commission; (viii)
there has been a materially adverse change in the condition (financial or
otherwise), prospects or obligations of the Company; (ix) the Company will have
sustained a material loss, whether or not insured, by reason of fire, flood,
accident or other calamity; (x) any action has been taken by the government of
the United States or any department or agency thereof which, in the judgment of
the Underwriter, has had a material adverse effect upon the market or potential
market for securities in general; or (xi) the market for securities in general
or political, financial or economic conditions will have so materially adversely
changed that, in the judgment of the Underwriter, it will be impracticable to
offer for sale, or to enforce contracts made by the Underwriter for the resale
of, the Firm Shares or the Option Shares, as the case may be.
(c) If this Agreement is terminated pursuant to Section 6 hereof or this
Section 11 or if the purchases provided for herein are not consummated because
any condition of the Underwriter's obligations hereunder is not satisfied or
because of any refusal, inability or failure on the part of the Company to
comply with any of the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company shall be unable to or does not
perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 10 of this
Agreement.
12. Information Furnished by the Underwriters to the Company. It is hereby
acknowledged and agreed by the parties hereto that for the purposes of this
Agreement, including, without limitation, Sections 4(e), 7(a), 7(b) and 8
hereof, the only information given by the Underwriters to the Company for use in
the Prospectus are the statements set forth on page [2] with
-31-
respect to stabilization, under the heading "Underwriting" and the identity of
counsel to the Underwriters under the heading "Legal Matters", as such
information appears in any Preliminary Prospectus and in the Prospectus.
13. Notices and Governing Law. All communications hereunder will be in
writing and, except as otherwise provided, will be delivered at, or mailed by
certified mail, return receipt requested, or telegraphed to, the following
addresses: if to the Placement Agent, to 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxx Xxxxxxxxx, Executive Vice President, with a copy to
Xxxxxxx Xxxxxx & Xxxx, P.C., Attn: Xxxxxxxx X. Xxxxxxx, Esq., 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; if to the Company, addressed to it at 0000
Xxxxxxxxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000, Attention: Ben Nemen, President,
with a copy to Xxxxxx Xxxxxxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxx X. Xxxxxxx, Esq.; or, in each case, to such other
address as the parties may hereinafter designate by like notice.
This Agreement shall be deemed to have been made and delivered in New York
City and shall be governed as to validity, interpretation, construction, effect
and in all other respects by the internal laws of the State of New York. The
Company (1) agrees that any legal suit, action or proceeding arising out of or
relating to this Agreement shall be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (2) waives any objection which the Company
may have now or hereafter to the venue of any such suit, action or proceeding,
and (3) irrevocably consents to the jurisdiction of the New York State Supreme
Court, County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. The Company further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agrees that service of process upon the
Company mailed by certified mail) to the Company's address shall be deemed in
every respect effective service of process upon the Company, in any such suit,
action or proceeding.
14. Parties in Interest. This Agreement is made solely for the benefit of
the several Underwriters, the Company and, to the extent expressed, any person
controlling the Company or any of the Underwriters, each officer, director,
partner, shareholder, employee and agent of the several Underwriters, the
directors of the Company, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns, and, no other person will acquire or have any right under or by virtue
of this Agreement.
-32-
The term "successors and assigns" will not include any purchaser of the Shares
from any of the several Underwriters, as such purchaser.
15. Validity. In case any term of this Agreement will be held invalid,
illegal or unenforceable, in whole or in part, the validity of any other terms
of this Agreement will not in any way be affected thereby.
16. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein.
17. Counterparts. This Agreement may be executed in counterparts and each
of such counterparts will for all purposes be deemed to be an original, and such
counterparts together will constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement between the Company and the Underwriter in accordance
with its terms.
Very truly yours,
INTELLICELL CORP.
By:
----------------------------
Name:
Title:
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
SANDS BROTHERS & CO., LTD.
By:
------------------------------
For itself and as Representative
of the several Underwriters
-33-
SCHEDULE A
Name of Underwriter Number of Firm Shares to be Purchased
------------------- -------------------------------------
Sands Brothers & Co., Ltd.
Total: 1,666,667
=========
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