UNDERWRITING AGREEMENT
EXHIBIT
1.1
___________________,
2007
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Marino Capital Partners, Inc.
0000 Xxxxxx Xx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxx, CEO
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U.S. EURO Securities, Inc.
00000 Xxxxxxx Xxx Xxxxx, Xxxxxxxxx Xxxxx
Xxxxxxx Xxx, XX 00000
Attn: Xxxxxxx Xxx Xxxxxx,
CEO
|
Gentlemen:
U.S.
Dry
Cleaning Corporation, a Delaware corporation (the “Company”), hereby confirms
its agreement with you (collectivelly, the “Underwriters”) as follows:
SECTION
1
THE
OFFERING
1.1
Description
of the Securities. The
Company proposes to issue and sell (the “Offering”) a minimum of 1,500,000 and a
maximum of up to 3,000,000 Units (the “Units”) of the Company’s securities, each
Unit comprising one share of its Common Stock (the “Shares”) and one redeemable
warrant to purchase one share of common stock (the “Warrants”), pursuant to the
terms of a Registration Statement on Form SB-2 (the “Registration Statement”)
filed with the Securities and Exchange Commission (“SEC”) on December 27, 2006,
and any pre- and post-effective amendments and supplements thereto. Except
as
otherwise provided herein, the
Company hereby appoints the Underwriters its exclusive (managing) agents to
sell
the Units, subject to the terms and provisions of this Agreement, on a “best
efforts, minimum/maximum” basis.
1.2
Allocation
of the Securities. The
Units
are allocated between the Underwriters as follows:
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Marino
Capital Partners, Inc.
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[___________]
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US
EURO Securities, Inc.
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[___________]
|
1.3
Direct
Investments.
As
allowed by any applicable laws, rules, or regulations, certain of the officers
and directors of the Company intend to directly offer and sell the Units to
certain individuals who are familiar with the Company and/or its officers and
directors (“Direct Investors”). The Underwriters agree to allocate up to
1,500,000 Units of the Offering to Direct Investors. The Underwriters shall
receive the Underwriters’ Compensation (as defined in Section 3.2) on the entire
gross proceeds of the Offering, including any sales to Direct Investors who
participate in the Offering.
1
SECTION
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
In
order
to induce the Underwriters to enter into this Agreement, the Company hereby
represents and warrants to and agrees with the Underwriters that:
2.1
Registration
Statement and Prospectus.
The
Registration Statement has been prepared by the Company in conformity with
the
requirements of the Act of 1933 (the “Act”) and the rules and regulations of the
Securities and Exchange Commission (the “SEC”) thereunder, and the Registration
Statement has been filed with the SEC. Copies of the Registration Statement
and
any amendments, and all forms of the related prospectuses contained therein,
have been delivered to the Underwriters. The Registration Statement, includes
the prospectus, Part II, and financial schedules and exhibits thereto, as
amended at the time when it shall become effective, and the prospectus included
as part of the Registration Statement on file with the SEC when it shall become
effective or, if the procedure in Rule 430A of the Rules and Regulations (as
defined below) under the Act is followed, the prospectus that discloses all
the
information that was omitted from the prospectus on the effective date pursuant
to such Rule, and in either case, together with any changes contained in any
prospectus filed with the SEC by the Company with your consent after the
effective date of the Registration Statement, is herein referred to as the
“Final Prospectus.” If the procedure in Rule 430A is followed, the prospectus
included as part of the Registration Statement on the date when the Registration
Statement became effective is referred to herein as the “Effective Prospectus.”
Any prospectus included in the Registration Statement and in any amendments
thereto prior to the effective date of the Registration Statement is referred
to
herein as a “Preliminary Prospectus.” For purposes of this Agreement, “Rules and
Regulations” mean the rules and regulations adopted by the SEC under the
Act.
Included
in the Registration Statement are the 3,000,000 Units proposed to be sold in
the
Offering, the Shares, the Warrants, the shares of Common Stock reserved against
exercise of the Warrants (the “Warrant Shares”)., the Underwriters’ Warrants (as
defined below), and the shares of Common Stock reserved against exercise of
the
Underwriters’ Warrants (the “Underwriters’ Warrant Shares”). As used in this
Agreement, the term “Effective Date” refers to the date the SEC declares the
Registration Statement effective pursuant to Section 8 of the Act.
2.2
Accuracy
of Registration Statement and Prospectus.
The SEC
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Units, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Act and the
applicable Rules and Regulations and to the Company’s knowledge has not included
at the time of filing any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; except that the foregoing shall not apply
to
statements in or omissions from any Preliminary Prospectus in reliance upon,
and
in conformity with, written information furnished to the Company by the
Underwriters, or from any Underwriters through the Underwriters, specifically
for use in the preparation thereof.
2
When
the
Registration Statement becomes effective and on the final closing of the sale
of
the Units under the Offering (the “Closing Date”), the Registration Statement,
the Effective Prospectus (and on the Closing Date, the Final Prospectus) will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations. No such document will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
except that the foregoing does not apply to information contained in or omitted
from the Registration Statement or the Effective Prospectus or Final Prospectus
in reliance upon written information furnished by the Underwriters, or by any
Underwriter through the Underwriters, specifically for use in the preparation
thereof. The Company will not at any time hereafter file any amendments to
the
Registration Statement or in accordance with Rule 424(b) of the Rules and
Regulations of which the Underwriters shall not have been previously advised
in
advance of filing or to which any Underwriter shall reasonably object in
writing.
2.3
Financial
Statements.
Squar,
Xxxxxx, Xxxxxxx & Xxxxxxxxxx, LLP, whose reports appear in the Effective
Prospectus and the Final Prospectus, are, and during the periods covered by
their reports were, independent accountants as required by the Act and the
applicable Rules and Regulations. The financial statements and schedules
(including the related notes) included in the Registration Statement, any
Preliminary Prospectus or the Effective Prospectus or the Final Prospectus,
present fairly the financial position, the results of operations, and changes
in
financial position of the entities purported to be shown thereby at the dates
and for the periods indicated; and such financial statements have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods indicated.
2.4
No
Material Adverse Change.
Except
as may be reflected in or contemplated by the Effective Prospectus or the Final
Prospectus, subsequent to the dates as of which information is given in the
Effective Prospectus or the Final Prospectus, and prior to the Closing Dates,
(a) there shall not have been any material adverse change in the condition,
financial or otherwise, of the Company or in its business taken as a whole;
(b)
there shall not have been any material transaction entered into by the Company
other than transactions in the ordinary course of business which are not
disclosed in the Effective or the Final Prospectus; (c) the Company shall not
have incurred any material liabilities, obligations or claims, contingent or
otherwise, which are not disclosed in the Effective Prospectus or the Final
Prospectus; and (d)
except in the ordinary course of business and with the consent of the
Underwriter, prior to the effective date of the Registration Statement there
shall not have been nor will there by any change in the capital stock or
long-term debt (except current payments) of the Company; and
(e)
the
Company has not and will not have paid or declared any dividends or other
distributions on its capital stock.
2.5
No
Defaults.
Other
than as disclosed in the Effective Prospectus or the Final Prospectus, the
Company is not in any default (which has not been waived) in the performance
of
any obligation, agreement or condition contained in any debenture, note or
other
evidence of indebtedness or any indenture or loan agreement. The execution
and
delivery of this Agreement and the consummation of the transactions herein
contemplated, and compliance with the terms of this Agreement will not conflict
with or result in a breach of any of the terms, conditions or provisions of,
or
constitute a default under, the certificate of incorporation, as amended, or
by-laws of the Company; any note, indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which
it
or any of its property is bound, other than for which the Company has received
a
consent or waiver of such conduct, breach or default or except where such
default would not have a material adverse effect on the business of the Company;
or any existing law, order, rule, regulation, writ, injunction, or decree of
any
government, governmental instrumentality, agency or body, arbitration tribunal
or court, domestic or foreign, having jurisdiction over the Company or its
property. The consent, approval, authorization, or order of any court or
governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the Act or under the securities laws of any state or
jurisdiction.
3
2.6
Incorporation
and Standing.
The
Company is, and at the Closing Date will be, duly incorporated and validly
existing in good standing as a corporation under the laws of the jurisdiction
of
its organization, with full power and authority (corporate and other) to own
its
property and conduct its business, present and proposed, as described in the
Effective Prospectus and the Final Prospectus; the Company has full power and
authority to enter into this Agreement; is duly qualified and in good standing
as a foreign corporation in each jurisdiction in which the character or location
of its properties (owned or leased) or the nature of its business makes such
qualification necessary except where the failure to be so qualified would not
have a material adverse effect on the Company; and each of the Company and
its
Subsidiaries holds all material licenses, certificates, and permits from
governmental authorities necessary for the conduct of its business as described
in the Effective Prospectus and Final Prospectus.
2.7
Capitalization.
The
Company’s authorized and outstanding capitalization on the Effective Date and on
the Closing Date are and will be as set forth under the caption “Capitalization”
in the Effective Prospectus and the Final Prospectus. The Company’s securities
conform to the description thereof contained under the captions “Description of
Securities” in the Effective Prospectus and the Final Prospectus. The
outstanding shares of Common Stock have been, and the shares, the Warrant
Shares, and the Underwriters’ Warrant Shares, upon issuance and delivery against
payment therefor in the manner described herein or in the Final Prospectus,
will
be, duly authorized and validly issued, fully paid and nonassessable. To the
knowledge of the Company, no sales of securities have been made by the Company
in violation of the registration or anti-fraud provisions of the Act or in
violation of any other federal law or laws of any state or jurisdiction, except
as disclosed in the Registration Statement.
2.8
Legality
of Securities.
The
Units, the Shares, the Warrants, the Warrant Shares, the Underwriters’ Warrants
(as defined below), and the shares of Common Stock reserved against exercise
of
the Underwriters’ Warrants (the “Underwriters’ Warrant Shares”) have been duly
and validly authorized and, when issued and delivered against payment therefor
as provided in this Agreement and in the Final Prospectus, will be validly
issued, fully paid and nonassessable. There are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the voting
or
transfer of, any shares of Common Stock pursuant to the Company’s articles of
incorporation, by-laws or other governing documents or any agreement or other
instrument to which the Company is a party or by which the Company may be bound.
Neither the filing of the Registration Statement nor the offering or sale of
the
Units as contemplated by this Agreement gives rise to any rights, other than
those which have been waived or satisfied, for or relating to the registration
of any shares of Common Stock. The Underwriters’ Warrants, when sold and
delivered, will constitute valid and binding obligations of the Company
enforceable in accordance with the terms thereof. A sufficient number of shares
of Common Stock of the Company have been reserved for issuance upon exercise
of
the Underwriters’ Warrants.
4
2.9
Prior
Sales.
No
unregistered securities of the Company, of an affiliate or of a predecessor
of
the Company have been sold within three years prior to the date hereof, except
as disclosed in the Registration Statement.
2.10 Litigation.
Except
as set forth in the Effective Prospectus and the Final Prospectus, there is,
and
at the Closing Date there will be, no action, suit or proceeding before any
court, arbitration tribunal or governmental agency pending, or to the knowledge
of the Company, threatened, which might result in judgments against the Company
not adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise), the business
or the prospects of the Company, or which would materially affect the properties
or assets of the Company.
2.11 Underwriters’
Warrants.
Upon
issuance of the Underwriters’ Warrants pursuant to Section 3.4 of this
Agreement, the Underwriters and designees of the Underwriters will receive
good
and marketable title thereto, free and clear of all liens, encumbrances, charges
and claims whatsoever; and the Company will have on the Effective Date and
at
the time of delivery of such Underwriters’ Warrants the requisite power and
authority to sell, transfer and deliver such Underwriters’ Warrants in the
manner provided hereunder.
2.12 Finder.
The
Company knows of no outstanding claims against it for compensation for services
in the nature of a finder’s fee, origination fee or financial consulting fee
with respect to the offer and sale of the Units hereunder except as previously
disclosed in writing to the Underwriters.
2.14 Tax
Returns.
The
Company has filed all federal and state tax returns that are required to be
filed by it and has paid all taxes shown on such returns and on all assessments
received by it to the extent such taxes have become due unless such tax
obligations have been discharged or disallowed by federal Bankruptcy Court
order. All taxes with respect to which the Company is obligated have been paid
or adequate accruals have been set up to cover any such unpaid
taxes.
5
2.15 Property.
Except
as otherwise set forth in or contemplated by the Effective Prospectus and the
Final Prospectus, the Company has good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
it, in each case free and clear of all liens, encumbrances and defects, except
such as are described in the Effective Prospectus and the Final Prospectus
or
such as not interfere with the use made or proposed to be made of such property
by the Company and any real property and buildings held under lease by the
Company are held by it under valid, existing, and enforceable leases with such
exceptions as are not material and do not interfere with the use made or
proposed to be made of such property and buildings by the Company.
2.16 Authority.
The
execution and delivery by the Company of this Agreement has been duly authorized
by all necessary corporate action and this Agreement is the valid, binding
and
legally enforceable obligation of the Company, except as rights to indemnity
hereunder may be limited by federal or state securities laws or public policy
and except as enforceability may be limited by bankruptcy, insolvency, or
similar laws affecting creditors rights generally and by general equitable
principles.
2.17 Lock-Up.
The
Company has obtained from its Chief Executive Officer his written agreement
placing restrictions on such person from selling any of the shares of the
Company’s common stock, warrants, options, convertible securities or rights
which may be converted into or exercised to purchase shares of the Company’s
common stock, or promotional shares, which he owns or possesses during the
12
month period following the Effective Date, subject to the terms and conditions
of such agreement (“Lock-Up”). At
the
Underwriters' sole discretion, any holders of 5% or more of the Company's
outstanding shares may also be subject to such Lock-Up.
2.18 Use
of Form SB-2.
The
Company is eligible to use Form SB-2 for the offer and sale of the
Units.
2.19 Governmental
Compliance.
The
Company is not in violation of any law, ordinance, governmental rule or
regulation or court decree to which it may be subject which violation might
reasonably be expected to have a material adverse effect on the condition
(financial or other), properties, prospective results of operations or net
worth
of the Company, except as disclosed in the Registration Statement.
2.20 Stabilization.
The
Company has not taken and may not take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the
price of the shares of Common Stock to facilitate the sale or resale of the
Units.
2.21 CUSIP
Number.
The
Company has obtained a CUSIP number for its Common Stock.
2.22 Subsidiaries.
The
Company has no subsidiaries and it has no present intention of acquiring or
forming any subsidiaries, except as disclosed in the Effective Prospectus and
the Final Prospectus.
6
2.23 Books
and Accounts.
The
books, records and accounts of the Company accurately and fairly reflect, in
reasonable detail, the transactions in and dispositions of the assets of the
Company. The systems of internal accounting controls maintained by the Company
are sufficient to provide reasonable assurances that (w) transactions are
executed in accordance with management’s general or specific authorization; (x)
transactions are recorded as necessary (A) to permit preparation of financial
statements in conformity with generally accepted accounting principles and
(B)
to maintain accountability for assets; and (z) the recorded accountability
for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
2.24 Employees.
No
labor disturbance by the employees of the Company exists or is imminent; and
the
Company is not aware of any existing or imminent labor disturbance by the
employees of any principal suppliers, contract manufacturing organizations,
manufacturers, authorized dealers or distributors that might be expected to
result in any material adverse change in the condition (financial or otherwise),
earnings, operations, business or prospects of the Company, considered as a
whole. No collective-bargaining agreement exists with any of the Company’s
employees and, to the best knowledge of the Company, no such agreement is
imminent.
2.25 Political
Contributions.
The
Company has not, directly or indirectly, at any time (x) made any contributions
to any candidate for political office, or failed to disclose fully any such
contribution, in violation of law; (y) made any payment to any state, federal
or
foreign governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or allowed by all
applicable laws; or (z) violated nor is it in violation of any provision of
the
Foreign Corrupt Practices Act of 1977, as amended.
2.27 Investment
Company Act.
The
Company is familiar with the Investment Company Act of 1940, as amended (the
“1940 Act”), and the rules and regulations thereunder, and has in the past
conducted, and intends in the future to conduct, its affairs in such a manner
as
to ensure that it will not become an “investment company” within the meaning of
the 1940 Act and such rules and regulations.
7
2.28 Patents.
The
Company owns or possesses adequate rights to use all material patents, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names and copyrights described or referred to in the Final Prospectus as owned
by or used by any of them, or which are necessary for the conduct of its
business as described in the Final Prospectus; and the Company has not received
any notice of infringement of or conflict with asserted rights of others with
respect to any patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the business, properties, condition (financial
or otherwise), prospects or results of operations of the Company.
SECTION
3
PURCHASE
AND SALE OF THE SECURITIES
3.1
Sale
of Units.
Subject
to the terms and conditions and upon the basis of the representations and
warranties herein set forth, the Company hereby appoints the Underwriters as
its
exclusive agents commencing on the Effective Date for the purpose of offering
the Units as provided in this agreement on a “best efforts” basis. The
Underwriters agree to use their best efforts to sell the Units as the Company’s
agents. It is understood and agreed that there is no firm commitment on the
Underwriters’ part to purchase any of the Units. The Underwriters may, in their
discretion, offer a part of the Units for sale by dealers who are members of
the
National Association of Securities Dealers, Inc. (“NASD”), selected by the
Underwriters, and the Underwriters may form and manage a selling group of such
selected dealers. The Underwriters may allow such concessions upon sales by
selected dealers as may be determined from time to time by the
Underwriters.
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An
underwriting fee of 1%;
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A
management fee of 2%;
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A
selling commission of 6%;
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A
non accountable expense allowance of 3%;
and
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The
Underwriters’ Warrants (as defined in Section
3.4).
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The
Underwriters shall receive the Underwriters’ Warrants, the 1% underwriting fee,
the 2% management fee, and the 3% non-accountable expense allowance on any
investments by Direct Investors but will not receive the 6% selling commission
on such investments by Direct Investors. Any
commissions and fees payable to the Underwriters under this paragraph shall
be
payable on the Closing Date or as otherwise provided herein.
3.3
Inspection
of Certificates.
For the
purpose of expediting the checking and packaging of the Units, if requested
by
any of the Underwriters, the Company agrees to make the certificates for the
Common Shares and the Warrants available for inspection by any Underwriter
at
the main office of any Underwriter at least two full business days prior to
the
proposed delivery date.
8
3.4
Issuance
of Underwriters’ Warrants.
On the
Closing Date of the Offering, at a price of $0.001 per warrant, the Company
will
issue to the Underwriters and their designees, warrants (the “Underwriters’
Warrants”) substantially in the form filed as an Exhibit to the Registration
Statement with such changes therein, if any, as may be agreed upon by the
Company and the Underwriters, to purchase the number of shares of Common Stock
equal to 10% of the Units sold in the Offering for a term beginning
on the Closing Date
and
ending on the date which is five years from the Closing Date at an exercise
price per share equal to 125% of the offering price per share of Units sold
in
the Offering.
The
Underwriters’ Warrant Shares shall be registered on the Registration Statement
for the Offering.
The
Underwriters’ Warrants shall also contain a net exercise provision and
anti-dilution provisions for stock splits, recombinations, and reorganizations
and shall otherwise be in form and substance satisfactory to the
Underwriters.
The
Underwriters’ Warrants may not be transferred other than to officers and
employees of the Underwriters who are also shareholders of the Underwriters,
or
by will, pursuant to the laws of descent and distribution, or by the operation
of law.
3.5
Warrant
Exercise. Upon
the
solicited exercise of any of the Warrants, Marino Capital Partners, Inc. shall
receive 9% of the gross proceeds received by the Company as a result of such
exercise, provided the investor states in writing that the transaction was
solicited and designates in writing an Underwriter as the broker/dealer to
receive compensation for the exercise.
3.6
Representations
of the Parties.
The
parties hereto respectively represent that as of the Effective Date and
continuing through the Closing Date, the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.
3.7
Post-Closing
Information.
The
Underwriters covenant that, reasonably promptly after the Closing Date, they
will supply the Company with all information required from the Underwriters
which must be supplied to the SEC, if any, and such additional information
as
the Company may reasonably request to be supplied to the securities authorities
for such states in which the Units have been qualified for sale.
3.8
Re-Offers
by Selected Dealers.
The
Underwriters shall require any selected dealer selling the Units to agree to
sell the Units on the terms and conditions of the Offering set forth in the
Prospectus.
9
SECTION
4
REGISTRATION
STATEMENT AND PROSPECTUS
4.1
Delivery
of Registration Statements.
The
Company shall deliver to each Underwriter without charge one manually signed
copy of the Registration Statement, including all financial statements and
exhibits filed therewith and any amendments or supplements thereto. The signed
copies of the Registration Statement so furnished to the Underwriters will
include manually signed copies of any and all consents and certificates of
the
independent public accountant certifying to the financial statements included
in
the Registration Statement and signed copies of any and all opinions, consents
and certificates of any other persons whose profession gives authority to
statements made by them and who are named in the Registration Statement as
having prepared, certified, or reviewed any part thereof.
4.2
Delivery
of Pre-Effective Prospectus.
The
Company will cause to be delivered to the Underwriters and to other
broker-dealers, without charge, prior to the Effective Date, as many copies
of
each Preliminary Prospectus filed with the SEC bearing in red ink the statement
required by Item 501(c)(8) of Regulation S-K (Reg. 229.501(c)(8)) as may be
required by the Underwriters. The Company consents to the use of such documents
by the Underwriters and by selected dealers prior to the Effective Date of
the
Registration Statement.
4.3
Delivery
of Prospectus.
The
Company will deliver, without charge, copies of the Effective Prospectus and
the
Final Prospectus at such addresses and in such quantities as may be required
by
the Underwriters for the purposes contemplated by this Agreement and shall
deliver said printed copies of the Effective Prospectus and the Final Prospectus
to the Underwriters and to selected dealers within three business days after
the
Effective Date.
4.4
Further
Amendments and Supplements.
If
during such period of time as in the opinion of the Underwriters or their
counsel the Final Prospectus is required to be delivered under the Act, any
event occurs or any event known to the Company relating to or affecting the
Company shall occur as a result of which the Final Prospectus as then amended
or
supplemented would include an untrue statement of a material fact, or omit
to
state any material fact necessary to make the statements therein, in light
of
the circumstances under which they were made, not misleading, or if it is
necessary at any time after the Effective Date to amend or supplement the Final
Prospectus to comply with the Act, the Company will forthwith notify the
Underwriters thereof and prepare and file with the SEC such further amendment
to
the Registration Statement or supplement the Final Prospectus (at the expense
of
the Company) so as to correct such statement or omission or effect such
compliance. The Company shall furnish and deliver to the Underwriters and to
others whose names and addresses are designated by the Underwriters, all at
the
cost of the Company, a reasonable number of copies of the amended or
supplemented Prospectus which as so amended or supplemented will not contain
any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the Prospectus not misleading in the light of the circumstances
as of the date of such Prospectus, amendment, or supplement, and which will
comply in all respects with the Act. In the event the Underwriters are required
to deliver a Prospectus beyond completion of their participation in the
Offering, upon request the Company will prepare promptly such Prospectus or
Prospectuses as may be necessary to permit continued compliance with the
requirements of Section 10 of the Act.
10
4.5
Use
of Prospectus.
The
Company authorizes the Underwriters and all selected dealers to whom any of
the
Units may be sold to use the Effective Prospectus and the Final Prospectus,
as
from time to time amended or supplemented, in connection with the offer and
sale
of the Units and in accordance with the applicable provisions of the Act, the
Rules and Regulations and state Blue Sky or securities laws.
SECTION
5
COVENANTS
OF THE COMPANY
The
Company covenants and agrees with the Underwriters that:
5.1
Objection
of Underwriter to Amendments or Supplements.
The
Company will not at any time, whether before or after the Effective Date, file
any amendment or supplement to the Registration Statement or Prospectus unless
and until a copy of such amendment or supplement has been furnished to the
Underwriters a reasonable period of time prior to the proposed filing thereof;
or to which the Underwriters or counsel for the Underwriters have reasonably
objected, in writing, on the ground that such amendment or supplement is not
in
compliance with the Act or the Rules and Regulations.
5.2
Company’s
Best-Efforts to Cause Registration Statement to Become
Effective.
The
Company will use its best efforts to cause the Registration Statement to become
effective or, if the procedure in Rule 430A of the Rules and Regulations is
followed, comply with the provisions of and make all requisite filings with
the
SEC pursuant to such Rule and to notify the Underwriters promptly (in writing,
if requested) of all such filings. The Company shall promptly advise the
Underwriters, and will confirm such advice in writing (a) when the Registration
Statement shall become effective and when any amendment thereto shall have
become effective and when any amendment of or supplement to the Effective
Prospectus or the Final Prospectus shall be filed with the SEC; (b) when the
SEC
makes a request or suggestion for any amendment to the Registration Statement
or
the Effective Prospectus or the Final Prospectus or for additional information
and the nature and substance thereof; and (c) of the happening of any event
which in the judgment of the Company makes any material statement in the
Registration Statement or Effective Prospectus or the Final Prospectus untrue
or
which requires the making of any changes in the Registration Statement or the
Effective Prospectus or Final Prospectus in order to make the statements therein
not misleading. The Company shall also promptly notify the Underwriters, and
confirm such notice in writing, when the Company has knowledge of the issuance
by the SEC of an order suspending the effectiveness of the Registration
Statement pursuant to Section 8 of the Act, suspending or preventing the use
of
any Preliminary Prospectus or the Effective Prospectus or Final Prospectus
or
suspending the qualification of the Units for offering or sale in any
jurisdiction, or of the institution of any proceedings for any such purpose.
The
Company will use every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or refusing or
suspending the qualification of the Units, and to obtain as soon as possible
a
lifting of any such suspension order, the reversal of any such refusal to
qualify, and the termination of any such suspension.
5.3.
Preparation
and Filing of Amendments and Supplements.
The
Company agrees to prepare and file promptly with the SEC, upon request of the
Underwriters, such amendments or supplements to the Registration Statement
or
Final Prospectus, in form satisfactory to counsel to the Company, as may be
reasonably necessary, in the opinion of counsel to the Underwriters and of
counsel to the Company; and it shall use its best efforts to cause the same
to
become effective as promptly as possible.
11
5.4
Blue
Sky Qualification.
The
Company will cooperate with the Underwriters in qualifying or registering the
Units and underlying securities for sale under the blue sky laws of such
jurisdictions as the Underwriters and the Company agree, and will continue
such
qualifications in effect so long as is reasonably required for the distribution
of the Units. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not currently qualified or where it would be subject
to
taxation as a foreign corporation.
5.5
Financial
Statements.
The
Company at its own expense will prepare and give such financial statements
and
other information to the SEC, or the proper public bodies of the states in
which
the Units and underlying securities may be registered or qualified, as may
be
required by them.
5.6
Reports
and Financial Statements to the Underwriter.
During
the period ending three years from the Closing Date, the Company will deliver
to
the Underwriters copies of each annual report of the Company, and will deliver
to the Underwriters, within 90 days after the close of each fiscal year of
the
Company, a financial report of the Company. All such reports will include a
balance sheet as of the end of the preceding fiscal year, a statement of
operations, a statement of cash flows and an analysis of shareholders’ equity
covering such fiscal year, and all will be in reasonable detail and certified
by
independent public accountants for the Company. These requirements will be
satisfied if the Company electronically files its Forms 10-KSB, Forms 10-QSB
and
Forms 8-K (or other appropriate forms) when they are filed with the
SEC.
If
the
Company shall fail to furnish the Underwriters with financial statements as
herein provided, within the times specified herein, an Underwriter, after giving
reasonable notice of not less than 30 days (and if the financial statements
are
not provided within such 30 day period), shall have the right to have such
financial statements prepared by independent public accountants of its own
choosing and the Company agrees to furnish such independent public accountants
such data and assistance and access to such records as they may reasonably
require to enable them to prepare such statements and to pay their reasonable
fees and expenses in preparing the same.
During
the period ending three years from the Closing Date, the Company shall also
provide to the Underwriters copies of all other statements, documents, or other
information which the Company shall mail or otherwise make available to any
class of its security holders, or which it shall file with the SEC; and, upon
request in writing from the Underwriter, the Company shall furnish to the
Underwriters such other information as may reasonably be requested and which
may
be properly disclosed to the Underwriters with reference to the property,
business and affairs of the Company provided such written request includes
an
agreement to keep confidential any information which should not be disclosed
to
the public.
12
5.7
Expenses
Paid by the Company.
The
Company will pay or cause to be paid, whether or not the transactions
contemplated hereunder are consummated or the Registration Statement is
prevented from becoming effective or this Agreement is terminated, (a) all
fees
and expenses (including, without limitation, fees and expenses of the Company’s
accountants and counsel, and fees and expenses of counsel for the Underwriters)
in connection with the preparation, printing, filing, delivery and shipping
of
the Registration Statement (including financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus, the Effective
Prospectus and the Final Prospectus as amended or supplemented, and the
printing, delivery and shipping of this Agreement and other underwriting
documents, including Blue Sky Memoranda and Selected Dealer Agreements; (b)
the
filing fee of the NASD; (c) any applicable listing fees; (d) the cost of
printing certificates or other documents representing the Units; (e) the cost
and charges of any transfer agent or registrar; (f) the fees and expenses of
qualifying the Units under the blue sky laws of various jurisdictions; (g)
all
expenses for due diligence, including meetings associated with this Offering,
which are reimbursable weekly or prior to being incurred, as may be requested
by
an Underwriter and as approved in advance in writing by the Company; (h) the
costs of any luncheons, functions, special expenses and all road show and travel
expenses and the Company shall provide arrangements for the payment of these
expenses prior to being incurred, as may be requested by an Underwriter and
approved in writing by the Company; and (i) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
provided for in this Section.
5.8
Reports
to Shareholders.
During
the period ending five years from the Closing Date, the Company will, as
promptly as possible, but not later than 180 days after the end of its annual
fiscal year, render and distribute reports to its shareholders which will
include audited statements of its operations and cash flows during such period
and its balance sheet as of the end of such period, as to which statements
the
Company’s independent certified public accountants shall have rendered an
opinion.
5.9
Section
11(a) Financials.
The
Company will make generally available to its security holders and will deliver
to the Underwriters, as soon as practicable, an earnings statement (as to which
no opinion need be rendered but which will satisfy the provisions of Section
11(a) of the Act) covering a period of at least 12 months beginning after the
Effective Date. Compliance by the Company with Rule 158 promulgated under the
Act shall satisfy the requirements of this Section 5.9.
5.10 Post-Effective
Availability of Prospectus.
The
Company will comply, at its own expense, with all requirements imposed upon
it
by the Act, as now or hereafter amended, by the Rules and Regulations, as from
time to time may be in force, and by any order of the SEC, so far as necessary
to permit the continuance of sales or dealings in the Units.
5.11 Application
of Proceeds.
The
Company will apply the net proceeds from the sale of the Units substantially
in
the manner specifically set forth in the Final Prospectus. Any deviation from
such application must be in accordance with the Final Prospectus and may occur
only after approval by the board of directors of the Company and then only
after
the board of directors has obtained the written opinion as to the propriety
of
any such deviation provided by recognized legal counsel well versed in the
federal and state securities laws.
13
5.12 Agreements
of Certain Shareholders.
The
Company will deliver to the Underwriters, prior to the execution of this
Agreement, the lock-up agreement referred to in Section 2.17.
5.13 Delivery
of Documents.
At or
prior to the Closing, the Company will deliver to the Underwriters true and
correct copies of the certificate of incorporation of the Company and all
amendments thereto; true and correct copies of the by-laws of the Company and
of
the minutes of all meetings of the directors and shareholders of the Company
held prior to the Closing Date which in any way relate to the subject matter
of
this Agreement. All such copies shall be certified by the Secretary of the
Company.
5.14 Cooperation
with Underwriter’s Due Diligence.
At all
times prior to the Closing Date, the Company will cooperate with the
Underwriters in such investigation as the Underwriter may make or cause to
be
made of all the properties, management, business and operations of the Company,
and the Company will make available to the Underwriters in connection therewith
such information in its possession as the Underwriters may reasonably
request.
5.15 Appointment
of Transfer Agent.
The
Company has appointed Interwest Transfer Co., Inc. as its transfer agent for
the
Company’s securities. The Company will not change or terminate such appointment
for a period of three years from the Effective Date without first obtaining
the
written consent of the Underwriters, which consent shall not be unreasonably
withheld.
5.16 Compliance
with Conditions Precedent.
The
Company will use all reasonable efforts to comply or cause to be complied with
the conditions precedent to the several obligations of the Underwriters in
Section 8 hereof.
5.17 Filing
of Form SR.
If
required under the Act, the Company agrees to file with the SEC all required
reports on Form SR in accordance with the provisions of Rule 463 promulgated
under the Act and to provide a copy of such reports to the Underwriters and
their counsel.
5.18 Bulletin
Board.
The
Company will use its best efforts to cooperate with a market maker which is
reasonably acceptable to the Company in applying for quotation of the Shares
on
the Over-the-Counter Bulletin Board (“OTCBB”). The
Company hereby agrees that the Underwriters are reasonably acceptable market
makers for the purpose of applying for quotation of the Shares on the
OTCBB.
5.19 Right
of Inspection.
For a
period of three years after the Effective Date, the Underwriters, at their
expense, will have the right to have a person or persons selected by each
Underwriter review the books and records of the Company upon seven days’ written
notice and at reasonable times. Such person or persons will be required to
execute a confidentiality agreement which will, in part, prohibit disclosure
of
information to any party except the Underwriters, which information shall be
held in confidence unless otherwise specifically agreed to by the Company in
writing.
14
5.20 Outside
Directors, Committees, Executive Compensation.
The
Company shall use its best efforts to have at least two members elected to
its
board of directors who are not officers or employees of the Company (“outside
directors”) on the Effective Date of the Registration Statement, and to cause
two such outside directors to be nominated as directors for two additional
one-year terms. The Company will form independent audit and compensation
committees which shall be comprised of at least three of the Company’s
directors, at least a majority of whom shall be outside directors.
5.21 Financial
Statements and Share Issuances.
The
Company has prepared and delivered to the Underwriters its most recent financial
statements constituting its best estimate of revenues, earnings and cash flow
and shall update such estimates on a quarterly basis during the registration
period. Except in connection with acquisitions or pursuant to the exercise
of
warrants and options outstanding prior to the completion of the Offering, and
the Company’s right to adopt a stock option plan (the “Plan”) reserving no more
than 20% of the issued and outstanding shares of Common Stock of the Company
as
of the date hereof and the grant of options to its officers and employees under
such Plan at an exercise price equal to or greater than the Offering price,
the
Company will not, without the Underwriters’ prior written consent, sell any
shares of capital stock of the Company or issue warrants or options to purchase
any shares of capital stock of the Company during the twelve month period
following the Offering if $7,000,000 gross proceeds or more are raised in the
Offering, or during the six month period following the Closing Date if
$5,000,000 to $6,999,999 in gross proceeds are raised in the Offering. This
provision shall not apply if less than $5,000,000 gross proceeds are raised
in
the Offering.
5.23 Exclusive
Rights. From
the
date of this Agreement through the earlier of the Closing Date or the
termination of the Offering (the “Exclusive Period”), the Underwriters shall be
the Company’s exclusive investment banker for any and all financings of the
Company. The Company shall refrain from negotiating with any other underwriter
or investment banker or other person regarding a possible private or public
offering of any of the Company’s securities without the prior consent of the
Underwriters. If the Company, with the consent of the Underwriters, secures
financing other than the Offering during the Exclusive Period, the Company
shall
pay to the Underwriters a cash commission on the gross proceeds of any financing
equal to 8% of all amounts up to $1,000,000, plus 7% of all amounts from
$1,000,001 through $2,000,000, plus 6% of all amounts over
$2,000,000.
SECTION
6
INDEMNIFICATION
AND CONTRIBUTION
6.1
Indemnification
by Company.
The
Company shall indemnify and hold harmless each Underwriter and each
participating dealer against any and all loss, claim, damage or liability,
joint
or several, to which such Underwriter or participating dealer may become
subject, under the Act or otherwise, insofar as such loss, claim, damage, or
liability (or action with respect thereto) arises out of or is based upon (a)
any violation of any registration requirements; (b) any improper use of sales
literature by the Company; (c) any untrue statement
15
or
alleged untrue statement made by the Company in Section 2 hereof; (d) any untrue
statement or alleged untrue statement of a material fact contained (i) in the
Registration Statement, any Preliminary Prospectus, the Effective Prospectus,
or
the Final Prospectus or any amendment or supplement thereto, or (ii) in any
application or other document executed by the Company specifically for such
application or based upon written information furnished by the Company, filed
in
order to qualify the Units under the securities laws of the states where filings
were made (any such application, document, or information being hereinafter
called “Blue Sky Application”); or (e) the omission or alleged omission to state
in the Registration Statement, any Preliminary Prospectus, the Effective
Prospectus, or the Final 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; and shall reimburse
each Underwriter and each participating dealer for any legal or other reasonable
expenses incurred by such Underwriter and participating dealer in connection
with investigating or defending against or appearing as a third-party witness
in
connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later
be
held to be improper, in which case the person receiving them shall promptly
refund them; except that the Company shall 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 through the Underwriter or
participating dealer by or on behalf of any Underwriter or participating dealer
specifically for use in the preparation of the Registration Statement, any
Preliminary Prospectus, the Effective Prospectus and the Final Prospectus or
any
amendment or supplement thereto, or any Blue Sky Application.
16
6.3
Right
to Provide Defense.
Promptly after receipt by an indemnified party under Section 6.1 or 6.2 above
of
written notice of a claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such section, notify the indemnifying party in writing
of the claim or the commencement
of that action; the failure to notify the indemnifying party shall not relieve
it of any liability which it may have to an indemnified party, except to the
extent that the indemnifying party did not otherwise have knowledge of the
claim
or the commencement of the action and the indemnifying party’s ability to defend
against the claim or action was prejudiced by such failure. Such failure shall
not relieve the indemnifying party from any other liability which it may have
to
the indemnified party or any person identified in Section 6.4 below. If any
such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any
other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from
the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable
to
the indemnified party under such section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; except that the
indemnified party shall have the right to employ counsel to represent the
indemnified party who may be subject to liability arising out of any claim
in
respect of which indemnity may be sought by the indemnified party under this
Section 6 if, in the reasonable judgment of the indemnified party, it is
advisable for the indemnified party to be represented by separate counsel,
and
in that event the fees and expenses of such separate counsel shall be paid
by
the indemnifying party. The indemnified party may, but shall not be obligated
to, participate in the defense at its own expense with its own
counsel.
6.4
Contribution.
If the
indemnification provided for in Sections 6.1 and 6.2 of this Agreement is
unavailable or insufficient to hold harmless an indemnified party, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages, or liabilities
referred to in Sections 6.1 or 6.2 above (a) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one
hand and the Underwriters or participating dealers on the other from the
offering of the Units; or (b) if the allocation provided by clause (a) above
is
not permitted by applicable law, in such proportion as is appropriate to reflect
the relative benefits referred to in clause (a) above but also the relative
fault of the Company on the one hand and the Underwriters or participating
dealers on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Underwriters or participating dealers shall be deemed to be in the
same
proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company bear to the total Underwriters’ Compensation
received by the Underwriters or participating dealers under this Agreement.
Relative fault shall be determined by reference to, among other things, whether
the untrue statement of a material fact or the omission to state a material
fact
relates to information supplied by the Company, the Underwriter, or the
participating dealers and the parties’ relative intent, knowledge, access to
information, and opportunity to correct or prevent such untrue statement or
omission. For purposes of this Section 6.4, the term “damages” shall include
reasonable counsel fees or other expenses reasonably incurred by the Company,
the Underwriters, or participating dealers in connection with investigating
or
defending any action or claim which is the subject of the contribution
provisions of this Section 6.4. Notwithstanding the provisions of this Section
6.4, no Underwriter or participating dealer shall be required to contribute
any
amount in excess of the amount by which the total price at which the Units
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter or participating dealer
has otherwise been required to pay by reason of any such untrue statements
or
omissions. No person adjudged guilty of fraudulent misrepresentation (within
the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any
person who was not guilty of such fraudulent misrepresentation. Under this
Section 6.4, each Underwriter’s obligations to contribute are several in
proportion to their respective underwriting obligations and not joint. Each
party entitled to contribution agrees that upon the service of a summons or
other initial legal process upon it in any action instituted against it in
respect of which contribution may be sought, it shall promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in Section 6.4 hereof).
17
6.5
Extension
of Obligations.
The
obligations of the Company under this Section 6 shall be in addition to any
other liability which the Company may otherwise have, and shall extend, upon
the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section shall be in addition to any liability that the respective
Underwriters may otherwise have, and shall extend, upon the same terms and
conditions, to each director of the Company (including any person who, with
his
consent, is named in the Registration Statement as about to become a director
of
the Company), to each officer of the Company who has signed the Registration
Statement, and to each person, if any, who controls the Company within the
meaning of the Act.
SECTION
7
EFFECTIVENESS
OF AGREEMENT
Once
fully executed, this Agreement shall become effective at 10:00 a.m., Los Angeles
time, on the first full business day after the Effective Date.
SECTION
8
CONDITIONS
OF THE UNDERWRITERS’ OBLIGATIONS
The
obligations of the Underwriters hereunder to sell the Units on a “best efforts”
basis shall be subject to the accuracy of each of the representations and
warranties on the part of the Company herein contained, to the performance
by
the Company of all its agreements herein contained, to the fulfillment of or
compliance by the Company with all covenants and conditions hereof, and to
the
following additional conditions:
8.1
Effectiveness
of Registration Statement.
The
Registration Statement and all post-effective amendments thereto filed with
the
SEC prior to the Closing Date shall have become effective and any and all
filings required by Rule 424 and Rule 430A of the Rules and Regulations shall
have been made; no stop order suspending the effectiveness of the Registration
Statement or any amendment or supplement thereto shall have been issued; no
proceeding for that purpose shall have been initiated or threatened by the
SEC
or be pending; any request for additional information on the part of the SEC
(to
be included in the Registration Statement or Final Prospectus or otherwise)
shall have been complied with to the satisfaction of the SEC; and neither the
Registration Statement, the Effective Prospectus or Final Prospectus, nor any
amendment thereto shall have been filed to which counsel to the Underwriter
shall have reasonably objected in writing or have not given their
consent.
18
8.2
Accuracy
of Registration Statement.
Neither
of the Underwriters shall have advised the Company that the Registration
Statement or the Effective Prospectus or Final Prospectus or any amendment
thereof or supplement thereto contains an untrue statement of a fact which,
in
the opinion of counsel to an Underwriter, is material, or omits to state a
fact
which, in the opinion of such counsel, is material and is required to be stated
therein, or is necessary to make the statements therein not
misleading.
8.4
Litigation
and Other Proceedings.
Other
than as disclosed in the Registration Statement or Prospectus, there shall
be no
litigation instituted or threatened against the Company and there shall be
no
proceeding instituted or threatened against the Company before or by any federal
or state SEC, regulatory body or administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, management, licenses, operations
or financial condition or income of the Company considered as an
entity.
8.5
Lack
of Material Change.
Except
as contemplated herein or as set forth in the Registration Statement and Final
Prospectus, during the period subsequent to the date of the last audited balance
sheet included in the Registration Statement, the Company (a) shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the last audited balance sheet included in the
Registration Statement, and (b) except in the ordinary course of its business,
the Company shall not have incurred any liabilities, claims or obligations
(direct or contingent) or disposed of any of its assets, or entered into any
material transaction or suffered or experienced any substantially adverse change
in its condition, financial or otherwise. The capital stock and surplus accounts
of the Company shall be substantially the same as at the date of the last
audited balance sheet included in the Registration Statement, without
considering the proceeds from the sale of the Units, other than as may be set
forth in the Final Prospectus, and except as the surplus reflects the result
of
continued profits or losses from operations consistent with prior
periods.
8.6
Review
by Underwriter’s Counsel.
The
authorization of the Units, the Shares, the Warrants, the Warrant Shares, the
Underwriters’ Warrants, and the Underwriters’ Warrant Shares, the Registration
Statement, the Effective Prospectus and the Final Prospectus and all corporate
proceedings and other legal matters incident thereto and to this Agreement
shall
be reasonably satisfactory in all respects to counsel to the
Underwriters.
19
8.7
Opinion
of Counsel.
The
Company shall have furnished to the Underwriters opinions as of the Effective
Date and the Closing Date, addressed to the Underwriters, from counsel to the
Company expressing such opinions as are set forth in the form attached
hereto.
8.8
Accountant’s
Letter.
The
Underwriters shall have each received letters addressed to each of them dated
the Effective Date, and the Closing Date, respectively, and a draft of such
letter at least five days prior to the Effective Date, and the Closing Date,
from Squar, Xxxxxx, Xxxxxxx & Xxxxxxxxxx, LLP, confirming that they are
independent public accountants with respect to the Company within the meaning
of
the Act and the published Rules and Regulations. In the letter dated the date
of
this Agreement, they shall provide such further “comfort” as the Underwriters
may request consistent with the professional standards applicable to certified
public accountants. The Underwriters shall be furnished without charge, in
addition to the original signed copies, such number of signed or photostatic
or
conformed copies of such letters as an Underwriter shall reasonably
request.
8.9
Officer’s
Certificate.
The
Company shall furnish to the Underwriters certificates, each signed by the
Chief
Executive Officer, President and Chief Financial Officer of the Company, dated
as of the Effective Date and as of each Closing Date the Underwriters designate,
to the effect that:
(a) The
representations and warranties of the Company in this Agreement are true and
correct at and as of the date of the certificate, and the Company has complied
with all the agreements and has satisfied all the conditions on its part to
be
performed or satisfied at or prior to the date of the certificate;
(b) The
Registration Statement has become effective and to the best of the knowledge
of
the respective signers no order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been initiated
or is threatened by the SEC; and
(c) The
respective signers have each examined the Registration Statement and the Final
Prospectus and any amendments and supplements thereto, and to the best of their
knowledge the Registration Statement and the Final Prospectus and any amendments
and supplements thereto contain all statements required to be stated therein,
do
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and, since the Effective Date, there has occurred no
event required to be set forth in an amended or a supplemented Prospectus which
has not been so set forth.
8.10 Tender
of Delivery of Units and Underwriters’ Warrants.
All of
the Units being offered by the Company and being sold by the Underwriters,
and
the Underwriters’ Warrants being purchased from the Company by the Underwriters,
shall be tendered for delivery in accordance with the terms and provisions
of
this Agreement.
20
8.11 Blue-Sky
Registration or Qualification.
The
Units shall be registered or qualified in such states as the Underwriters and
the Company may agree pursuant to Section 5.4, and each such registration or
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Dates. On the Effective Date and the Closing Date,
the
Underwriters’ counsel shall provide written information which contains the
following:
(a) the
names
of the states in which applications to register or qualify the Units have been
filed;
(b) the
status of such registrations or qualifications in such states as of the date
of
such letter;
(c) a
list
containing the name of each such state in which the Units may be legally offered
and sold by a dealer licensed in such state and the number of each which may
be
legally offered and sold in the Offering in each such state as of the date
of
such letter;
(d) with
respect to the written information provided on the Effective Date, a
representation that such counsel will promptly update such written information
if counsel receives actual notice of any material changes in the information
provided therein between the Effective Date and the final Closing
Date;
(e) the
names
of the states in which the offer and sale of the Units in the Offering is exempt
from registration or qualification; and
(f) a
statement that the Underwriters and selected dealers in the Offering may rely
upon the information contained therein.
8.12 Approval
of Underwriters’ Counsel.
All
opinions, letters, certificates and evidence mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance satisfactory to counsel to the
Underwriters, whose approval shall not be unreasonably withheld. The suggested
form of such documents shall be provided to the counsel for the Underwriters
at
least three business days before the dates they are to be provided, that is,
the
Effective Date and the Closing Dates.
8.13 Officers’
Certificate as a Company Representation.
Any
certificate signed by an officer of the Company and delivered to the
Underwriters or counsel for the Underwriters shall be deemed a representation
and warranty by the Company to the Underwriters as to the statements made
therein.
SECTION
9
TERMINATION
9.1
Termination
Because of Noncompliance.
This
Agreement may be terminated in its entirety by the Underwriters by notice to
the
Company prior to its effectiveness in the event that the Company shall have
failed or been unable to comply with any of the terms, conditions or provisions
of this Agreement which the Company is required by this Agreement to be
performed, complied with or fulfilled (including but not limited to those
specified in Sections 2, 3, 4, 5, and 8 hereof) within the respective times
herein provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Underwriters in
writing.
21
9.2
Market-out
Termination.
This
Agreement may be terminated by the Underwriters by notice to the Company at
any
time if, in the sole judgment of the Underwriters, payment for and delivery
of
the Units is rendered impracticable or inadvisable because of:
(a) Material
adverse changes in the Company’s business, business prospects, management,
earnings, properties or conditions, financial or otherwise;
(b) Any
action, suit, or proceedings, at law or in equity, hereafter threatened or
filed
against the Company by any person or entity, or by any federal, state or other
commission, board or agency wherein any unfavorable result or decision could
materially adversely affect the business, business prospects, properties,
financial condition or income or earnings of the Company;
(c) Additional
material governmental restrictions not in force and effect on the date hereof
shall have been imposed upon the trading in securities generally, or new
offering or trading restrictions shall have been generally established by a
registered securities exchange, the SEC, the National Association of Securities
Dealers, Inc. or other applicable regulatory authority, or trading in securities
generally on any such exchange, the Nasdaq Stock Market, or otherwise, shall
have been suspended, or a general moratorium shall have been established by
federal or state authorities;
(d) Substantial
and material changes in the condition of the market beyond normal fluctuations
such that it would be undesirable, impracticable or inadvisable in the judgment
of the Underwriters to proceed with this Agreement or with the public offering
of the Units;
(e) Any
outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial national
or international calamity or emergency if, in the judgment of the Underwriter,
the effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the sale
of
and payment for the Units; or
9.3
Termination
Upon Expiration of Prospectus. The
Company may terminate the Offering when the term of the Offering period under
the Final Prospectus expires, unless the term is extended by mutual agreement
of
the parties.
22
9.4
Effect
of Termination Hereunder.
Any
termination of this Agreement pursuant to this Section 9 shall be without
liability of any character (including, but not limited to, loss of anticipated
profits or consequential damages) on the part of any party hereto, except that
the Company shall remain obligated to pay the costs and expenses provided to
be
paid by it specified in Sections 3.2, 3.4, 3.5 and 5.7; and the Company and
the
Underwriters shall be obligated to pay, respectively, all losses, claims,
damages or liabilities, joint or several, under Sections 6.1 or 6.4 in the
case
of the Company and Sections 6.2 or 6.4 in the case of an
Underwriter.
SECTION
10
UNDERWRITER’S
REPRESENTATIONS AND WARRANTIES
The
Underwriters represent and warrant to and agree with the Company
that:
10.1 Registration
as Broker-Dealer and Member of NASD.
Each of
the Underwriters is registered as a broker-dealer with the SEC and is registered
as a securities broker-dealer in all states in which it will sell Units and
is a
member in good standing of the National Association of Securities Dealers,
Inc.
10.2 Incorporation
and Standing.
Each of
the Underwriters is, and at the Closing Date will be, duly incorporated and
validly existing in good standing as a corporation under the laws of the
jurisdiction of its organization, with full power and authority to enter into
this Agreement; is duly qualified and in good standing as a foreign corporation
in each jurisdiction in which the character or location of its properties (owned
or leased) or the nature of its business makes such qualification necessary
except where the failure to be so qualified would not have a material adverse
effect on such Underwriter.
10.3 Authority.
The
execution and delivery by each of the Underwriters of this Agreement has been
duly authorized by all necessary corporate action and this Agreement is the
valid, binding and legally enforceable obligation of the Underwriters, except
as
rights to indemnity hereunder may be limited by federal or state securities
laws
or public policy and except as enforceability may be limited by bankruptcy,
insolvency, or similar laws affecting creditors rights generally and by general
equitable principles.
10.4 No
Pending Proceedings.
There
is not now pending or threatened against either of the Underwriters any action,
suit or proceeding before any court, arbitration tribunal or government agency
pending, or to the knowledge of such Underwriter, threatened concerning its
activities as a broker or dealer or otherwise which would materially affect
the
Underwriter’s capacity to complete the terms of this Agreement.
10.5 Governmental
Compliance.
Neither
of the Underwriters is not in violation of any law, ordinance, governmental
rule
or regulation or court decree to which it may be subject which violation might
reasonably be expected to have a material adverse effect on such Underwriter’s
capacity to complete the terms of this Agreement.
23
10.6 Company’s
Right to Terminate.
In the
event any action or proceeding of the type referred to in Section 10.2 above
shall be instituted or threatened against an Underwriter at any time prior
to
the Effective Date hereunder, or in the event there shall be filed by or against
an Underwriter in any court pursuant to any federal, state, local or municipal
statute, a petition in bankruptcy or insolvency or for reorganization or for
the
appointment of a receiver or trustee of its assets or if it makes an assignment
for the benefit of creditors, the Company shall have the right on three days’
written notice to the Underwriters to terminate this Agreement without any
liability to the Underwriters or the Company of any kind except for the payment
of all expenses as provided herein.
10.7 Underwriters’
Covenants.
Each of
the Underwriters covenants and agrees with the Company that (a) it will not
offer or sell the Units in any state or other jurisdiction where it has not
been
advised in writing by its legal counsel or counsel for the Company that the
Units are qualified for the offer and sale therein or exempt from such
requirements; (b) it will not make any representation to any person in
connection with the offer and sale of the Units covered hereby except as set
forth in the Registration Statement or as authorized in writing by the Company
and the Underwriter; (c) it will comply in good faith with all laws, rules
and
regulations applicable to the distribution of the securities, including the
Rules of Fair Practice of the NASD; (d) the Underwriter has the authority to
execute this Agreement; and (e) the Underwriter will not deal with or engage
any
finder who is not a registered broker/dealer or a foreign finder as allowed
by
NASD rules in connection with the proposed Offering.
SECTION
11
NOTICE
Except
as
otherwise expressly provided in this Agreement:
11.1 Notice
to the Company.
Whenever notice is required by the provisions of this Underwriting Agreement
to
be given to the Company, such notice shall be in writing addressed to the
Company as follows:
U.S.
Dry
Cleaning Corporation
000
Xxxxxxxx Xxxxxx Xxx, Xxxxx 000
Xxxx
Xxxxxxx, XX 00000
Attn:
Xxxxxx
X.
Xxx, CEO
with
a
copy to:
Xxxx
X.
Xxxxxxxxxx, Esq.
Xxxxxxxxx
Traurig LLP
000
Xxxx
Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx
Xxxx, XX 00000
24
11.2 Notice
to the Underwriters.
Whenever notice is required by the provisions of this Agreement to be given
to
the Underwriters, such notice shall be given in writing addressed to the
Underwriters as follows:
|
Marino
Capital Partners, Inc.
|
US
EURO Securities, Inc.
|
|
0000
Xxxxxx Xx., Xxxxx 000
|
00000
Xxxxxxx Xxx Xx., Xxx. XX-0
|
|
Xxxxxxx
Xxxxx, XX 00000
|
Xxxxxxxxx,
XX 00000
|
|
Attn:
Xxxxx Xxxxxx, CEO
|
Attn:
Xxxxxxx Xxx Xxxxxx, CEO
|
with
a
copy to:
Xxxxxx
& Xxx, APC
00000
Xxxx Xxxxxx
Xxxxxx,
XX 00000
Attn:
Xxxxx Xxxxxx, Esq.
11.3
Effective
Date of Notices.
Such
notices shall be effective on the date of delivery set forth on the receipt
if
the notice is sent by registered or certified mail or any expedited
delivery.
SECTION
12
MISCELLANEOUS
12.1
Benefit.
This
Agreement is made solely for the benefit of the Underwriters, the Company,
their
respective officers, directors and controlling persons referred to in Section
15
of the Act and such other persons as are identified in this Agreement, and
their
respective successors and assigns, and no other person shall acquire or have
any
right under or by virtue of this Agreement. The term “successor” or the term
“successors and assigns” as used in this Agreement shall not include any
purchasers, as such, of any of the Units.
12.2
Survival.
The
respective indemnities, agreements, representations, warranties, and covenants
of the Company or its officers and the Underwriters as set forth in or made
pursuant to this Agreement and the indemnity and contribution agreements
contained in Section 6 hereof of the Company and the Underwriters (as defined
in
Section 6) shall survive and remain in full force and effect, regardless of
(a)
any investigation made by or on behalf of the Company or the Underwriters or
any
such officer or director thereof or any controlling person of the Company or
of
the Underwriters, (b) delivery of or payment for the Units, and (c) the Closing
Date, and any successor of the Company or the Underwriters or any controlling
person, officer or director thereof, as the case may be, shall be entitled
to
the benefits hereof.
12.3
Governing
Law.
This
Agreement and the rights of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of California including
all
matters of construction, validity, performance, and enforcement and without
giving effect to the principles of conflict of laws.
12.4
Jurisdiction.
The
parties submit to the jurisdiction of the Courts of the County of Orange, State
of California or a Federal Court empaneled in the Central District of the State
of California for the resolution of all legal disputes arising under the terms
of this Agreement.
12.5
Attorneys’
Fees.
In the
event any Party hereto shall commence legal proceedings against the other to
enforce the terms hereof, or to declare rights hereunder, as the result of
a
breach of any covenant or condition of this Agreement, the prevailing party
in
any such proceeding shall be entitled to recover from the losing party its
costs
of suit, including reasonable attorneys’ fees, as may be fixed by the
court.
25
12.6
Assignment.
This
Agreement shall be binding upon the parties hereto, their successors and
assigns, and prior to the Closing Date shall not be assignable without the
express written consent of all parties hereto.
12.7
Entire
Agreement.
Other
than as set forth in Section 1.1, this Agreement contains the entire agreement
and understanding between the parties hereto, and supersedes any and all prior
agreements and understandings.
12.9
Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original and all of which together will constitute one and the same
instrument.
12.10 Facsimile
Signatures.
The
parties hereto agree that this Agreement may be executed by facsimile signatures
and such signatures shall be deemed originals. The parties further agree that
within ten days following the execution of this Agreement, they shall exchange
original signature pages.
12.11 Amendments.
This
Agreement may be amended only by a written agreement executed by all of the
parties hereto.
12.12 Definition
of “Business Day”. For
purposes of this Agreement, “business day” means any day on which the New York
Stock Exchange, Inc. is open for trading.
26
Please
confirm that the foregoing correctly sets forth the Agreement between you and
the Company.
|
|
Very
truly yours,
U.S.
Dry Cleaning Corporation,
a
Delaware corporation
|
|
|
By:
Xxxxxx X. Xxx
Its:
Chief Executive Officer
|
The
foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date
first above written.
|
Marino
Capital Partners, Inc.,
|
|
US
EURO Securities, Inc.,
|
|
a
California corporation
|
|
A
California Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
Xxxxx Xxxxxx
|
|
By:
Xxxxxxx Xxx Xxxxxx
|
|
Its:
Chief Executive Officer
|
|
Its:
Chief Executive Officer
|
27
