Exhibit 1.1
VELOCITY ASSET MANAGEMENT, INC.
SERIES A CONVERTIBLE PREFERRED STOCK
$0.001 PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
____________, 2006
Xxxxxxxx & Xxxxxxxxx, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Velocity Asset Management, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to Xxxxxxxx & Strudwick, Inc. (the "Underwriter") an aggregate of 1,000,000
shares (the "Firm Shares") and, at the election of the Underwriter, up to
150,000 additional shares (the "Optional Shares") of the Company's Series A
Convertible Preferred Stock $0.001 par value per share ("Stock") (the Firm
Shares and the Optional Shares that the Underwriter elects to purchase pursuant
to Section 2 hereof being collectively called the "Shares").
1. The Company represents and warrants to the Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333-130056) (the
"Initial Registration Statement") in respect of the offer and sale of Shares
under the Securities Act of 1933, as amended (the "Act") has been filed with the
Securities and Exchange Commission (the "Commission"). The Initial Registration
Statement and any post-effective amendment thereto (collectively the
"Registration Statement"), each in the form heretofore delivered to the
Underwriter, have been declared effective by the Commission in such form other
than a registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the
Act, which became effective upon filing, no other document with respect to the
Initial Registration Statement has heretofore been filed with the Commission. No
stop order preventing or suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or, to the Company's knowledge, threatened by the
Commission. Any preliminary prospectus included in the Initial Registration
Statement or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act is hereinafter called a "Preliminary
Prospectus." The various parts of the Initial Registration Statement and the
Rule 462(b) Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus filed with
the Commission pursuant to Rule 424(b) under the Act in accordance with Section
5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the
Initial Registration Statement at the time it was declared effective, each as
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amended at the time such part of the Initial Registration Statement became
effective or such part of the Rule 462(b) Registration Statement, if any, became
or hereafter becomes effective, are hereinafter collectively called the
"Registration Statement". The term "Prospectus" shall mean the final prospectus
relating to the Shares that is first filed pursuant to Rule 424(b) after the
execution of this agreement (the "Execution Time") or, if no filing pursuant to
Rule 424(b) is required, shall mean the form of final prospectus relating to the
Shares included in the Registration Statement at the date the Registration
Statement is declared effective by the Commission (the "Effective Date"). The
term "Statutory Prospectus" shall mean the preliminary prospectus, as amended or
supplemented, relating to the Shares that is included in the Registration
Statement immediately prior to the Time of Sale (as defined herein). All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a preliminary prospectus, Statutory Prospectus or the
Prospectus shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("XXXXX").
(b) At or prior to [ ]:00 [A./P.]M. New York City time (the "Time of
Sale"), the Company had prepared the following information relating to the
public offering and sale of the Shares (collectively, the "Disclosure Package"):
the Statutory Prospectus, the issuer free writing prospectuses as defined in
Rule 433 of the Securities Act (each, an "Issuer Free Writing Prospectus"), if
any, the roadshow presentation, if any, the pricing information, and any other
"free writing prospectus" (as defined pursuant to Rule 405 under the Securities
Act) that the parties hereto shall hereafter expressly agree in writing to treat
as part of the Disclosure Package. If, subsequent to the date of this Agreement,
the Company and the Underwriter have determined that the Disclosure Package
included an untrue statement of material fact or omitted a statement of material
fact necessary to make the information therein not misleading and have agreed to
provide an opportunity to purchasers of the Shares to terminate their old
purchase contracts and enter into new purchase contracts, then the "Disclosure
Package" will refer to the information available to purchasers at the time of
entry into the first such new purchase contract.
(c) The Disclosure Package, at the Time of Sale, complied in all
material respects with the Act and the rules thereunder and, if filed by
electronic transmission pursuant to XXXXX (except as may be permitted by
Regulation S-T under the Act), was identical to the copy thereof delivered to
the Underwriter for use in connection with the offer and sale of the Shares.
Each of the Registration Statement and any post-effective amendment thereto, at
the time it became effective and (giving effect to any amendment filed prior to
the date hereof) at the date hereof, complied and will comply in all material
respects with the Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus, as
amended or supplemented as of its date, at the date hereof, at any time of any
filing pursuant to Rule 424(b), at a Time of Delivery did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and warranties set forth in
the two immediately preceding sentences do not apply to statements in or
omissions from the Registration Statement or any post-effective amendment
thereto or the Prospectus made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
the Underwriter expressly for use therein.
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(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as set forth or contemplated
in the Registration Statement, there has not been (i) any change in the capital
stock or long-term debt of the Company or any of its subsidiaries, (ii) any
payment or declaration of any dividend or distribution by the Company, (iii) any
liability or obligation, direct or contingent, incurred by the Company or any of
its subsidiaries other than in the ordinary course of business or (iv) any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, general affairs, management,
prospects, financial position, stockholders' equity or results of operations of
the Company;
(e) The Company has good and marketable title to all real and personal
property owned by it, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus and do not interfere with
the use made of such property by the Company; and any real property and
buildings held under lease by the Company are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made of such property and buildings by the
Company;
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Delaware, with
power and corporate authority to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it conducts any business so as to
require such qualification, except for such jurisdictions where the failure to
so qualify or be in good standing would not, individually or in the aggregate,
result in any material adverse effect, or any development involving a
prospective material adverse change or effect, in or on the business, prospects,
financial position, stockholders equity or results of operations of the Company
(a "Material Adverse Effect");
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Stock contained in the Prospectus;
(h) The Shares to be issued and sold by the Company to the Underwriter
hereunder have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly issued and
fully paid and non-assessable and will conform to the description of the Shares
of the Company contained in the Prospectus;
(i) The issue and sale of the Shares by the Company and the compliance
by the Company with all of the provisions of this Agreement and the consummation
of the transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company is subject
other than any conflict, breach or violation that would not have a Material
Adverse Effect, nor will such action result in any violation of any statute or
any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties other than any violation
that would not have a Material Adverse Effect, nor will such action result in
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any violation of the provisions of the Certificate of Incorporation or Bylaws of
the Company; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the Shares by
the Underwriter;
(j) The statements in the Prospectus relating to legal matters,
documents or proceedings set forth under the caption "Description of Securities"
fairly present, in all material respects, such legal matters, documents or
proceedings;
(k) Except as disclosed in the Registration Statement and the
Prospectus, no holder of any security of the Company has any rights to require
registration of any security of the Company as part or on account of, or
otherwise in connection with, the offer and sale of the Shares contemplated
hereby, and any such rights so disclosed or otherwise have either been fully
complied with by the Company or effectively waived by the holders thereof, and
any such waivers remain in full force and effect;
(l) The Company is not (i) in violation of its Certificate of
Incorporation or Bylaws or (ii) in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound
except as would not have a Material Adverse Effect;
(m) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party or of which any
property of the Company is the subject which, if determined adversely to the
Company, could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(n) There are no contracts or other documents (including, without
limitation, any voting agreement), which are required to be described in the
Registration Statement and the Prospectus or filed as exhibits to the
Registration Statement by the Act and the rules and regulations of the
Commission under the Act and which have not been so described or filed;
(o) No relationship exists between or among the Company and any
director, officer, stockholder or affiliate of the Company which is required by
the Act and rules and regulations of the Commission under the Act to be
described in the Registration Statement or the Prospectus which is not so
described and described as required in material compliance with such
requirement. There are no outstanding loans, advances (except advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
disclosed in the Registration Statement and the Prospectus;
(p) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company", as such term is defined
in the Investment Company Act of 1940, as amended (the "Investment Company
Act");
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(q) Xxxxx, Xxxxxxxx & Co., P.A. who have audited certain financial
statements of the Company and its subsidiaries, are, to the Company's knowledge,
independent public accountants as required by the Act and the rules and
regulations of the Commission promulgated thereunder;
(r) The financial statements filed with the Commission as a part of
the Registration Statement and included in the Prospectus present fairly, in all
material respects, the financial position of the Company as of and at the dates
indicated and the results of its operations and cash flows for the periods
specified. Such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial data set
forth in the Prospectus under the captions "Prospectus Summary-Summary Selected
Consolidated Financial Data", "Selected Consolidated Financial Data" and
"Capitalization" fairly present, in all material respects, the information set
forth therein on a basis consistent with that of the audited financial
statements contained in the Registration Statement;
(s) The Company has entered into contracts with insurers for insurance
coverage against such losses and risks as the Company believes are prudent and
customary in the business in which the Company is engaged; and the Company has
no reason to believe that it will not be able to renew its existing insurance
coverage at then prevailing rates applicable to similarly situated organizations
as and when such coverage expires;
(t) Except as disclosed in the Registration Statement and Prospectus,
the Company owns, possesses, licenses or has other rights to use the patents and
patent applications, copyrights, trademarks, service marks, trade names,
technology, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary rights) and other intellectual property (or could
acquire such intellectual property upon commercially reasonable terms) necessary
to conduct its business in the manner in which it is being conducted
(collectively, the "Company Intellectual Property"); except as disclosed in the
Registration Statement and Prospectus, to the Company's knowledge, the Company
is not obligated to pay a royalty, grant a license, or provide other
consideration to any third party in connection with the Company Intellectual
Property other than as disclosed in the Prospectus; except as disclosed in the
Registration Statement and Prospectus, the Company has not received any notice
of violation or conflict with rights of others with respect to the Company
Intellectual Property; except as disclosed in the Registration Statement and
Prospectus, there are no pending or to the Company's knowledge, threatened
actions, suits, proceedings or claims by others that the Company is infringing
any patent, trade secret, trade xxxx, service xxxx, copyright or other
intellectual property or proprietary right; and except as disclosed in the
Registration Statement and Prospectus, the products or processes of the Company
referenced in the Prospectus do not, to the knowledge of the Company, violate or
conflict with any intellectual property or proprietary right of any third
person;
(u) The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 and 15d-14 under the Exchange
Act), which (i) are designed to ensure that material information relating to the
Company is made known to the Company's principal executive officer and its
principal financial officer by others within the Company; and (ii) are effective
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in all material respects to perform the functions for which they were
established. There (i) are not any significant deficiencies in the design or
operation of internal controls which could adversely affect the Company's
ability to record, process, summarize, and report financial data or (ii) has not
been any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls. Since
the date of the most recent evaluation of the Company's disclosure controls and
procedures, there have been no significant changes in internal controls or in
other factors that could significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses. Upon the effectiveness of the Registration Statement, the Company
will be in compliance in all material respects with all provisions of the
Xxxxxxxx-Xxxxx Act of 2002 that are effective and applicable to the Company as
an "issuer" as defined under the Xxxxxxxx-Xxxxx Act of 2002;
(v) Except as described in the Prospectus, there are no outstanding
subscriptions, rights, warrants, calls or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of, any shares of capital stock of or other
equity or other ownership interest in the Company;
(w) Other than this Agreement, neither the Company nor any of its
subsidiaries is a party to any contract, agreement or understanding with any
person that would give rise to a valid claim against the Company or any of its
subsidiaries or any Underwriter for a brokerage commission, finder's fee or like
payment in connection with the offering and sale of the Shares;
(x) No forward-looking statement (within the meaning of Section 27A of
the Act and Section 21E of the Exchange Act) contained in the Registration
Statement, the Preliminary Prospectus or the Prospectus has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good
faith; and
(y) Other than excepted activity pursuant to Regulation M under the
Exchange Act, neither the Company nor any of its affiliates has taken, directly
or indirectly, any action designed to, or that could reasonably be expected to,
cause or result in any stabilization or manipulation of the price of the Shares.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to the Underwriter, and the Underwriter agrees to
purchase from the Company, at a purchase price per share of $10.00 less the
Underwriter's discount of 8%, the number of Firm Shares set forth in the first
paragraph hereof and (b) in the event and to the extent that the Underwriter
shall exercise the election to purchase Optional Shares as provided below, the
Company agrees to issue and sell to the Underwriter, and the Underwriter agrees,
to purchase from the Company, at the purchase price per share set forth in
clause (a) of this Section 2, the number of Optional Shares as to which such
election shall have been exercised.
The Company hereby grants to the Underwriter the right to purchase at their
election up to 150,000 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering sales of shares
in excess of the number of Firm Shares. Any such election to purchase Optional
Shares may be exercised only by written notice from the Underwriter to the
Company, given within a period of 45 calendar days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be purchased
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and the date on which such Optional Shares are to be delivered, as determined by
the Underwriter but in no event earlier than the First Time of Delivery (as
defined in Section 5 hereof) or, unless the Underwriter and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
3. The Underwriter represents and warrants to the Company that:
(a) The Underwriter is a member, in good standing, of the National
Association of Securities Dealers, Inc. ("NASD"), and is duly registered as a
broker-dealer under the Securities Exchange Act of 1934, and under the laws of
each state in which it proposes to offer the Shares, except where such
registration would not be required by law.
(b) This Agreement when accepted and approved will be duly authorized,
executed, and delivered by the Underwriter and is a valid and binding agreement
of the Underwriter, enforceable in accordance with its terms, except to the
extent that enforceability may be limited by (is) bankruptcy, insolvency,
moratorium, liquidation, reorganization, or similar laws affecting creditors'
rights generally, regardless of whether such enforceability is considered in
equity or at law, (ii) general equity principles, and (iii) limitations imposed
by federal and state securities laws or the public policy underlying such laws
regarding the enforceability of indemnification or contribution provisions.
(c) The consummation of the transactions relating to the Offering will
not violate or constitute a breach of, or default under, the Underwriter's
articles of incorporation or bylaws, or any material instrument, agreement, or
indenture to which it is a party, or violate any order applicable to the
Underwriter of any federal or state regulatory body or administrative agency
having jurisdiction over it or its property.
4. Upon the authorization by the Company of the release of the Firm Shares,
the Underwriter proposes to offer the Firm Shares for sale upon the terms and
conditions set forth in the Prospectus.
5. (a) The Shares to be purchased by the Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as the Underwriter may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to the
Underwriter, through the facilities of the Depository Trust Company ("DTC") for
the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Company to the Underwriter at
least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, ____ a.m., New York City time, on ________, 2006 or such
other time and date as the Underwriter and the Company may agree upon in
writing, and, with respect to the Optional Shares, ____ a.m., New York time, on
the date specified by the Underwriter in the written notice given by the
Underwriter of its election to purchase such Optional Shares, or such other time
and date as the Underwriter and the Company may agree upon in writing. Such time
and date for delivery of the Firm Shares is herein called the "First Time of
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Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the cross
receipt for the Shares and any additional documents reasonably requested by the
Underwriter pursuant to Section 7(j) hereof, will be delivered at the offices of
Ellenoff Xxxxxxxx & Schole, LLP (the "Closing Location"), and the Shares will be
delivered at the Designated Office, all at such Time of Delivery. A meeting will
be held at the Closing Location at ___ p.m., New York City time, on the Business
Day next preceding such Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this Section 5,
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
6. The Company agrees with the Underwriter:
(a) To prepare the Prospectus in a form approved by the Underwriter
and to file such Prospectus pursuant to Rule 424(b) under the Act not later than
the Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus which
shall be disapproved by the Underwriter promptly after reasonable notice thereof
(provided that any such disapproval must be reasonable under the circumstances);
to advise the Underwriter, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish the Underwriter with copies thereof for a period beginning
on the date hereof and ending on the latest Closing Date or such date, as in the
opinion of counsel for the Underwriter, the Prospectus is no longer required by
law to be delivered in connection with sales of Shares by the Underwriter (the
"Prospectus Delivery Period"); to advise the Underwriter, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to obtain
the withdrawal of such order;
(b) To take such action as the Underwriter may reasonably request to
qualify the Shares for offering and sale under the securities laws of such
jurisdictions as the Underwriter has designated as of the date hereof and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
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(c) If, after the time of the initial distribution of the preliminary
prospectus to offerees and prior the Time of Sale, any event shall occur or
condition exist as a result of which the Disclosure Package or the Prospectus
would include any untrue statements 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 shall be
necessary to amend or supplement the Disclosure Package or the Prospectus, in
order to make the statement therein, in the light of the circumstances at the
Time of Sale, not misleading, or if in the opinion of the Underwriter or counsel
for the Underwriter it is otherwise necessary to amend or supplement the
Disclosure Package or the Prospectus, in order to comply with law, the Company
agrees to (i) notify the Representative of any such event or condition and (ii)
promptly prepare, file with the Commission and furnish at its own expense to the
Underwriter and to dealers, amendments or supplements to the Disclosure Package
or the Prospectus necessary to make the statements in the Disclosure Package or
the Prospectus as so amended or supplemented, in the light of the circumstances
at the Time of Sale, not misleading or so that the Disclosure Package or the
Prospectus will comply with law.
(d) The Company agrees that, unless it obtains the prior written
consent of the Underwriter, it will not make any offer relating to the Shares
that would constitute and Issuer Free Writing Prospectus or that would otherwise
constitute a "free writing prospectus" (as defined in Rule 405 of the Act)
required to be filed by the Company with the Commission or retained by the
Company under Rule 433 of the Act. Any such free writing prospectus consented to
by the Underwriter is hereinafter referred to as a "Permitted Free Writing
Prospectus." The Company agrees that (i) it has treated and will treat, as the
case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus, and (ii) has complied and will comply, as the case may be, with the
requirements of Rules 164 and 433 of the Act applicable to any Permitted Free
Writing Prospectus, including in respect of timely filing with the Commission,
legending and record keeping.
(e) The Company agrees to promptly file with the Commission (to the
extent required by the Act) and to furnish the Underwriter, without charge,
during the Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto and the Disclosure Package (including each
Issuer Free Writing Prospectus) as the Underwriter may reasonably request at the
time of the original printing of such Prospectus, amendment or supplement
thereto or the Disclosure Package, or the use of such Issuer Free Writing
Prospectus, as applicable.
(f) To make generally available to its security holders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
thereunder (including, at the option of the Company, Rule 158);
(g) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
directly or indirectly, without the Underwriter's prior written consent: (i)
offer, pledge, sell, contract or otherwise dispose of any shares of Stock,
securities of the Company substantially similar to the Stock, or securities
convertible into, or exchangeable or exercisable for, or repayable with, Stock
or securities substantially similar to Stock (collectively, "Company
Securities"); (ii) sell any option or contract to purchase any Company
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Securities, (iii) purchase any option or contract to sell any Company
Securities; (iv) grant any option, right or warrant for the sale of Company
Securities, except pursuant to employee stock option plans existing on the date
hereof; (v) lend or transfer any Company Securities; (vi) make, request or
demand the filing of a registration statement relating to Covered Securities; or
(vii) enter into any swap or other agreement that transfers, in whole or in
part, the economic consequences of ownership of any Company Securities, whether
any such swap or transaction is to be settled by delivery of Stock or other
securities, in cash or otherwise; provided however, the Company may (i) issue
shares of its Common Stock upon exercise of outstanding securities as of the
date hereof (ii) issue shares of its Common Stock upon conversion of the Shares;
(iii) issue options or securities of the Company to employees, officers,
directors or consultants in accordance with and under its stock option plans as
in effect on the date hereof and (iv) issue shares of its Common Stock or other
securities in connection with any acquisition made by the Company whether in an
acquisition of securities of a third party or the assets of a third party.
(h) During a period of three years from the effective date of the
Registration Statement, upon request from the Underwriter, to furnish to the
Underwriter copies of all reports or other communications (financial or other)
furnished to stockholders, and to deliver to the Underwriter (i) as soon as they
are available, copies of any reports and financial statements furnished to or
filed with the Commission or any national securities exchange on which any class
of securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as the
Underwriter may from time to time reasonably request (such financial statements
to be on a consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders generally
or to the Commission);
(i) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds";
(j) To use its best efforts to list the Shares on the American Stock
Exchange;
(k) To file with the Commission such information on Form 10-QSB or
Form 10-KSB as may be required by Rule 463 under the Act;
(l) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement,
and the Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act;
and
(m) Subsequent to the sale of the Shares pursuant to this Agreement
and for a period of two years from the date of such sale, the Company shall
grant the Underwriter the right to appoint one non-voting observer to the
Company's Board of Directors. The Company shall reimburse this observer for
reasonable expenses incurred in attending the meetings of the Board of Directors
and other related matters.
7. The Company covenants and agrees with the Underwriter that the Company
will pay or cause to be paid the following: (a) (i) the fees, disbursements and
expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
10
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriter and dealers;
(ii) the cost of printing or producing any Blue Sky Memorandum which cost shall
not exceed the sum of $7,500 provided the Shares are accepted for listing on the
American Stock Exchange, closing documents (including any compilations thereof)
and any other documents in connection with the offering, purchase, sale and
delivery of the Shares; (iii) all expenses in connection with the qualification
of the Shares for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the fees and disbursements of counsel for the
Company and counsel for the Underwriter in connection with such qualification
and in connection with the Blue Sky Memorandum; (iv) all fees and expenses in
connection with listing the Shares on the American Stock Exchange; (v) the
filing fees incident to securing any required review by the National Association
of Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the
cost of preparing any stock certificates; (vii) the cost and charges of any
transfer agent or registrar; and (viii) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section; and (b) subject to Section 8, the
Company will pay to the Underwriter a non-accountable expense allotment equal to
one and one-quarter percent (1.25%) of the aggregate public offering price of
the Firm Shares. Such payment shall be made at the First Time of Delivery with
respect to the Shares delivered at such time, and if applicable, a second
payment shall be made at the Second Time of Delivery with respect to any
Optional Shares delivered at such time. It is understood, however, that, except
as provided in this Section, and Sections 9 and 11 hereof, the Underwriter will
pay all of their own costs and expenses, including the fees of their counsel and
stock transfer taxes on resale of any of the Shares by them.
8. The obligations of the Underwriter hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in its discretion, to the
condition that all representations and warranties and other statements of the
Company herein are, at and as of such Time of Delivery, true and correct, the
condition that the Company shall have performed all of its obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to the Underwriter's
reasonable satisfaction;
(b) Xxxxxxx & Xxxxxxx, P.C., counsel for the Underwriter, shall have
furnished to the Underwriter their written opinion, dated such Time of Delivery,
in the form attached here to as Annex II(a);
(c) Ellenoff Xxxxxxxx & Schole LLP, counsel for the Company, shall
have furnished to the Underwriter their written opinion, dated such Time of
Delivery, in the form attached hereto as Annex II(b);
11
(d) On the date of the Prospectus at a time prior to the execution of
this Agreement, at ____ a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Xxxxx, Gutenski & Co.,
P.A. shall have furnished to the Underwriter a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to the
Underwriter, to the effect set forth in Annex I hereto;
(e) Since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any change, or any development involving a
prospective change, in or affecting the general affairs, management, prospects,
financial position, stockholders' equity or results of operations of the
Company, otherwise than as set forth or contemplated in the Prospectus, the
effect of which is in the reasonable judgment of the Underwriter so material and
adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus; provided that if
the Underwriter fails to perform its obligations hereunder for the reason
specified in this Section 8(e), then the Company shall not be obligated to pay
to the Underwriter the amount described in Section 7(b);
(f) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on the American Stock Exchange; (ii)
a suspension or material limitation in trading in the Company's securities on
the American Stock Exchange; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York authorities or a material
disruption in commercial banking or securities settlement or clearance services
in the United States; (iv) the outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war or (v) the occurrence of any other calamity or crisis or any
change in financial, political or economic conditions in the United States or
elsewhere, if the effect of any such event in the reasonable judgment of the
Underwriter makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus; provided that if
the Underwriter fails to perform its obligations hereunder for the reason
specified in this Section 8(f), then the Company shall not be obligated to pay
to the Underwriter the amount described in Section 7(b).
(g) The Shares to be sold at such Time of Delivery shall have been
duly listed on the American Stock Exchange;
(h) The Company has obtained and delivered to the Underwriter executed
copies of an agreement from each of the Company's directors, officers, and
stockholders owning more than 5% of the Company's outstanding common stock, in
form and substance satisfactory to the Underwriter, whereby each person agrees
that during the 180 day period after the date of the Prospectus, not to directly
or indirectly, without the Underwriter's prior written consent: (i) offer,
pledge, sell, contract or otherwise dispose of any shares of common stock,
securities of the Company substantially similar to the common stock, or
securities convertible into, or exchangeable or exercisable for, or repayable
with, common stock or securities substantially similar to common stock
(including any Shares) (collectively, "Company Securities"); (ii) sell any
option or contract to purchase any Company Securities, (iii) purchase any option
12
or contract to sell any Company Securities; (iv) grant any option, right or
warrant for the sale of Company Securities, except pursuant to employee stock
option plans existing on the date hereof; (v) lend or transfer any Company
Securities; (vi) make, request or demand the filing of a registration statement
relating to Company Securities; or (vii) enter into any swap or other agreement
that transfers, in whole or in part, the economic consequences of ownership of
any Company Securities, whether any such swap or transaction is to be settled by
delivery of common stock or other securities, in cash or otherwise;
(i) The Company shall have furnished or caused to be furnished to the
Underwriter at such Time of Delivery certificates of officers of the Company
satisfactory to the Underwriter as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to the
performance by the Company of all of its obligations hereunder to be performed
at or prior to such Time of Delivery, as to matters set forth in subsections (a)
and (f) of this Section 8 and as to such other matters as the Underwriter may
reasonably request.
9. (a) The Company will indemnify and hold harmless the Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred (except that the Company may delay reimbursement of the first $50,000
of such expenses incurred with respect to all such claims and actions in the
aggregate until the completion of the first investigation or defense giving rise
to such expenses); provided, however, that the Company shall not be liable in
any such case 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 any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Underwriter expressly for use therein.
(b) The Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary 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 any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Underwriter expressly for use
13
therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party under subsection (a) or (b) above except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights and defenses) by such failure; and provided, further, that the omission
so to notify the indemnifying party shall not relieve it from any liability it
may have to the indemnified party otherwise than under such subsection. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriter on
the other from the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriter on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
14
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriter, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriter on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriter agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), the Underwriter shall not be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 9 shall be in
addition to any 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
Underwriter under this Section 8 shall be in addition to any liability which the
Underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company within the meaning of the Act.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the Underwriter, as set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of the Underwriter or any controlling person of the Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If for any reason, any Shares are not delivered by or on behalf of the
Company as provided herein, the Company will reimburse the Underwriter for all
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred by the Underwriter in making preparations for the purchase, sale and
delivery of the Shares not so delivered without limiting any other rights or
remedies of the Underwriter.
12. All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriter shall be delivered or sent by certified mail,
facsimile transmission or overnight courier service to Xxxxxxxx & Xxxxxxxxx,
Inc., 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, Attention: X. XxXxxxxx
00
Xxxxx, XXX; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary, with a copy to Ellenoff Xxxxxxxx & Schole, LLP, 000 Xxxxxxxxx Xxxxxx,
00xx Xxxxx Xxx Xxxx, Xxx Xxxx 00000 Attn.: Xxxxxxx Xxxxxxxx, Esq. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriter, the Company and, to the extent provided in Sections 9 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or the Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from the Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
The Company is authorized, subject to applicable law, to disclose any and
all aspects of this potential transaction that are necessary to support any U.S.
federal income tax benefits expected to be claimed with respect to such
transaction, and all materials of any kind (including tax opinions and other tax
analyses) related to those benefits, without the Underwriter imposing any
limitation of any kind.
If the foregoing is in accordance with the Underwriter's understanding,
please sign and return to the Company three (3) counterparts hereof, and upon
the acceptance hereof by the Underwriter, this letter and such acceptance hereof
shall constitute a binding agreement between the Underwriter and the Company.
Very truly yours,
Velocity Asset Management, Inc.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
16
Accepted as of the date hereof:
Xxxxxxxx & Xxxxxxxxx, Incorporated
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
17
