MERIT CAPITAL ASSOCIATES , INC.
125,000 shares of
Common Stock, $.001 par value
UNDERWRITING AGREEMENT
August ___, 2000
SB Merger Corp.
000 Xxxx Xxxxx Xxxxx
Xxxxxxxx Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx, President
Dear Sirs:
SB Merger Corp., a Delaware corporation (the "Company"), hereby confirms
its agreement with Merit Capital Associates, Inc. (the "Underwriter"), as
follows:
1. Description of the Shares.
The Company proposes to issue and sell on a "best efforts all or none"
basis through the Underwriter an aggregate of 125,000 shares (the "Shares") of
common stock, $.01 par value per share (the "Common Stock"). The offering of
Shares hereby may sometimes be referred to as the "Offering." The Underwriter is
not required to purchase any of the Shares and, to the extent the Shares are
sold, will deposit the funds received in connection with the Offering in the
Escrow Account (Funds) and the Shares sold in the Offering in the Escrow Account
(Stock) pursuant to the respective escrow agreements entered into between the
Company and Continental Stock Transfer and Trust Company dated August __, 2000.
2. Representations and Warranties of the Company.
The Company makes the following representations and warranties to the
Underwriter:
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(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission"), a registration statement on Form SB-2 (File No.
333-39044) for the registration of the Shares under the Securities Act of 1933,
as amended (the "1933 Act" or the "Act"), which has been prepared in conformity
with the of 1933 Act and the Rules and Regulations of the Commission promulgated
thereunder. The Company will file further amendments to said registration
statement in the form to be delivered to you and will not, before the
registration statement becomes effective, file any other amendment thereto to
which you shall have objected in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
exhibits and all other documents filed as a part thereof or incorporated
therein), is hereinafter called the "Registration Statement," and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of the
General Rules and Regulations of the Commission under the Act (the
"Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus." For purposes hereof,
"Rules" and "Regulations" mean the rules and regulations adopted by the
Commission under the 1933 Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(b) Neither the Commission nor any state regulatory authority have issued
any orders preventing or suspending the use of any Prospectus, and each
Prospectus conforms in all material respects with the requirements of the 1933
Act and has not included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, not misleading, subject to the provisions set forth below
and except as such untrue statement or omission has been cured in the final
prospectus.
(c) When the Registration Statement becomes effective under the Act and at
all times subsequent thereto including the Closing Date (as hereinafter defined)
and for such longer periods as in the opinion of counsel for the Underwriter, a
Prospectus is required to be delivered in connection with the sale of the Shares
by the Underwriter ("Underwriter"), as the case may be, the Registration
Statement and Prospectus, and any amendment thereof or supplement thereto, will
contain all material statements which are required to be stated therein in
accordance with the Act and the Regulations, and will in all material respects
conform to the requirements of the Act and the Regulations, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, 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; provided, however, that this representation
and warranty does not apply to statements or omissions made in reliance upon and
in conformity with express written information furnished to the Company by you,
for use in connection with the preparation of the Registration Statement or
Prospectus, or in any amendment thereof or supplement thereto. It is understood
that the statements concerning the Underwriter in the Prospectus with respect to
the information concerning the NASD affiliation of the Underwriter and
disclosures required by the Underwriter constitute for purposes of this
Paragraph the only information furnished in writing by or on behalf of the
Underwriter for inclusion in the Registration Statement and Prospectus, as the
case may be, and contains all
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information required to be disclosed by the Underwriter.
(d) The Company is, and at the Closing Date will be, a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company is duly qualified or licensed and
in good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing, except those jurisdictions in which
the failure to so qualify would not have a material adverse effect. The Company
has all requisite corporate powers and authority, and, except as set forth in
the Registration Statement, the Company has all material and necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies to own or lease its
properties and conduct its business as described in the Prospectus. The
disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the business of the Company, as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact. The authorized, issued and outstanding capital
stock of the Company as of August 2000 and as of the date of the Prospectus is
as set forth in the Prospectus under " Description of Securities; the shares of
issued and outstanding capital stock of the Company set forth thereunder have
been duly authorized, validly issued and are fully paid and non-assessable;
except as set forth in the Prospectus, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or agreements or other
rights to convert any obligation into, any shares of capital stock of the
Company, have been granted or entered into by the Company and the Shares and the
Common Stock, conform in all material respects, to all statements relating
thereto contained in the Registration Statement and Prospectus.
(e) The Company has all corporate power and authority to enter into this
Agreement and carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained or will have been obtained prior to the Closing Date. This Agreement
has been duly and validly authorized and executed by the Company. The Shares to
be issued and sold by the Company pursuant to this Agreement have all been duly
authorized and will be validly issued, fully paid and non-assessable; none of
the Shares, are or will be subject to the preemptive rights of any stockholder
of the Company, and none of the capital stock of the Company is and will be
subject to the preemptive rights of any stockholder of the Company, and all of
such Shares conform and at all times up to and including their issuance will
conform in all material respects to all statements with regard thereto contained
in the Registration Statement and Prospectus; the holders thereof will not be
subject to any liability under the laws of the State of Delaware as currently in
effect solely as such holders; and all corporate action required to be taken for
the authorization, issuance and sale of the Shares has been taken, and this
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, to issue and sell, upon exercise in accordance
with the terms thereof, the number and kind of Shares called for thereby; and
upon the issuance and delivery of the Shares sold hereunder pursuant to the
terms hereof, the purchasers of such Shares will acquire good and marketable
title to such Shares, free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever.
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(f) Except as set forth in the Prospectus, the consummation of the
transactions contemplated by this Agreement, and the fulfillment of the terms
hereof, will not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, the Articles of Incorporation, as
amended, or By-laws of the Company or of any evidence of material indebtedness,
lease, contract or other agreement or instrument to which the Company is a party
or by which the Company or any of its material properties is bound, or under any
applicable law, rule, regulation, judgment, order or decree of any government,
professional advisory body, administrative agency or court, domestic or foreign,
having jurisdiction over the Company, or properties which are material to the
Company or its businesses, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the properties or assets of the Company; and
no consent, approval, authorization or order of any court or governmental or
other regulatory agency or body, is required for the consummation by the Company
of the transactions on its part herein contemplated or the issuance of the
Shares, except such as may be required under the Act or under state blue sky
laws, except where a breach, violation or failure to obtain such consent would
not have a material adverse effect upon the business or operation of the
Company.
(g) Subsequent to the date hereof, and prior to the Closing Date, the
Company will not issue or acquire any equity shares or instruments convertible
into or exchangeable for equity shares or other like convertible or exchangeable
shares or instruments, and except as described in the Registration Statement,
the Company does not have, and at the Closing Date will not have, outstanding
any options to purchase or rights or warrants to subscribe for, or any shares or
obligations convertible into or exchangeable for, or commitments to issue or
sell shares of its Preferred Stock, Common Stock or any such options, warrants,
convertible shares or instruments, or obligations.
(h) The financial statements and notes thereto included in the Registration
Statement and the Prospectus fairly present the financial position and the
results of operations of the Company at the dates and for the periods to which
they apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved.
(i) Except as set forth in the Registration Statement, the Company is not,
and at the Closing Date will not be, in violation or breach of, or default in,
the due performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which the
Company is or may be bound or to which any of the property or assets of the
Company or any of its subsidiaries are subject, which violations, breaches,
default or defaults, singularly or in the aggregate, would have a material
adverse effect on the Company or its subsidiaries. The Company has not or will
not have taken any action in material violation of the provisions of the
Articles of Incorporation, as amended, or the By-laws of the Company or any
statute or any order, rule or regulation of any court or regulatory authority or
governmental body having jurisdiction over or
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application to the Company or its business or properties.
(j) Subsequent to the dates as of which information is given in the
Registration Statement and the Prospectus and prior to the Closing Date, except
as set forth in or contemplated by the Registration Statement and the
Prospectus, (i) the Company has and will have conducted its business in
substantially the same manner as on April 30, 2000; (ii) the Company has not
incurred or will not have incurred any material liability or obligation, direct
or contingent, or has entered into or will have entered into any material
transaction; (iii) the Company has not and will not have paid or declared any
dividend or other distribution on its capital stock, (iv) there has not been and
will not have been any change in (A) the capitalization of the Company, (B) the
business, properties, prospects, financial condition or results of operations of
the Company, or (C) the value of the assets of the Company, arising for any
reason whatsoever; and (v) the Company has not, and at the Closing Date will not
have, any material contingent obligation.
(k) The Company has, and at the Closing Date will have, good and marketable
title to all properties and assets described in the Registration Statement and
the Prospectus as owned by it, free and clear of all liens, charges,
encumbrances, claims, security interests, restrictions and defects of any
material nature whatsoever, except such as are described or referred to in the
Registration Statement and the Prospectus. All of the material leases and
subleases under which the Company is the lessor or sublessor of properties or
assets or under which the Company holds properties or assets as lessee as
described in the Prospectus are, and will on the Closing Date be, in full force
and effect, and except as described in the Prospectus, the Company is not and
will not be in default in respect to any of the terms or provisions of any of
such leases or subleases, and no claim has been asserted by anyone adverse to
rights of the Company as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above, or affecting or questioning the right of
the Company to continue possession of the leased or subleased premises or assets
under any such lease or sublease except as described or referred to in the
Prospectus, and the Company owns or leases all such properties as are necessary
to its operations as now conducted and, except as otherwise stated in the
Prospectus, as proposed to be conducted set forth in the Prospectus.
(l) Except as set forth in the Prospectus, the Company does not own or
control any capital stock or shares of, or have any proprietary interest in, or
otherwise participate in any other corporation, partnership, joint venture,
firm, association or business organization; provided, however, that this
provision shall not be applicable to the investment, if any, of the net proceeds
from the sale of the shares sold by the Company in certificates of deposits,
savings deposits, short-term obligations of the United States Government, money
market instruments or other short-term investments.
(m) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as otherwise expressly set
forth herein or therein, the Company has not (i) issued any shares or incurred
any material liability or obligation, direct or contingent, for borrowed money;
or (ii) entered into any material transaction other than in the ordinary course
of business; or (iii) declared or paid any dividend or made any other
distribution
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on or in respect to its capital stock.
(n) There is no litigation or governmental proceeding pending, or to the
knowledge of the Company, threatened against, or involving the properties or
business of the Company which might materially adversely affect the value,
assets or the operation of the properties or the business of the Company, except
as expressly set forth in the Prospectus. Further, except as referred to in the
Prospectus, there are no pending actions, suits or proceedings related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race, nor is the Company charged with or, to its knowledge, under
investigation with respect to any violation of any statutes or regulations of
any regulatory authority having jurisdiction over its business or operations,
and no labor disturbances by the employees of the Company exist or, to the
knowledge of the Company, have been threatened.
(o) The Company has, and at the Closing Date will have, filed all necessary
federal, state and foreign income and franchise tax returns or has requested
extensions thereof (except in any case where the failure to so file would not
have a material adverse effect on the Company), as the case may be, and has paid
all taxes which it believes in good faith were required to be paid by it except
for any such tax that currently is being contested in good faith or as described
in the Prospectus.
(p) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriter in connection with (i) the issuance by the Company of
the Shares, (ii) the purchase of the Shares by the Underwriter, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) any tax deficiency or claims outstanding, proposed or assessed against it.
(q) The Company maintains insurance policies including, but not limited to,
general liability and property insurance, which sufficiently insures the Company
and its employees against such losses and risks generally insured against by
comparable businesses, and the Company (i) has not failed to give notice or
present any insurance claim with respect to any matter, including, but not
limited to, the Company's business, property or employees, under the insurance
policy or surety bond in a due and timely manner, (ii) does not have any
disputes or claims against any underwriter of such insurance policies or surety
bonds or has not failed to pay any premiums due and payable thereunder, or (iii)
has complied with all conditions contained in such insurance policies and surety
bonds. There are no circumstances under any such insurance policy or surety
bond, which would relieve any insurer of its obligation to satisfy in full any
valid claim of the Company.
(r) The Company is in compliance with the requirements of Section 13(b)(2)
of the Exchange Act and, except as disclosed in the Prospectus, to the Company's
knowledge, neither the Company, nor any of its employees, officers, directors,
agents or affiliates, have made, directly or indirectly, any payment of funds of
such entity or received or retained funds in violation of any law, rule or
regulation, which payment, receipt or retention is of a character which is
required to be
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disclosed in the Prospectus.
(s) Neither the Company nor any of its employees, directors, stockholders,
or affiliates (as defined by the Rules and Regulations) of any of the foregoing
have taken or will take, directly or indirectly, any action designed to or which
has constituted or which might be expected to cause or result in, under the
Exchange Act, or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(t) The Company has not at any time (i) made any contribution to any
candidate for political office, or failed to disclose fully any such
contribution, in violation of law, or (ii) made any payment to any state,
federal, foreign governmental or professional regulatory agency, officer or
official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required or
allowed by applicable law.
(u) Except as set forth in the Registration Statement, to the knowledge of
the Company, neither the Company, nor any officer, director, employee or agent
of the Company, has made any payment or transfer of any funds or assets of any
such entity or conferred any personal benefit by use of such entity's assets or
received any funds, assets or personal benefit in violation of any law, rule or
regulation, which is required to be stated in the Registration Statement or
necessary to make the statements therein not misleading.
(v) There are no agreements, instruments, certificates, or other documents
of the Company, which are of a character required to be described in the
Registration Statement or Prospectus or filed as exhibits to the Registration
Statement, which have not been so described or filed.
(w) The Company will apply the net proceeds from the sale of the Shares
sold by it for the purposes and in the manner set forth in the Registration
Statement and Prospectus under the heading "Use of Proceeds."
(x) The Company shall maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are executed in
accordance with management's general or specified authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (3) access to assets is permitted only in
accordance with management's general or specific authorizations; and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(y) Except as set forth in the Registration Statement, no holder of any
Shares of the Company has the right to require registration of any Shares.
(z) The Company is in compliance with all federal and state laws, rules and
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regulations relating to consumer protection, occupational safety and health and
to the storage, handling or transportation of hazardous or toxic materials and
the Company has received all permits, licenses or other approvals required of
the Company under applicable federal and state occupational safety and health
and environmental laws and regulations to conduct its business and the Company
is in compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals which would not, singly or in the
aggregate, result in a material adverse change in the condition (financial or
otherwise), business, net worth or results of operations of the Company, except
as the case may be, as may be described in or contemplated by the Prospectus.
(aa) The minute books of the Company have been made available to the
Underwriter and contain a complete summary of all meetings and actions of the
directors and stockholders of the Company, since the time of its incorporation,
and reflect all transactions referred to in such minutes accurately in all
material respects.
3. Covenants of the Company.
The Company covenants and agrees that:
(a) The Company will notify the Underwriter immediately of any actual or
threatened or impending investigations (formal or informal) or any delisting or
other proceedings brought by NASDAQ, the NASD, SEC or any other governmental or
regulatory agency or body or any exchange.
(b) The Company will deliver to the Underwriter, without charge, one
conformed copy of each Registration Statement and of each amendment or
supplement thereto, including all financial statements and exhibits.
(c) The Company has delivered to the Underwriter as many copies as have
been requested of the Registration Statement, and thereafter from time to time
during such reasonable period as you may request if, in the opinion of counsel
for the Underwriter, the Prospectus is required by law to be delivered in
connection with sales by the Underwriter, as many copies of the Prospectus (and,
in the event of any amendment of or supplement to the Prospectus, of such
amended or supplemented Prospectus) as the Underwriter may reasonably request
for the purposes contemplated by the Act.
(d) The Company will use its best efforts to cause the Registration
Statement to become effective and will notify the Underwriter immediately, and
confirm the notice in writing: (i) when the Registration Statement or any
post-effective amendment thereto becomes effective, if the provisions of Rule
497 promulgated under the 1933 Act will be relied upon and when the Prospectus
has been filed in accordance with said Rule 497; (ii) of the issuance by the
Commission of any stop order or of the initiation, or to the best of the
Company's knowledge, the threat of any
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proceedings for that purpose; (iii) of the suspension of the qualification of
the Shares for offering or sale in any jurisdiction or of the initiating, or to
the best of the Company's knowledge the threatening, of any proceeding for that
purpose; and (iv) of the receipt of any comments from the Commission. If the
Commission shall enter a stop order at any time, the Company will make every
reasonable effort to obtain the lifting of such order at the earliest possible
moment.
(e) During the time when a prospectus is required to be delivered under the
1933 Act, the Company will comply with all requirements imposed upon it by the
1933 Act and the Exchange Act, as now and hereafter amended and by the Rules and
Regulations, as from time to time in force, as necessary to permit the
continuance of sales of or dealings in the Shares in accordance with the
provisions hereof and the Prospectus. If at any time when a prospectus relating
to the Shares is required to be delivered under the 1933 Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
counsel for the Underwriter, the Prospectus as then amended or supplemented
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify you promptly and prepare and file
with the Commission an appropriate amendment or supplement in accordance with
Section 10 of the 1933 Act and will furnish to you copies thereof.
(f) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter and counsel to the Underwriter) or transmit the
Prospectus by a means reasonably calculated to result in filing with the
Commission pursuant to Rule 497 not later than the Commission's close of
business on the earlier of (i) the second business day following the execution
and delivery of this Agreement, and (ii) the fifth business day after the
Effective Date of the Registration Statement or post-effective amendment
thereto.
(g) The Company will endeavor in good faith, in cooperation with you, at or
prior to the time the Registration Statement becomes effective, to qualify the
Shares for offering and sale under the Securities laws or blue sky laws of such
jurisdictions as you may reasonably designate. In each jurisdiction where such
qualification shall be effected, the Company will, unless you agree that such
action is not at the time necessary or advisable, file and make such statements
or reports at such times as are or may reasonably be required by the laws of
such jurisdiction.
(h) The Company will make generally available to its securityholders, as
soon as practicable, but in no event later than the first day of the fifteenth
full calendar month following the Effective Date of the Registration Statement,
an earnings statement of the Company, which will be in reasonable detail but
which need not be audited, covering a period of at least twelve months beginning
after the Effective Date of the Registration Statement, which earnings
statements shall satisfy the requirements of Section 11(a) of the Act and the
Regulations as then in effect. The Company may discharge this obligation in
accordance with Rule 158 of the Rules and Regulations.
(i) Prior to the Closing Date the Company will not issue, directly or
indirectly,
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without your prior written consent and that of counsel for the Underwriter, any
press release or other public announcement or hold any press conference with
respect to the Company or its activities with respect to this Offering.
(j) The Company will deliver to you prior to filing, any amendment or
supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date of the Registration Statement and will not file any
such amendment or supplement to which you shall reasonably object after being
furnished such copy.
(k) During the period of 120 days commencing on the date hereof, the
Company will not at any time take, directly or indirectly, any action designed
to, or which will constitute or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Shares to facilitate
the sale or resale of any of the Shares.
(l) The Company will apply the net proceeds from the Offering received by
it in the manner, and subject to the conditions, set forth under the section
entitled "Use of Proceeds" in the Prospectus. No portion of the net proceeds
will be used, directly or indirectly, to acquire any Shares issued by the
Company.
(m) The Company will retain counsel, an accounting firm, and financial
printer, and maintain a Transfer Agent and, if necessary under the jurisdiction
of incorporation of the Company, a Registrar (which may be the same entity as
the Transfer Agent) for its Common Stock, all of whom shall be reasonably
acceptable to the Underwriter.
(n) The Company, as the case may be, will comply with all of the provisions
of any undertakings contained in the Registration Statement in all material
respects.
4. Sale, Purchase and Delivery of Shares: Closing Date.
(a) The Company agrees to sell through the Underwriter, on a best efforts
all-or-none basis, and subject to the terms and conditions herein and in the
Escrow Agreements, the Shares at a price of $1.00 per Share, less a commission
of three percent (3%) of the offering price thereof.
(b) Delivery of the Shares and payment therefor shall only be made after
proceeds for the sale of 125,000 shares have been deposited with the Escrow
Agent and cleared. Delivery of certificates for the Common Stock (in definitive
form and registered in such names and in such denominations as you shall request
by written notice to the Company delivered at least two business days' prior to
the Closing Date), shall be made against payment of the purchase price therefor
by certified or bank check to the order of the Company. The Company will make
such certificates available for inspection at least two business days prior to
the Closing Date at such place as you shall designate.
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(c) Unless otherwise agreed, the "Closing Date" shall be promptly following
such date as proceeds of $125,000 representing the purchase of all of the Shares
have been collected and cleared through the Escrow Agent, but in no event later
than _____________, 2000, or such other date as agreed to by the parties and
disclosed as the outside closing date in the Registration Statement.
(d) The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Shares to the purchasers by the Company shall be
borne by the Company. The Company will pay and hold the Underwriter harmless
from any and all liabilities with respect to or resulting from any failure or
delay in paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance or sale of the
Shares.
5. Representations and Warranties of the Underwriter .
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., and has complied with all NASD
requirements concerning net capital and compensation to be received in
connection with the Offering.
(b) To the Underwriter's knowledge, there are no claims for services in the
nature of a finder's origination fee with respect to the sale of the Shares
hereunder to which the Company is, or may become, obligated to pay.
(c) Neither the Underwriter nor any of its registered agents have provided
purchasers of the Shares with any information concerning the Company other than
the Prospectus.
6. Payment of Expenses.
The Company will pay and bear all costs, fees, taxes and expenses incident
to and in connection with: (i) the issuance, offer, sale and delivery of the
Shares, including all expenses and fees incident to the preparation, printing,
filing and mailing (including the payment of postage with respect to such
mailing) of the Registration Statement (including all exhibits thereto), each
Prospectus, and amendments and post-effective amendments thereof and supplements
thereto, and this Agreement and related documents, Blue Sky Memoranda, including
the cost of preparing and copying all copies thereof in quantities deemed
necessary by the Underwriter; (ii) the printing, engraving, issuance and
delivery of the Share Certificates and any transfer or other taxes payable
thereon in connection with the original issuance thereof; (iv) the qualification
of the Shares under the state or foreign Securities or "Blue Sky" laws selected
jointly by the Company and the Underwriter; (v) fees and disbursements of
counsel and accountants for the Company; (vi) other expenses and disbursements
reasonably incurred on behalf of the Company; (vii) the filing fees payable to
the Commission and the National Association of Securities Dealers, Inc.
("NASD"); and (viii) any application for listing of the Shares.
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7. Conditions of Underwriter's Obligations.
The obligations of the Underwriter to consummate the transaction
contemplated by this Agreement shall be subject to the continuing accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of the Closing Date, the accuracy of the statements of the
Company and its officers and directors made pursuant to the provisions hereof,
and to the performance by the Company of its covenants and agreements hereunder
and under any and all covenants and agreements contemplated herein and under
each certificate, opinion and document contemplated hereunder and to the
following additional conditions:
(a) The Registration Statement, in form and substance satisfactory to the
Underwriter, shall have become effective not later than 5:00 p.m., New York
time, on the date following the date of this Agreement, or such later date and
time as shall be consented to in writing by you and, on or prior to the Closing
Date, no stop order suspending the effectiveness of the Registration Statement
or the qualification or registration of the Shares under the Securities laws of
any jurisdiction shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending or to your knowledge or the
knowledge of the Company, shall be contemplated by the Commission or any such
authorities of any jurisdiction and any request on the part of the Commission or
any such authorities for additional information shall have been complied with to
the reasonable satisfaction of the Commission or such authorities and counsel to
the Underwriter, and after the date hereof no amendment or supplement shall have
been filed to the Registration Statement or Prospectus without your prior
consent.
(b) The Registration Statement or the Prospectus or any amendment thereof
or supplement thereto shall not contain an untrue statement of a fact which is
material, or omit to state a fact which is material and is required to be stated
therein or is necessary to make the statements therein, not misleading.
(c) Between the time of the execution and delivery of this Agreement and
the Closing Date, there shall be no litigation instituted against the Company or
any of its officers or directors and between such dates there shall be no
proceeding instituted or, to the Company's knowledge, threatened against the
Company or any of its officers or directors before or by any federal, state or
county commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding would have a material adverse effect on the Company
or its business, business prospects or properties, or have a material adverse
effect on the financial condition or results of operation of the Company.
(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall have been no
litigation instituted against the Company or any officer or director of the
Company and since such dates there shall have been
-12-
no proceeding instituted or threatened against the Company or any officer or
director of the Company before or by any federal, state or local court,
commission, regulatory body, administrative agency or other governmental agency
or body, domestic or foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding could materially affect the business, properties,
prospects, financial condition or results of operations of the Company, and (ii)
no executive officer of the Company listed as such in the Prospectus shall have
died, become physically or mentally disabled, resigned or been removed or
discharged.
(e) Each of the representations and warranties of the Company contained
herein and each certificate and document contemplated under this Agreement to be
delivered to you shall be true and correct at the Closing Date as if made at the
Closing Date, and all covenants and agreements contained herein and in each such
certificate and document to be performed on the part of the Company and all
conditions contained herein and in each such certificate and document to be
fulfilled or complied with by the Company at or prior to the Closing Date shall
be fulfilled or complied with.
(f) At the Closing Date, the Company shall have received the opinion of
Gusrae Xxxxxx & Xxxxx, counsel to the Company, dated as of such Closing Date in
form and content satisfactory to you.
(g) Prior to the Closing Date:
(i) There shall have been no material adverse change in the condition
or prospects or the business activities, financial or otherwise, of the
Company from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside the ordinary course
of business, entered into by the Company from the latest date as of which
the financial condition of the Company, is set forth in the Registration
Statement and Prospectus which is material to the Company, which is either
(x) required to be disclosed in the Prospectus or Registration Statement
and is not so disclosed, or (y) likely to have a material adverse effect on
the business or financial condition of the Company;
(iii) The Company shall not be in default under any material provision
of any instrument relating to any outstanding indebtedness, except as
described in the Prospectus;
(iv) No material amount of the assets of the Company shall have been
pledged, mortgaged or otherwise encumbered, except as set forth in the
Registration Statement and Prospectus;
(v) No action, investigation suit or proceeding, at law or in equity,
shall have been pending or to the best of its knowledge threatened against
the Company or
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affecting any of its properties or businesses before or by any court or
federal or state commission, board or other administrative agency wherein
an unfavorable decision, ruling or finding would materially and adversely
affect the business, operations, prospects or financial condition or income
of the Company, taken as a whole, except as set forth in the Registration
Statement and Prospectus;
(vi) No stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or, to the best of the
knowledge of the Company threatened by the Commission; and
(vii) Each of the representations and warranties of any of the Company
contained in this Agreement and in each certificate and document
contemplated under this Agreement to be delivered to you was, when
originally made and is at the time such certificate is dated, true and
correct.
(h) Concurrently with the execution and delivery of this Agreement and at
the Closing Date, you shall have received a certificate of the Company signed by
the Chief Executive Officer of the Company and the principal financial officer
of the Company, dated as of the Closing Date, to the effect that the conditions
set forth in subparagraph (g) above have been satisfied and that, as of the
Closing Date, the representations and warranties of the Company set forth in
Paragraph 2 herein and the statements in the Registration Statement and
Prospectus were and are true and correct in all material respects. Any
certificate signed by any officer of the Company and delivered to you shall be
deemed a representation and warranty by the Company to the Underwriter as to the
statements made therein.
(i) On the Closing Date there shall have been duly tendered to you for your
account the appropriate number of shares of Common Stock.
(j) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Shares and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the Underwriter, or the
Company shall be contemplated by the Commission or the NASD. The Company and the
Underwriter represent that at the date hereof each has no knowledge that any
such action is in fact contemplated against any of them by the Commission or the
NASD.
8. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Underwriter and each person, if any, who
controls such Underwriter (such person, a "controlling person") within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act, and
any of its agents including its attorneys, against any and all losses,
liabilities, claims, damages, actions and expenses or liability, joint or
several, whatsoever (including but not limited to any and all expense whatsoever
reasonably incurred in investigating, preparing or
-14-
defending against any litigation, commenced or threatened, or any claim
whatsoever, including those regarding legal fees), joint or several, to which it
or such controlling persons may become subject under the Act, the Exchange Act
or under any other statute or at common law or otherwise or under the laws of
foreign countries, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any Prospectus (as from time to time amended and supplemented); in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included the shares of the Company or in any application
or other document or written communication (in this Paragraph 8 collectively
called "application") executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Shares under the securities laws thereof or filed with the Commission or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon or in conformity with written information furnished to the Company
with respect to the Underwriter by or on behalf of the Underwriter expressly for
use in the Registration Statement or Prospectus, or any amendment or supplement
thereof, or in application, as the case may be.
(b) The Underwriter agrees to indemnify and hold harmless the Company and
each of the officers and directors of the Company who have signed the
Registration Statement and each other person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the Underwriter in Paragraph 8(a), but only with respect to any untrue statement
or alleged untrue statement of any material fact contained in or any omission or
alleged omission to state a material fact required to be stated in the
Registration Statement or Prospectus or any amendment or supplement thereof or
necessary to make the statements therein not misleading or in any application
made solely in reliance upon, and in conformity with, written information
furnished to the Company by you specifically expressly for use in the
preparation of the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriter in connection with this Offering. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have. Notwithstanding the foregoing, the Underwriter shall have no
liability under this Paragraph 8(b) if any such untrue statement or omission
made in a Preliminary Prospectus is cured in the Prospectus, and the Prospectus
is delivered to the person or persons alleging the liability upon which
indemnification is being sought.
(c) If any action is brought against any indemnified party (the
"Indemnitee") in respect of which indemnity may be sought against another party
pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume the
defense of the action, including the employment and fees of counsel (reasonably
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
the employment of such counsel shall have been authorized in writing by the
Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the
-15-
defense or shall previously have assumed the defense of any such action or
claim, the Indemnitor shall not thereafter be liable to any Indemnitee in
investigating, preparing or defending any such action or claim. Each Indemnitee
shall promptly notify the Indemnitor of the commencement of any litigation or
proceedings against the Indemnitee in connection with the issue and sale of the
Shares or in connection with the Registration Statement or Prospectus.
(d) In order to provide for just and equitable contribution under the 1933
Act in any case in which: (i) the Underwriter makes a claim for indemnification
pursuant to Paragraph 8 hereof, but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction and the time to
appeal has expired or the last right of appeal has been denied) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Paragraph 8 provides for indemnification of such case; or (ii) contribution
under the 1933 Act may be required on the part of the Underwriter in
circumstances for which indemnification is provided under this Paragraph 8,
then, and in each such case, the Company and the Underwriter shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after any contribution from others) in such proportion so that the
Underwriter is responsible for the portion represented by dividing the total
compensation received by the Underwriter herein by the total purchase price of
all Shares sold in the public offering and the Company is responsible for the
remaining portion; provided, that in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11 (f) of the 0000
Xxx) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of the
1933 Act other than the Company and the Underwriter. As used in this Paragraph
8, the term "Underwriter" includes any officer, director, or other person who
controls the Underwriter within the meaning of Section 15 of the 1933 Act, and
the word "Company" includes any officer, director or person who controls the
Company within the meaning of Section 15 of the 1933 Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then the
Underwriter and each person who controls the Underwriter shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement.
(e) Within fifteen (15) days after receipt by any party to this Agreement
(or its Underwriter) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
made against another party (the "contributing party"), notify the contributing
party of the commencement thereof, but the omission so to notify the
contributing party will not relieve it from any liability it may have to any
other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any party,
and such party notifies a contributing party or his or its Underwriter of the
commencement thereof within the aforesaid fifteen (15) days, the contributing
party will be entitled to participate therein with the
-16-
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 8 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
9. Representations, Warranties, and Agreements to Survive Delivery.
The respective indemnity and contribution agreements by the Underwriter and
the Company contained in Paragraph 8 hereof, and the covenants, representations
and warranties of the Company and the Underwriter set forth in this Agreement,
shall remain operative and in full force and effect regardless of (i) any
investigation made by the Underwriter or on its behalf or by or on behalf of any
person who controls the Underwriter, or by the Company, or any controlling
person of the Company, or any director or any officer of the Company, (ii)
acceptance of any of the Shares and payment therefor, or (iii) any termination
of this Agreement, and shall survive the delivery of the Shares and any
successor of the Underwriter or the Company, or of any person who controls you
or the Company, or any other indemnified party, as the case may be, shall be
entitled to the benefit of such respective indemnity and contribution
agreements. The respective indemnity and contribution agreements by the
Underwriter and the Company contained in this Paragraph 9 shall be in addition
to any liability which the Underwriter and the Company may otherwise have.
10. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 10:00 a.m., New York time, on
the first full business day following the day on which you and the Company
receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Underwriter by notifying the
Company at any time on or before the Closing Date, if any domestic or
international event or act or occurrence has in your sole opinion, materially
disrupted, or in your sole opinion will in the immediate future materially
disrupt, securities markets; or if trading on the New York Stock Exchange, the
American Stock Exchange, or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed; or if
a moratorium in foreign exchange trading by major international banks or persons
has been declared; or if the Company shall have sustained a loss material or
substantial to the Company taken as a whole by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not such loss shall have been insured, will, in your sole opinion, make it
inadvisable to proceed with the delivery of the Shares; or if there shall have
been a material adverse change in the conditions of the securities market in
general, as in your reasonable judgment would make it inadvisable to proceed
with the offering, sale and delivery of the Shares; or if there shall have been
a material adverse change in the financial or Securities markets, particularly
in the over-the-counter market having occurred since the date of this Agreement.
-17-
(c) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Paragraph 10, the Company shall be
notified promptly by you by telephone or facsimile, confirmed by letter.
(d) If this Agreement shall not become effective or if this Agreement shall
not be carried out within the time specified herein by reason of any failure on
the part of the Company to perform any undertaking, or to materially satisfy any
condition of this Agreement by it to be performed or satisfied, the sole
liability of the Company to the Underwriter, in addition to the obligations
assumed by the Company pursuant to Paragraph 8 herein, will be to reimburse the
Underwriter for such reasonable out-of-pocket expenses of the Underwriter in
connection with this Agreement and the proposed offering of the Shares.
11. Notices.
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriter, shall be mailed
by registered or certified mail, postage prepaid, return receipt registered, or
delivered personally with receipt acknowledged or by a nationally-recognized
next-day courier service with delivery confirmed to the Underwriter at the
address first above written, Attention: Xxxx Xxxxxx, if sent to the Company,
shall be mailed or delivered as set forth above to the Company at 000 Xxxx Xxxxx
Xxxxx, Xxxxxxxxx: Xxxxxxx X. Xxxxxxxx.
12. Parties.
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriter and the Company, and the controlling persons, directors
and officers referred to in Paragraph 8 hereof, and their respective successors,
legal Underwriter and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained.
13. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware and shall supersede any
agreement or understanding, oral or in writing, express or implied, between any
of the Company and you relating to the sale of any of the Shares.
14. Jurisdiction and Venue.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the conflicts of laws
principles thereof. The parties hereto hereby
-18-
agree that any suit or proceeding arising under this Agreement, or in connection
with the consummation of the transactions contemplated hereby, shall be brought
solely in a federal or state court located in the City, County and State of New
York.
15. Counterparts.
This Agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
MERIT CAPITAL ASSOCIATES, INC.
By: _______________________________
Xxxx Xxxxxx, President
Accepted as of the date first above
written:
SB MERGER CORP.
By:
---------------------------------
Xxxxxx Xxxxxxxx, President
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