ROOM PLUS, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1996
The Thornwater Company, L.P., as
Representative of the several Underwriters.
000X Xxxx 00xx Xxxxxx
Xxx Xxxx, X.X. 00000
Dear Sirs:
The undersigned, Room Plus, Inc., a New York corporation (the
"Company"), hereby confirms its agreement with The Thornwater Company L.P., as
representative, (being referred to herein alternatively as "you" or the
"Representative") of the several underwriters (each an "Underwriter" and
collectively "Underwriters"), as follows:
1. Introduction. Pursuant to this Underwriting Agreement
("Agreement"), (i) the Company proposes to issue and sell to you an aggregate of
1,000,000 shares (the "Company Firm Shares") of the common stock, par value
$.00133 per share, of the Company (the "Common Stock") and 2,200,000 Redeemable
Common Stock Purchase Warrants (the "Redeemable Warrants"), each exercisable to
purchase one share of Common Stock, at any time commencing one year after the
date on which the Registration Statement (as defined in Section 2(a) hereof)
shall have become, or declared, effective (the "Effective Date"), and ending
five years thereafter (the Company Firm Shares and Redeemable Warrants are
called the "Company Firm Securities"); and each of the stockholders of the
Company named in Schedule A hereto (the "Selling Stockholders"), acting
severally and not jointly, proposes to sell to you the respective number of
shares of Common Stock set forth opposite the Selling Stockholders' names on
Schedule A for an aggregate of 100,000 shares of Common Stock (the "Selling
Stockholder Shares; and together with the Company Firm Shares, the "Firm
Securities"). The Redeemable Warrant exercise price, subject to adjustment as
described in the agreement providing for the Redeemable Warrants (the "Public
Agreement"), shall be $ _____ per share. The Common Stock and Redeemable
Warrants will be separately tradeable immediately upon issuance and may be sold
by the Underwriters separately and not necessarily together or in any particular
ratio.
Commencing one year from the date of issuance, the Redeemable Warrants
are subject to redemption by the Company at $.05 per Redeemable Warrant, if the
closing bid price of the
Common Stock exceeds $____ per share for thirty consecutive trading days ending
on the 15th trading day immediately prior to the date of the redemption notice.
Upon your request, as provided in Section 3 of this Agreement, the
Company shall also issue and sell to you up to an additional 165,000 shares of
Common Stock and/or 330,000 Redeemable Warrants for the purpose of covering
over-allotments in the sale of the Firm Securities (the "Over-allotment
Option"). Such additional securities are hereinafter referred to as the "Option
Securities." The Firm Securities and the Option Securities are hereinafter
sometimes referred to as the "Securities." The Company also proposes to issue
and sell to you, pursuant to the terms of the warrant agreement, dated _______,
1996 between you and the Company (the "Underwriter's Warrant Agreement")
warrants (the "Underwriter's Warrants") to purchase up to 110,000 shares of
Common Stock and/or 220,000 Redeemable Warrants. The Underwriter's Warrants
shall be exercisable during the 4-year period commencing one (1) year from the
date of the Prospectus (as defined in Section 2(a) hereof) at a price of $____
per share of Common Stock or $.11 per Redeemable Warrant, subject to adjustment
in certain events to protect against dilution. The securities issuable upon
exercise of the Underwriter's Warrants are hereinafter sometimes referred to as
the "Underwriter's Securities." The Securities, the Underwriter's Warrants and
the Underwriter's Securities are more fully described in the Registration
Statement and the Prospectus referred to below.
2. Representations and Warranties of the Company and Selling
Shareholders.
I. The Company represents and warrants to the Underwriters as of the
date hereof that:
a. Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement"), and an
amendment or amendments thereto, on Form SB-2 (No. 333- ), including any related
preliminary prospectus (the "Preliminary Prospectus"), for the registration of
the Securities and the Underwriter's Securities, under the Securities Act of
1933, as amended (the "Act"), which registration statement and amendment or
amendments have been prepared by the Company in conformity with the requirements
of the Act, and the rules and regulations (the "Regulations") of the Commission
promulgated under the Act. Before the Registration
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Statement becomes effective, the Company will not file any amendment to such
Registration Statement to which you shall have reasonably objected after having
been furnished with a copy thereof. Except as the context may otherwise require,
such Registration Statement, as amended, on file with the Commission at the time
the Registration Statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement," and the form
of prospectus, in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations (or included in the Registration Statement, if no
filing under Rule 424 is required), is hereinafter called the "Prospectus."
b. On the Effective Date and at all times subsequent thereto up to
Closing Date I and Closing Date II, if any (as such terms are defined in Section
3(d) hereof), the Registration Statement and the Prospectus will comply in all
material respects with the applicable provisions of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The representation and warranty made in this Section 2(b)
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
c. This Agreement, the Underwriter's Warrant Agreement and the
Financial Advisory and Investment Banking Agreement (as defined in Section 5(r)
hereof), have been duly and validly authorized by the Company, and this
Agreement constitutes, and the Public Warrant Agreement, the Underwriter's
Warrant Agreement and the Financial Advisory and Investment Banking Agreement,
when executed and delivered pursuant to this Agreement, will (assuming due
execution by the Representative) each constitute a valid and binding agreement
of the Company, enforceable against the Company in accordance with its
respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization,
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moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification, contribution or
exculpation provision may be limited under applicable Federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The Securities and the Underwriter's Warrants to be issued and
sold by the Company pursuant to this Agreement, the Underwriter's Securities
issuable upon exercise of the Underwriter's Warrants and payment therefor, have
been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities,
the Underwriter's Warrants and the Underwriter's Securities are not and will not
be subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company; and all corporate
action required to be taken for the authorization, issuance and sale of the
Securities, the Underwriter's Warrants and the Underwriter's Securities has been
duly and validly taken. The Underwriter's Warrants constitute 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 type of the Company's securities called for thereby; except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification, contribution or
exculpation provision may be limited under applicable Federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
d. All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; the
issuances and sales of all such securities complied in all material respects
with applicable Federal and state securities laws; the holders thereof have no
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities were
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issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company.
e. Except as set forth in the Registration Statement and the
Prospectus, the Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, respectively, free and clear of
all liens, encumbrances, claims, security interests, defects and restrictions of
any material nature whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable.
f. There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding pending or to the knowledge of the Company
threatened against, or involving the properties or business of the Company which
if adversely determined could reasonably be expected to materially and adversely
affect the financial position, or prospects, or business of the Company, except
as referred to in the Prospectus.
g. All contracts and other documents required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement have been described in the Registration Statement or the
Prospectus or filed with the Commission as Exhibits to the Registration
Statement, as required.
h. The financial statements of the Company, together with the related
notes, included in the Registration Statement and 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. There has been no material
adverse change in financial condition or results of operations of the Company,
or to the knowledge of the Company, any development involving a prospective
change in the condition or prospects of the Company, financial or otherwise,
since the date of the financial statements included in the Prospectus, except as
disclosed therein.
x. Xxxxxxxxxxx and Company, whose reports is filed with the Commission
as a part of the Registration Statement, is an independent accountant as
required by the Act and the Regulations.
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j. Except as otherwise set forth in the Prospectus, the Company does
not own, directly or indirectly, an interest in any corporation, partnership,
joint venture, trust or other business entity. The Company is duly qualified and
licensed and in good standing as a foreign corporation in each jurisdiction in
which its operations require such qualification or licensing, except where the
failure to be so qualified or licensed would not have a material adverse affect
on the Company. The Company has all requisite corporate power and authority, and
all necessary material 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 Company is, and has been, doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates and permits and with
all applicable Federal, state and local laws, rules and regulations, including
but not limited to laws and regulations relating to environmental matters and
employee health and safety matters, except where non-compliance would not have a
material adverse effect on the Company, and none of the aforementioned
authorizations, approvals, orders, licenses, certificates or permits have been
suspended or revoked, nor to the knowledge of the Company are there any
proceedings pending or threatened which could result in a suspension or
revocation thereof. The Company has all requisite corporate power and authority
to enter into this Agreement, the Public Agreement, the Underwriter's Warrant
Agreement and the Financial Advisory and Investment Banking Agreement and to
carry out the provisions and conditions hereof and thereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing with, any court,
government agency or other body is required for the issuance of the Securities
and the Underwriter's Securities, pursuant to this Agreement, the Public
Agreement and the Underwriter's Warrant Agreement, and as contemplated by the
Prospectus, except with respect to applicable Federal and state securities laws.
k. The outstanding debt, the property and the business of the Company
conforms in all material respects to the descriptions thereof contained in the
Registration Statement and Prospectus.
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l. The Securities, the Underwriter's Warrants, the Underwriter's
Securities and any other securities issued or to be issued by the Company on or
before the Closing Dates (as defined in Section 3(d) hereof) described herein
conform, or will conform when issued, in all material respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
m. Except as set forth in the Prospectus, no material default exists in
the due performance and observance of any term, covenant or condition of any
license, contract, 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 may be bound or to which any of the property or
assets of the Company are subject, which default would reasonably be expected to
have a materially adverse effect on the financial condition or business of the
Company.
n. The Company is not in violation of any term or provision of its
Certificate of Incorporation or By-Laws. Neither the execution and delivery of
this Agreement, nor the issuance and sale of the shares of Common Stock, the
Redeemable Warrants, the Underwriter's Warrants and the Underwriter's
Securities, nor the consummation of any of the transactions contemplated herein
or therein, nor the compliance by the Company with the terms and provisions
hereof has materially conflicted with, or will materially conflict with, or has
resulted in, or will result in, a material breach of, any of the terms and
provisions of, or has constituted or will constitute a material default under,
or has resulted in or will result in the creation or imposition of any lien,
charge or encumbrance upon the property or assets of the Company pursuant to the
terms 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 is subject; nor will such action result in any material
violation of the provisions of the Certificate of Incorporation or the By-Laws
of the Company or any contract or agreement, or any statute or any order, rule
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or regulation applicable to the Company or any other regulatory authority or
other governmental body having jurisdiction over the Company.
o. Except as disclosed in the Prospectus, all taxes which are due and
payable from the Company have been paid in full, unless being contested in good
faith by the Company, and the Company does not have any tax deficiency or claim
outstanding, proposed or assessed against it.
p. Subsequent to the respective dates as of which information is given
in the most recently circulated Preliminary Prospectus included as a part of the
Registration Statement, and except as may otherwise be indicated or contemplated
herein or therein, (i) the Company has not issued any securities, (ii) declared
or paid any dividend or made any other distribution on or in respect to its
capital stock; (iii) incurred any material liability or obligation, direct or
contingent, for borrowed money; or (iv) entered into any transaction other than
in the ordinary course of business.
q. To the Company's knowledge, the Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus or part thereof.
r. On the Effective Date, (i) the authorization of capital stock of the
Company is as set forth in the Registration Statement; and (ii) not more than an
aggregate of 3,220,000 shares of Common Stock shall be issued and outstanding
excluding: (A) the 2,200,000 shares of Common Stock issuable upon the exercise
of the Redeemable Warrants; (B) up to an additional 165,000 shares of Common
Stock issuable upon the exercise of the Over-allotment Option or the 330,000
shares issuable upon the exercise of the Redeemable Warrants issuable upon the
exercise of the Over-allotment Option; (C) the 110,000 shares of Common Stock
issuable upon exercise of the Underwriter's Warrants or the 220,000 shares of
Common Stock issuable upon exercise of the Redeemable Warrants issuable upon the
exercise of the Underwriter's Warrant (which warrants are identical to the
Redeemable Warrants); and (D) 1,581,250 shares of Common Stock issuable upon
exercise of warrants issued and outstanding as of __________, 1996. Other than
the shares of Common Stock already issued (within the meaning of the immediately
preceding sentence), the Securities, the Underwriter's Warrant and the
Underwriter's Securities to be offered in or in connection with the public
8
offering, no other shares of capital stock or securities convertible into
capital stock shall be outstanding or reserved for issuance at the completion of
the proposed public offering without the consent of the Representative.
s. Except for the registration rights granted under the Underwriter's
Warrant Agreement, to the Selling Stockholders named in the Registration
Statement or as disclosed in the Prospectus, no holders of any securities of the
Company or of any options, warrants or convertible or exchangeable securities of
the Company exercisable for or convertible or exchangeable for securities of the
Company have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company.
t. Assuming that there will be two "market makers" for the Common
Stock, at least 300 beneficial owners of the Common Stock and a sufficient
"public float" of the Shares, and that the Company's registration of the Common
Stock pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act") becomes effective (all as contemplated by the requirements of the National
Association of Securities Dealers, Inc.), the Common Stock is eligible for
quotation on the Nasdaq Stock Market ("Nasdaq"). The Company has filed a
registration statement with the Commission pursuant to Section 12(g) of the
Exchange Act, and has used its best efforts to have the same declared effective
by the Commission on an accelerated basis on the Effective Date.
u. Except as described in the Prospectus, to the Company's knowledge,
there are no claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect to the sale
of the Securities hereunder or any other arrangements, agreements,
understandings, commitments, payments or issuances of securities with respect to
the Company that may affect the Underwriter's compensation, as determined by the
National Association of Securities Dealers, Inc. ("NASD").
v. Neither the Company, nor, to the knowledge of the Company, any of
its employees or officers or directors, agents or any other person acting on
behalf of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or agent
of a customer, supplier, or official or governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
9
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) which (i) could reasonably
be expected to subject the Company to any material damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if not given in
the past, could reasonably be expected to have had a materially adverse effect
on the assets, business or operations of the Company as reflected in any of the
financial statements contained in the Prospectus, or (iii) if not continued in
the future, could reasonably be expected to materially adversely affect the
assets, business, operations or prospects of the Company.
w. The Company owns or possesses the requisite licenses or rights to
use all trademarks, service marks, service names, trade names, patents and
patent applications, copyrights, methods, protocols, techniques, technologies,
procedures and other rights (collectively the "Intangibles") described as owned,
or used, by the Company in the Registration Statement. There is no claim, action
or proceeding by any person, pending or, to the Company's knowledge threatened,
which pertains to or challenges the rights of the Company with respect to any
Intangibles used in the conduct of the business of the Company, except as
described in the Prospectus. To the Company's knowledge, current products,
services and processes of the Company do not infringe on any Intangibles held by
any third party.
x. Except as set forth in the Registration Statement, the Company is
not under any obligation to pay royalties or fees of any kind whatsoever to any
third party with respect to Intangibles it has developed, uses, employs or
intends to use or employ.
y. The Company has generally enjoyed satisfactory employer/employee
relationships with its employees and is in material compliance in all material
respects with all Federal, state and local laws and regulations respecting the
employment of its employees and employment practices, terms and conditions of
employment and wages and hours relating thereto. There are no material pending
or to the Company's knowledge, threatened investigations involving the Company
by the U.S. Department of Labor or corresponding foreign agency, or any other
10
governmental agency responsible for the enforcement of such Federal, state or
local laws and regulations. There is no unfair labor practice charge or
complaint against the Company pending before the National Labor Relations Board
or corresponding foreign agency or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or to the Company's knowledge, threatened against
or involving the Company, or any predecessor entity, and none has occurred.
Except as disclosed in the Prospectus, no representation question exists
respecting the employees of the Company. No collective bargaining agreement or
modification thereof is currently in effect or being negotiated by the Company
and its employees. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company.
aa. Neither the Company, nor, to the Company's knowledge, any of
its officers or directors or any of its employees or stockholders, have taken,
directly or indirectly, any action designed to or which has constituted or which
could reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
ab. The Company does not maintain nor has it maintained,
sponsored or contributed to any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan" or a "multiemployer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). The Company neither presently maintains or contributes or at
any time in the past, maintained or contributed to a defined benefit plan, as
defined in Section 3(35) of ERISA. The Company has never completely or partially
withdrawn from a "multiemployer plan."
ac. Except as set forth in the Prospectus under "MANAGEMENT" or
"CERTAIN TRANSACTIONS," the Company is not a party to any agreement with any
officer, director or stockholder of the Company or any subsidiary or any
affiliate or associate of any such person or entity which is required to be
disclosed in the Prospectus pursuant to Regulation SB. Except as set forth in
the Prospectus, to the Company's knowledge, no officer, director or stockholder
of the Company or any "affiliate" or "associate" (as these terms are defined in
11
Rule 405 promulgated under the Regulations) of any such person or entity or the
Company, has or has had, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficial interest in any contract or agreement to which the Company is
a party or by which it may be bound or affected.
ad. The minute books of the Company have been made available to
counsel to the Underwriters and contain all available minutes of meetings and
actions by unanimous consent of directors and stockholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
ae. The statements in the Prospectus under "RISK FACTORS,"
"BUSINESS," "CERTAIN TRANSACTIONS," "MANAGEMENT" and "DESCRIPTION OF
SECURITIES," insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions are correct in all
material aspects.
II. Each of the Selling Stockholders, severally and not jointly,
represents and warrants to, the Underwriters as of the date hereof, as follows:
a. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not result in a The
breach by such Selling Stockholder of, or constitute a default by such Selling
Stockholder under, any material indenture, deed or trust, contract or other
agreement or instrument or any decree, judgment or order to which such Selling
Stockholder is a party or by which such Selling Stockholder may be bound.
b. Such Selling Stockholder has, and will have, at Closing Date
I, good and marketable title to the Selling Stockholder Shares to be sold by
such Selling Stockholder hereunder, free and clear of any pledge, lien, security
interest, encumbrance, claim or equity, created by or arising through the
Selling Stockholder other then pursuant to this Agreement; such Selling
Stockholder has full right, power and authority to sell, transfer and deliver
the Selling Stockholder Shares to be sold by such Selling Stockholder hereunder;
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and upon delivery of the Selling Stockholders Shares to be sold by such Selling
Stockholder hereunder and payment of the purchase price thereof as herein
contemplated, the Underwriter will receive good and marketable title to the
Selling Stockholder Shares purchased by it from such Selling Stockholder, free
and clear of any pledge, lien, security interest, encumbrance, claim or equity.
c. Such Selling Stockholder has duly executed and delivered in
the form heretofore furnished to the Representative, a power of attorney and
custody agreement (the "Power of Attorney and Custody Agreement") with the
Company as the attorney-in-fact and the custodian (the "Attorney-in-Fact" and
the "Custodian", respectively); the Attorney-in-Fact is authorized to execute
and deliver this Agreement and the certificates referred to in Section 4(k) or
that may be required pursuant to Section 4(h) on behalf of such Selling
Stockholder, to authorize the delivery of the Selling Stockholder Shares to be
sold by such Selling Stockholder hereunder, to duly endorse (in blank or
otherwise) the certificate or certificates representing such Selling Stockholder
Shares, to accept payment therefor, and otherwise to act on behalf of such
payment therefor, and otherwise to act on behalf of such Seller in connection
with this Agreement.
d. All authorizations, approvals and consents necessary for the
execution and delivery by such Selling Stockholder of the Power of Attorney and
Custody Agreement, the execution and delivery by or on behalf of such Selling
Stockholder of this Agreement, and the sale and delivery of the Selling
Stockholder Shares to be sold by such Selling Stockholder hereunder and
thereunder (other than, at the time of the execution hereof, the issuance of the
order of the Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under the state
securities laws), have been obtained and are in full force and effect; and such
Selling Stockholder has the full right, power and authority to enter into this
Agreement and the Power of Attorney and Custody Agreement to sell, transfer and
deliver the Selling Stockholder Shares to be sold by such Selling Stockholder
hereunder.
e. For a period of two years from the Effective Date, such
Selling Stockholder will not, without the prior written consent of the
Representative, directly or indirectly, offer to sell, grant any option for the
sale of, or otherwise dispose of, any Common Stock of the Company or any
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securities convertible into Common Stock owned by such Selling Stockholder or
with respect to which such Selling Stockholder has the power of disposition,
other than to the Underwriters pursuant to this Agreement.
f. Such Selling Stockholder has not taken, and will not take,
directly or indirectly any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security or the Company to facilitate the sale
or exercise of the Shares.
g. Certificates in negotiable form for all Selling Stockholder
Shares to be sold by such Selling Stockholder hereunder have been placed in
custody with the Custodian by or for the benefit of such Selling Stockholder for
the purposes or effecting delivery by such Selling Stockholder hereunder.
3. Purchase, Sale and Delivery of the Securities and Underwriter's
Warrants.
a. On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriter severally, an aggregate of 1,000,000 shares of
Common Stock and 2,200,000 Redeemable Warrants, the Selling Stockholders,
severally and not jointly, agree to sell to the Underwriters severally an
aggregate of 100,000 shares of Common Stock and the Underwriters severally, and
not jointly agree to purchase from the Company and the Selling Stockholders
severally, such Securities on a firm commitment basis at a purchase price of
$______ per share of Common Stock and $_____ per Redeemable Warrant, to be sold
by the Underwriters at an initial public offering price of $_____ per share, and
$.10 per Redeemable Warrant.
b. In addition, upon not less than two (2) days' notice from the
Representative to the Company, for a period of forty-five (45) days from the
date of the Prospectus, the Company agrees to sell to the Underwriters at a
purchase price of $____ all or any part of the Option Securities, to be sold by
the Underwriters hereunder at an initial public offering price of $_____ per
share and $.09 per Redeemable Warrant. Delivery of the Option Securities shall
be made concurrently with tender of payment therefor. Option Securities may be
purchased by the Underwriters only for the purpose of covering over-allotments
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in the sale of the Firm Securities, and the Underwriters shall have no
obligation to make any over-allotments. No Option Securities shall be delivered
unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
c. On Closing Date I (defined below in Section 3(d)), the
Company shall issue and sell to the Representative, the Underwriter's Warrants,
which warrants shall entitle the holder thereof to purchase up to 110,000 shares
of Common Stock and/or 220,000 Redeemable Warrants. The total purchase price of
the Underwriter's Warrants shall be $10. The Underwriter's Warrants shall be
exercisable in whole or in part for up to an additional 110,000 shares of Common
Stock and/or 220,000 Redeemable Warrants for a period of four (4) years
commencing one (1) year from the date of the Prospectus at a price of $____ per
share on $.11 per Redeemable Warrant (150% of the initial public offering price
of the respective securities). The Underwriter's Warrant Agreement and form of
Underwriter's Warrant Certificate shall be substantially in the form filed as
Exhibit __ to the Registration Statement.
d. Payment for the Underwriter's Warrant shall be made on
Closing Date I. Payment for the Firm Securities and the Option Securities shall
be made on each of Closing Date I and Closing Date II, respectively, at the
Representative's election by certified or bank cashier's checks in New York
Clearing House funds, payable to the order of the Company and the Selling
Stockholders in appropriate amounts at the offices of the Representative, or at
such other place as agreed upon by the Representative and the Company or by wire
or transfer, upon delivery of certificates (in form and substance reasonably
satisfactory to the Representative) representing the Securities or by
confirmation of electronic transfer of the Securities to the Representative for
the account of the Underwriters. Delivery and payment for the Firm Securities
shall be made at 10:00 A.M. New York time, on or before the fifth business day
following the Effective Date or at such earlier time as the Representative shall
determine, or at such other time as shall be agreed upon by the Representative
and the Company. The hour and date of delivery and payment for the Firm
Securities are called "Closing Date I." The Firm Securities shall be registered
in such name or names and in such authorized denominations as the Representative
15
may request in writing at least two (2) full business days prior to Closing Date
I. The Company will permit the Representative to examine and package any
certificates representing the Firm Securities for delivery, at least one (1)
full business day prior to Closing Date I. Delivery for each of the Option
Securities as provided above shall be made within the two (2) business day
period after notice of exercise to the Company, and against payment therefor, as
provided above. The hour and date of such delivery and payment made subsequent
to Closing Date I for Option Securities is referred to as "Closing Date II."
Closing Date I and Closing Date II are referred to collectively as "Closing
Dates." The Option Securities shall be registered in such name or names and in
such denominations as the Representative may request in writing at the time of
exercise of the Over-allotment Option.
e. The Company shall not be obligated to sell or deliver any
Firm Securities except upon tender of payment by the Underwriters for all the
Firm Securities.
4. Public Offering. The Underwriter is to make a public offering
of the Firm Securities and such of the Option Securities as it may determine.
The Securities are to be initially offered to the public at the offering price
set forth on the cover page of the Prospectus (such price being hereinafter
called the "Public Offering Price"). The Representative may, at its own expense,
enter into one or more agreements as it, in its sole discretion, deems
advisable, with one or more broker-dealers who shall act as dealers or
co-underwriters in connection with such public offering.
5. Covenants of the Company. The Company covenants and agrees
that it will:
a. Use its best efforts to cause the Registration Statement to
become effective and will notify the Representative immediately, and confirm the
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto becomes effective, (ii) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceeding for
that purpose, (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Securities and the
Underwriter's Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, and (iv) of
16
the receipt of any comments from the Commission. If the Commission or any state
securities commission shall enter a stop order or suspend such qualification at
any time, the Company will make every reasonable effort to obtain promptly the
lifting of such order.
b. File the Prospectus (in form and substance reasonably
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission in accordance with
Rule 424, if the Prospectus is required to be so filed.
c. During the time when a prospectus is required to be delivered
under the Act, use all its reasonable best efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Regulations, as from time to time in force, so far
as necessary to permit the continuance of sales of or dealings in the Securities
and the Underwriter's Securities in accordance with the provisions hereof and
the Prospectus. If at any time when a prospectus relating to the Securities or
the Underwriter's Securities is required to be delivered under the Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Underwriters, or either of them, the Prospectus,
as then amended or supplemented, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will notify the Representative
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act.
d. Deliver to the Underwriters, without charge, such number of
copies of each Preliminary Prospectus and the Prospectus as the Representative
may reasonably request and, as soon as the Registration Statement or any
amendment or supplement thereto becomes effective, deliver to the Representative
two (2) signed copies of the Registration Statement, including exhibits, and all
post-effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and signed copies of all consents of certified
experts.
17
e. Endeavor in good faith, in cooperation with the Underwriters,
and Gersten, Savage, Xxxxxxxxx & Xxxxxx LLP at or prior to the time the
Registration Statement becomes effective, to qualify the Securities and the
Underwriter's Securities for offering and sale under the securities laws of such
jurisdictions as the Representative may reasonably designate, provided that no
such qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees that such action is not at the time necessary
or advisable, use its reasonable best efforts to file and make such statements
or reports at such times as are or may reasonably be required by the laws of
such jurisdiction.
f. Make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Act) covering a period of at least twelve
(12) consecutive months beginning after the Effective Date.
g. For a period of five (5) years from the Effective Date,
furnish to the Underwriters copies of such financial statements and other
periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities, and promptly furnish to
each Underwriter (i) a copy of each periodic report the Company shall file with
the Commission, (ii) a copy of every press release and every news item and
article with respect to the Company, or its affairs which was released by the
Company, (iii) a copy of each Form 8-K prepared by the Company, and (iv) such
additional documents and information with respect to the Company, and its
affairs or any future subsidiaries or affiliates of the Company as either
Underwriter may from time to time reasonably request.
h. Apply the net proceeds from the offering received by it in a
manner consistent in all material respects with the caption "USE OF PROCEEDS" in
the Prospectus.
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i. Deliver to the Representative, prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and not file any such amendment or supplement to which
the Representative shall reasonably object, after being furnished such copy, in
writing with reasonable specificity as to the nature and extent of any
objection.
j. For a period of three (3) years from Closing Date I, provide
the Representative, upon its request, at the Company's sole expense, (i) with
access to daily consolidated financial transfer sheets relating to the Common
Stock and designate American Stock Transfer & Trust Company as transfer agent
for the Company's securities or such other transfer agent mutually agreeable by
the Company and the Representative and (ii) to cause the Company's depository to
fax a "special security position report" to the Representative on a weekly
basis.
k. For a period of three (3) years after Closing Date I,
nominate and use its best efforts to engage a designee of the Representative, as
a nonvoting advisor to the Company's Board of Directors (the "Advisor") or in
lieu thereof to designate an individual for election as a director, in which
case the Company shall use its best efforts to have such individual elected as a
director. The designee may be a director, officer, partner, employee or
affiliate of an Underwriter and the Representative shall designate such person
in writing to the Board. In the event the Representative shall not have
designated such individual at the time of any meeting of the Board or such
person is unavailable to serve, the Company shall notify the Representative of
each meeting of the Board. An individual, if any, designated by the
Representative shall receive all notices and other correspondence and
communications sent by the Company to members of the Board. Such Advisor or
director, as the case may be, shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings including, but not limited
to, food, lodging, and transportation. In addition, such Advisor or Director
shall be entitled to the same compensation as the Company gives to other
non-employee directors for acting in such capacity. The Company further agrees
that, during said three (3) year period, it shall give the Advisor or director,
as the case may be, the same notice of any meeting of the Company's Board of
Directors as it affords its other directors. Further, during such three (3) year
period, the Company shall give prior notice to the Representative with respect
19
to any proposed acquisitions, mergers, reorganizations or other similar
transactions.
The Company agrees to indemnify and hold the Underwriters and such
Advisor harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of the Advisor at any such meeting described herein. In the event the Company
maintains a liability insurance policy affording coverage for the acts of its
officers and directors, it agrees, if possible to include the Advisor as an
insured under such policy.
l. Until the sooner of (i) seven (7) years from the date hereof,
or (ii) the sale to the public of the Underwriter's Securities, not take any
action or actions which are in the Company's direct control which may prevent or
disqualify the Company's use of Form SB-2 (or another appropriate form) for the
registration under the Act of the Underwriter's Securities and the shares of
Common Stock underlying the Redeemable Warrants.
m. For a period of five (5) years from the Effective Date, use
its best efforts to maintain the quotation by Nasdaq of the Securities.
n. Supply the Underwriters with four (4), and Gersten, Savage,
Xxxxxxxxx & Xxxxxx, L.L.P., counsel to the Representative, with three (3), bound
volumes of the underwriting materials within a reasonable time after the latest
Closing Date.
o. For a period of two (2) years from the Effective Date, not
issue any other shares of Common Stock or securities convertible into or
exercisable for Common Stock without the prior written consent of the
Representative, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the Company may issue securities upon (i) the
exercise of any warrants or options outstanding on the date hereof pursuant to
the terms thereof, and (ii) the exercise of the Redeemable Warrants and/or
Underwriter's Warrant.
p. So long as the Securities or the Underwriter's Securities are
registered under the Exchange Act, hold an annual meeting of stockholders for
the election of directors within 180 days after the end of each of the Company's
fiscal years and, within 150 days after the end of each of the Company's fiscal
years, provide the Company's stockholders with the audited financial statements
of the Company as of the end of the fiscal year just completed prior thereto.
20
Such financial statements shall be those required by Rule 14a-3 under the
Exchange Act and shall be included in an annual report pursuant to the
requirements of such Rule.
q. Engage a financial public relations firm reasonably
satisfactory to the Underwriter as soon as possible after Closing Date I, and
continuously engage such firm, or an acceptable substitute firm for at least the
period ending twenty-four (24) months after Closing Date I.
r. Enter into the Underwriter's Warrant Agreement and the
Financial Advisory and Investment Banking Agreement (the "Consulting Agreement")
in substantially the form filed as Exhibits ___ and ___, respectively, to the
Registration Statement.
s. As soon as possible after Closing Date I, take all necessary
and appropriate actions to be included in Standard and Poor's Corporation
Descriptions or other equivalent securities manual and to maintain its listing
therein for a period of five (5) years from the Effective Date.
t. Cause all of the Company's stockholders, to enter into
written agreements (the "Lock-up Agreements") that, for a period of two years
after the Effective Date as to officers, directors, employees of the Company and
their affiliates and family members, six months from the Effective Date as to
shareholders who acquired their securities of the Company in a private placement
concluded in 1996 and one year from the Effective Date as to all other
securityholders, they will not, without the consent of the Representative, (i)
publicly sell any securities of the Company owned directly or beneficially by
them (as defined in the Exchange Act); or (ii) otherwise sell, or transfer such
securities unless the transferee agrees in writing to be bound by an identical
lock-up.
u. Use its best efforts to qualify, by the Effective Date,
Common Stock and Redeemable Warrants for listing on the NASDAQ Small Cap System
and Boston Stock Exchange (the "BSE") or another regional exchange acceptable to
you, or in the alternative the NASDAQ National Market System.
21
v. For a period of two years from the Effective Date, the
Company shall not issue any of its securities in any offering pursuant to
Regulation S under the 1933 Act, without the prior written consent of the
Representative.
w. (i) Grant to the Representative a preferential right on the
terms and subject to the conditions set forth in Sections 5(u) and 5(p), for a
period of two (2) years from the Effective Date, to purchase for its account, or
to sell for the account of the Company or its present affiliates or subsidiaries
or any of its stockholders listed in the Prospectus under the caption "PRINCIPAL
STOCKHOLDERS" (the "Principal Stockholders"), any securities of the Company, on
terms not more favorable to the Company or such present or future subsidiary or
affiliate or the Principal Stockholders than they can secure elsewhere, to
purchase or sell any such securities. If the Representative fails to notify the
Company in writing of its intention to act as underwriter or placement agent or
otherwise participate or introduces a third party to participate in such
offering within fifteen (15) days after receipt of a notice containing such
proposal, then the Underwriter shall have no further claim or right with respect
to the proposal contained in such notice. If, thereafter, such proposal is
materially modified, the Company, and each present or future affiliate or
subsidiary or its Principal Stockholders shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided hereinabove with respect to the original proposal; and (ii) If the
Representative is offered the right of first refusal and agree to perform such
functions, but fail to perform, the Representative will not be entitled to any
compensation, and will be deemed to have waived its right of first refusal with
respect to future offerings unless such failure to perform is caused by the
Company.
x. Designate the Representative (with the right of
Representative to designate an Underwriter) as the Company's exclusive Warrant
Solicitation Agents in the event of any solicitation of the exercise of the
Redeemable Warrants, in connection with a redemption of the Redeemable Warrants
or otherwise, and shall pay to the Representative a Warrant Solicitation fee of
five (5%) percent of the exercise price of all solicited Redeemable Warrants,
subject to the rules and regulations of the NASD with regard to such fees.
22
y. Neither the Company nor any representative of the Company has
made or shall make any written or oral representation in connection with the
Offering and sale of the Securities or the Underwriters' Warrant which is not
contained in the Prospectus, which is otherwise inconsistent with or in
contravention of anything contained in the Prospectus, or which shall constitute
a violation of the Act, the Rules and Regulations, the Exchange Act or the rules
and regulations promulgated under the Exchange Act.
z. For so long as any Redeemable Warrant is outstanding, the
Company shall, at its own expense: (i) use its reasonable best efforts to cause
post-effective amendments to the Registration Statement, or new registration
statements relating to the Redeemable Warrants and the Common Stock underlying
the Redeemable Warrants to become effective in compliance with the Act and
without any lapse of time between the effectiveness of the Registration
Statement and of any such post-effective amendment or new registration
statement; provided, however, that the Company shall have no obligation to
maintain the effectiveness of such Registration Statement or file a new
Registration Statement, or to keep available a prospectus at any time at which
such registration or prospectus is not then required; (ii) cause a copy of each
Prospectus, as then amended, to be delivered to each holder of record of a
Redeemable Warrant; (iii) furnish to the Underwriters and dealers as many copies
of each such Prospectus as the Underwriters or dealers may reasonably request;
and (iv) maintain the "blue sky" qualification or registration of the Redeemable
Warrants and the Common Stock underlying the Redeemable Warrants, or have a
currently available exemption therefrom, in each jurisdiction in which the
Securities were so qualified or registered for purposes of the Offering.
6. Payment of Expenses.
a. The Company hereby agrees to pay all expenses (other than
fees of counsel to the Underwriters) in connection with the offering, including
but not limited to, (i) the preparation, printing, filing and mailing (including
the payment of postage and overnight delivery with respect to such mailing) of
the Registration Statement and the Prospectus and related documents, including
the cost of all copies thereof and of the Preliminary Prospectus and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriter in quantities as hereinabove stated, (ii) the printing, engraving,
23
issuance and delivery of the shares of Common Stock, the Redeemable Warrants,
and the Underwriter's Warrants, (iii) the qualification of the Securities, the
Underwriter's Warrants and the Underwriter's Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," and "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, and the fees and disbursements of counsel
for the Underwriter relating to Blue Sky matters (all of which fees under this
item (iii) shall be payable by the Company in the sum of $35,000 of which
$12,500 has previously been paid), (iv) advertising costs and expenses including
but not limited to the reasonable costs and expenses in connection with the
"road show," information meetings and presentations, bound volumes and
"tombstones" in the Wall Street Journal, New York Times, and Washington Post and
prospectus memorabilia, (v) costs and expenses in connection with due diligence
investigations, including but not limited to the reasonable fees of any
independent counsel or consultant retained, phone calls relating to due
diligence investigations, and all reasonable travel and lodging expenses
incurred by you and/or counsel to the Underwriters in connection with visits to,
and examination of, the Company's premises, (vi) fees and expenses of the
transfer agent and warrant agent, (vii) application and listing fees for
inclusion in Xxxxx'x OTC Manual or Standard and Poor's Corporation Descriptions
or other equivalent securities manuals, and (viii) the fees payable to the NASD
and Nasdaq. The $35,000 payment to counsel for the Underwriter shall not include
fees of special counsel if same is required to be incurred in a merit review
state which may require local counsel. In this connection, Blue Sky applications
shall be made in such states and jurisdictions as shall be requested by the
Underwriter. Payments due shall be made on each Closing Date I.
b. The Company shall pay to the Representative an aggregate
non-accountable expense allowance, in addition to the expenses payable pursuant
to Section 6(a), equal to three (3%) percent of the gross proceeds received by
the Company from the sale of the Securities less than $25,000 previously paid on
account thereof.
7. Conditions of Underwriter's Obligations. The obligations of
the Underwriters to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy in all material aspects of the
24
representations and warranties of the Company as of the date hereof and as of
each of the Closing Dates, to the accuracy in all material respects of the
statements of officers of the Company made pursuant to the provisions hereof and
to the performance by the Company of its obligations hereunder in all material
respects and to the following conditions:
a. The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you, and, at each of the
Closing Dates, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Gersten, Savage, Xxxxxxxxx &
Xxxxxx LLP, counsel to the Representative.
b. At Closing Date I, the Underwriter shall have received the
favorable opinion of Wilentz, Xxxxxxx & Xxxxxxx, P.A., counsel to the Company,
dated Closing Date I, addressed to the Underwriters and in form and substance
reasonably satisfactory to Gersten, Savage, Xxxxxxxxx & Xxxxxx LLP, counsel to
the Representative, in substantially the form attached as Exhibit A hereto.
c. On or prior to each of Closing Date I and Closing Date II,
counsel for the Underwriters shall have been furnished such documents,
certificates and opinions as it may reasonably require for the purpose of
enabling it to review or pass upon the matters referred to in Section 7(b), or
in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
d. Prior to each of Closing Date I and Closing Date II, (i)
there shall have been no material adverse change, or development involving a
material adverse prospective change, in the condition or prospects of 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, not in the ordinary
course of business, entered into by the Company from the latest date as of which
its financial conditions are set forth in the Registration Statement and
25
Prospectus which is materially adverse to the Company; (iii) the Company shall
not be in default under any provision of any instrument relating to any
outstanding indebtedness which default would have a material adverse effect on
the Company; (iv) no amount of the assets of the Company shall have been pledged
or mortgaged, except as set forth in the Registration Statement and Prospectus;
(v) no action, suit or proceeding, at law or in equity, shall be pending or
threatened against the Company before or by any court or Federal or state
commission, board or other administrative agency wherein an unfavorable result,
decision, ruling or finding would adversely affect the business, prospects,
operations, or financial condition or income of the Company, except as set forth
in the Registration Statement and Prospectus and except where such a result is
deemed remote by counsel to the Company with respect to such action or
proceeding; (vi) no stop order shall have been issued under the Act and no
proceedings with respect thereto shall have been initiated or threatened by the
Commission; (vii) the market for securities in general or political, financial
or economic conditions shall not have materially adversely changed from those
reasonably foreseeable as of the date hereof as to render it impracticable in
the Representative's reasonable judgment to make a public offering of the
Securities, and there has not been a material adverse change in market levels
for securities in general or financial or economic conditions which render it
inadvisable in the Representative's judgment to proceed; and (viii) there shall
not have commenced or occurred any war or Act of God or other calamity which
would have a material adverse effect on, or result in a material loss to, the
Company.
The Company agrees and acknowledges that the Representative shall be
the sole determining party as to the presence of any such conditions, events,
occurrences and provisions set forth in this Section 7(d).
e. At each of Closing Date I and Closing Date II, the
Underwriters shall have received a certificate of the Company signed by the
President and the Secretary of the Company, dated Closing Date I and Closing
Date II, respectively, to the effect that the conditions set forth in section
7(d)(i) through (vi) above have been satisfied and that, as of Closing Date I
and Closing Date II, respectively, the representations and warranties of the
Company set forth in Section 2 hereof are true and correct.
26
f. By the Effective Date, the Underwriters shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
g. At the time this Agreement is executed, and at each of
Closing Date I and Closing Date II, the Representative shall have received a
letter, addressed to the Representative and in form and substance reasonably
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (3) below) to the Underwriters and
to Gersten, Savage, Xxxxxxxxx & Xxxxxx LLP, counsel for the Representative, from
Ehrenkrantz and Company, dated, as of the date of this Agreement and as of each
of Closing Date I and Closing Date II:
(1) confirming that they are independent accountants
with respect to the Company within the meaning of the Act and the applicable
Regulations;
(2) stating that in their opinion the financial
statements of the Company included in the Registration Statement and Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published Regulations thereunder;
(3) stating that, on the basis of a reading of the
latest available minutes of the stockholders and boards of directors and the
various committees of the boards of directors of the Company and any current or
former subsidiaries of the Company, consultations with officers and other
employees of the Company responsible for financial and accounting matters, a
reading of the latest interim financial statements of the Company (which shall
be as of a date not later than thirty (30) days prior to the Effective Date) and
other specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that (A) the audited financial statements for
the years ended December 31, 1995 of the Company in the Registration Statement
does not comply as to form in all material respects with the applicable
accounting requirements of the Act, and the Regulations or are not fairly
presented in conformity with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited financial statements
of the Company included in the Registration Statement, (B) at a date not more
27
than five (5) days prior to the Effective Date, there was any change in the
capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity of the Company as compared with amounts shown in December
31, 1995 balance sheet included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or, if there was any
decrease, setting forth the amount of such decrease, and (C) during the period
from December 31, 1995 to a specified date not more than five (5) days prior to
the Effective Date there was any decrease in revenues, decrease (increase) in
net earnings (losses) or increases in net loss per common share outstanding of
the Company, in each case as compared with the corresponding period ending
December 31, 1995 other than as set forth in or contemplated by the Registration
Statement, or, if there was any such increase or decrease, setting forth the
amount of such increase or decrease;
(4) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including worksheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and statements as to such other matters incident to the transaction
contemplated hereby as the Representative may reasonably request.
(5) all proceedings taken in connection with the
authorization, issuance or sale of the Securities, the Underwriter's Warrants
and the Underwriter's Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Representative and to Gersten, Savage,
Xxxxxxxxx & Xxxxxx LLP, counsel to the Representative.
h. On each of Closing Date I and Closing Date II, there shall
have been duly tendered to you, for your account, the appropriate number of
Securities, and individually for your own account, the Underwriter's Warrants.
28
i. No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to Section 5(e) hereof shall have been
issued on either Closing Date I or Closing Date II, and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Underwriters or
the Company, shall be contemplated.
j. Prior to each of the Closing Date I and Closing Date II there
shall not have been received or provided by the Company's independent public
accountants or attorneys, qualifications to the effect of either difficulties in
furnishing certifications as to material items including, without limitation,
information contained within the footnotes to the financial statements, or as
affecting matters incident to the issuance and sale of the Securities or as to
corporate proceedings or other matters.
k. On or prior to Closing Date I, the Underwriter's Warrant
Agreement and the Financial Advisory and Investment Banking Agreement shall have
been executed and delivered by the Company, and the Lock-Up Agreements shall
have been executed and delivered by all of the Company's existing stockholders.
l. Any certificate signed by any officer of the Company and
delivered to the Representative or to counsel to the Representative shall be
deemed a representation and warranty by the Company to the Underwriters as to
the statements made therein. If any condition to the Underwriters' respective
obligations hereunder to be fulfilled prior to or at any Closing Date is not so
fulfilled, the Representative may terminate this Agreement or, if the
Representative so elects, may waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
8. Indemnification.
a. The Company and the Selling Stockholders, severally and not
jointly, shall indemnify and hold the Underwriters, and each controlling person,
if any, who controls an Underwriter within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act), harmless against any and all liabilities,
claims, lawsuits, including any and all awards and/or judgments to which it may
become subject under the Act, the Exchange Act or any other Federal or state
29
statute, at common law or otherwise, insofar as said liabilities, claims and
lawsuits (including awards and/or judgments) arise out of or are in connection
with the Registration Statement, Prospectus and related Exhibits filed under the
Act, except for any liabilities, claims and lawsuits (including awards and/or
judgments), arising out of acts or omissions of the Underwriter seeking such
indemnification. In addition, the Company shall also indemnify and hold the
Underwriter harmless against any and all costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing liabilities,
claims and lawsuits to which the indemnity applies.
An Underwriter shall give the Company, and the Selling Stockholders,
within two (2) business days of the time that such Underwriter first becomes
aware thereof, notice of any such liability, claim or lawsuit which such
Underwriter contends is the subject matter of the Company's indemnification, and
the Company thereupon shall be granted the right to take any and all necessary
and proper action, at its sole cost and expense, with respect to such liability,
claim and lawsuit, including the right to settle, compromise and dispose of such
liability, claim or lawsuit.
Each Underwriter, severally and not jointly, shall indemnify and hold
the Company, and each controlling person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and the Selling Stockholders, harmless against any and all liabilities, claims,
lawsuits, including any and all awards and/or judgments to which it may become
subject under the Act, the Exchange Act or any other Federal or state statute,
at common law or otherwise, insofar as said liabilities, claims and lawsuits
(including awards and/or judgments) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact required to be stated
or necessary to make the statement therein, not misleading, which statement or
omission was made in reliance upon information furnished in writing to the
Company by or on behalf of such Underwriter for inclusion in the Registration
Statement or Prospectus or any amendment or supplement thereto. In addition,
such Underwriter shall also indemnify and hold the Company harmless against any
and all costs and expenses, including reasonable counsel fees, incurred or
relating to the foregoing.
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The Company and the Selling Stockholders shall give to the applicable
Underwriter and the Representative prompt notice of any such liability, claim or
lawsuit which the Company contends is the subject matter of such Underwriter's
indemnification and such Underwriter thereupon shall be granted the right to
take any and all necessary and proper action, at its sole cost and expense, with
respect to such liability, claim and lawsuit, including the right to settle,
compromise or dispose of such liability, claim or lawsuit, excepting therefrom
any and all proceedings or hearings before any regulatory bodies and/or
authorities.
b. In order to provide for just and equitable contribution under
the Act in any case in which (i) any person entitled to indemnification under
this Section 8 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 8, then, and in each such case, the Company, the Selling Stockholders
and the Underwriters shall contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after any contribution from others)
in such proportion taking into consideration the relative benefits received by
each party from the offering covered by the Prospectus (taking into account the
portion of the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning the matter with respect to which
the claim was assessed, the opportunity to correct and prevent any statement or
omission and other equitable considerations appropriate under the circumstances;
provided, however, that notwithstanding the above in no event shall either
Underwriter be required to contribute any amount in excess of 10% of the initial
public offering price of the Securities purchased by such Underwriter as set
forth the final Prospectus; and provided, that, in any such case, no person
guilty of a 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.
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Within fifteen (15) days after receipt by any party to this Agreement
(or its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be 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 which 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 representative of the commencement thereof
within the aforesaid fifteen (15) days, the contributing party will be entitled
to participate therein with the 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 Section 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 and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates, and such representations, warranties and
agreements of the Underwriters, the Company and the Selling Stockholders,
including the indemnity agreements contained in Section 8 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any of the Underwriters, the Company or any controlling person,
and shall survive termination of this Agreement or the issuance and delivery of
the Securities to the Underwriters until the earlier of the expiration of any
applicable statute of limitations or the seventh anniversary of Closing Date II,
at which time the representations, warranties and agreements shall terminate and
be of no further force and effect.
10. Effective Date of This Agreement and Termination hereof.
a. This Agreement shall become effective at 9:30 a.m., New York
time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by the
32
Underwriters of the Securities, whichever is earlier. The time of the initial
public offering, for the purpose of this Section 10, shall mean the time, after
the Registration Statement becomes effective, of the release by the Underwriters
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities or the time, after the Registration
Statement becomes effective, when the Securities are first released by the
Representative for offering by the Underwriters or dealers by letter or
telegram, whichever shall first occur. The Representative may prevent this
Agreement from becoming effective without liability to any other party, except
as noted below, by giving the notice indicated below in this Section 10 before
the time this Agreement becomes effective. The Representative agrees to give the
undersigned notice of the commencement of the offering described herein.
b. The Representative shall have the right, in its sole
discretion, to terminate this Agreement, including without limitation, the
obligations to purchase the Firm Securities and the obligation to purchase the
Option Securities after the exercise of the Over-Allotment Option, by notice
given to the Company prior to delivery and payment for all the Firm Securities
or the Option Securities, as the case may be, only if any of the conditions
enumerated in Section 7 are not either fulfilled or waived by the Representative
on or before any Closing Date.
c. If the Representative elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10, the Company shall be notified on the same day as such election is made by
the Representative by telephone or telegram, confirmed by letter.
d. Anything herein to the contrary notwithstanding, if this
Agreement shall not be carried out within the time specified herein, or any
extensions thereof granted by the Representative, by reason of any failure on
the part of the Company to perform any undertaking or satisfy any condition of
this Agreement by it to be performed or satisfied then, in addition to the
obligations assumed by the Company pursuant to Section 6(a) hereof, the
Representative shall provide the Company with a statement of the Underwriters'
accountable expenses.
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e. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or termination of this Agreement, and whether
or not this Agreement is otherwise carried out, the provisions of Section 8
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the Underwriters,
shall be mailed, delivered or telegraphed and confirmed to The Thornwater
Company L.P., 000X Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 Attention:
Managing Director, with a copy to Gersten, Savage, Kaplowitz & Xxxxxx LLP, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxx Xxxxxxxxx, Esq.; if
to the Company, shall be mailed, delivered or telegraphed and confirmed to Room
Plus, Inc., 00 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000, Attention: Chairman
of the Board, with a copy to Xxxxxxx Xxxxxxx & Xxxxxxx P.A., 00 Xxxxxxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx, Attention: Xxxxxxx Xxxxx, Esq..
12. Parties. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 8 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
13. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws. The parties agree to submit
themselves to the jurisdiction of the courts of the State of New York or of the
United States of America for the Southern District of New York, which shall be
the sole tribunals in which any parties may institute and maintain a legal
proceeding against the other party arising from any dispute in this Agreement.
In the event either party initiates a legal proceeding in a jurisdiction other
than in the courts of the State of New York or of the United States of America
for the Southern District of New York, the other party may assert as a complete
defense and as a basis for dismissal of such legal proceeding that the legal
34
proceeding was not initiated and maintained in the courts of the State of New
York or of the United States of America for the Southern District of New York,
in accordance with the provisions of this Section 13.
14. Entire Agreement. This Agreement, the Underwriter's Warrant
Agreement and the Financial Advisory and Investment Banking Agreement contain
the entire agreement between the parties hereto in connection with the subject
matter hereof and thereof.
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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,
ROOM PLUS, INC.
By: ______________________________
Name: Xxxx Xxxxxx
Title: Chairman of the Board
ROOM PLUS, INC.
By:___________________________
Xxxx Xxxxxx, on behalf of and
as attorney in fact for the
Selling Stockholders
Accepted as of the date
first above written.
New York, New York
THE THORNWATER COMPANY L.P.
By: ______________________________
Name: Xxxxxx X'Xxxxx
Title: Managing Director
