Exhibit 1.1
UNDERWRITING AGREEMENT
BETWEEN
PIVOT RULES, INC.
AND
GKN SECURITIES CORP.
DATED: APRIL__, 1997
TABLE OF CONTENTS
Page
----
INDEX OF DEFINITIONS..............................................................................................v
1. Purchase and Sale of Securities..........................................................................1
1.1 Firm Securities.................................................................................1
1.1.1 Purchase of Firm Securities............................................................1
1.1.2 Payment and Delivery...................................................................1
1.2 Over-Allotment Option...........................................................................2
1.2.1 Option Securities......................................................................2
1.2.2 Exercise of Option.....................................................................2
1.2.3 Payment and Delivery...................................................................2
1.3 Underwriter's Purchase Option...................................................................3
1.3.1 Purchase Option........................................................................3
1.3.2 Payment and Delivery...................................................................3
2. Representations and Warranties of the Company............................................................3
2.1 Filing of Registration Statement................................................................3
2.1.1 Pursuant to the Act....................................................................3
2.1.2 Pursuant to the Exchange Act...........................................................3
2.2 No Stop Orders, Etc.............................................................................3
2.3 Disclosures in Registration Statement...........................................................4
2.3.1 Securities Act and Exchange Act Representation.........................................4
2.3.2 Disclosure of Contracts................................................................4
2.3.3 Prior Securities Transactions..........................................................5
2.4 Changes After Dates in Registration Statement...................................................5
2.4.1 No Material Adverse Change.............................................................5
2.4.2 Recent Securities Transactions, Etc....................................................5
2.5 Independent Accountants.........................................................................5
2.6 Financial Statements............................................................................5
2.7 Authorized Capital; Options; Etc................................................................5
2.8 Valid Issuance of Securities; Etc...............................................................6
2.8.1 Outstanding Securities.................................................................6
2.8.2 Securities Sold Pursuant to this Agreement.............................................6
2.9 Registration Rights of Third Parties............................................................6
2.10 Validity and Binding Effect of Agreements.......................................................7
2.11 No Conflicts, Etc...............................................................................7
2.12 No Defaults; Violations.........................................................................7
2.13 Corporate Power; Licenses; Consents.............................................................7
2.13.1 Conduct of Business....................................................................7
2.13.2 Transactions Contemplated Herein.......................................................8
2.14 Title to Property; Insurance....................................................................8
i
Page
----
2.15 Litigation; Governmental Proceedings............................................................8
2.16 Good Standing...................................................................................8
2.17 Taxes...........................................................................................8
2.18 Employees' Options..............................................................................9
2.19 Transactions Affecting Disclosure to NASD.......................................................9
2.19.1 Finder's Fees..........................................................................9
2.19.2 Payments Within Twelve Months..........................................................9
2.19.3 Use of Proceeds........................................................................9
2.19.4 Insiders' NASD Affiliation.............................................................9
2.20 Foreign Corrupt Practices Act...................................................................9
2.21 Nasdaq and The Boston Stock Exchange Eligibility...............................................10
2.22 Intangibles....................................................................................10
2.23 Relations With Employees.......................................................................10
2.23.1 Employee Matters......................................................................10
2.23.2 Employee Benefit Plans................................................................10
2.24 Officers' Certificate..........................................................................11
2.25 Warrant Agreement..............................................................................11
2.26 Agreements With Insiders.......................................................................11
2.26.1 Lock-Up Agreements....................................................................11
2.26.2 Insider Sales.........................................................................11
2.27 Subsidiaries...................................................................................11
2.28 Unaudited Financials...........................................................................11
2.29 Xxxxxx Financial, Inc. Credit Lines............................................................12
3. Covenants of the Company................................................................................12
3.1 Amendments to Registration Statement...........................................................12
3.2 Federal Securities Laws........................................................................12
3.2.1 Compliance............................................................................12
3.2.2 Filing of Final Prospectus............................................................12
3.2.3 Exchange Act Registration.............................................................12
3.3 Blue Sky Filing................................................................................12
3.4 Delivery to the Underwriter of Prospectuses....................................................13
3.5 Events Requiring Notice to the Underwriter.....................................................13
3.6 Review of Financial Statements.................................................................13
3.7 Reserved.......................................................................................13
3.8 Secondary Market Trading and Standard & Poor's.................................................13
3.9 Nasdaq and BSE Maintenance.....................................................................13
3.10 Warrant Solicitation and Registration of Common Stock Underlying the
Warrants.......................................................................................14
3.10.1 Warrant Solicitation and Warrant Solicitation Fees....................................14
3.10.2 Registration of Common Stock..........................................................14
3.11 Reserved.......................................................................................14
3.12 Reports to the Underwriter.....................................................................14
ii
Page
----
3.12.1 Periodic Reports, Etc.................................................................14
3.12.2 Transfer Sheets and Weekly Position Listings..........................................15
3.12.3 Secondary Market Trading Memorandum...................................................15
3.13 Underwriter's Purchase Option..................................................................15
3.14 Disqualification of Form SB-2..................................................................15
3.15 Payment of Expenses............................................................................15
3.15.1 General Expenses......................................................................15
3.15.2 Non-Accountable Expenses..............................................................16
3.16 Application of Net Proceeds....................................................................16
3.17 Delivery of Earnings Statements to Security Holders............................................16
3.18 Key Person Life Insurance......................................................................17
3.19 Stabilization..................................................................................17
3.20 Internal Controls..............................................................................17
3.21 Accountants and Lawyers........................................................................17
3.22 Transfer Agent.................................................................................17
3.23 Sale of Securities.............................................................................17
3.24 Exercise Price of Options......................................................................17
4. Conditions of the Underwriter's Obligations.............................................................17
4.1 Regulatory Matters.............................................................................18
4.1.1 Effectiveness of Registration Statement...............................................18
4.1.2 NASD Clearance........................................................................18
4.1.3 No Blue Sky Stop Orders...............................................................18
4.2 Company Counsel Matters........................................................................18
4.2.1 Effective Date Opinion of Counsel.....................................................18
4.2.2 Opinion of Intellectual Property Counsel..............................................22
4.2.3 Closing Date and Option Closing Date Opinions of Counsel..............................23
4.2.4 Reliance..............................................................................23
4.2.5 Secondary Market Trading Memorandum...................................................23
4.3 Cold Comfort Letter............................................................................23
4.4 Officers' Certificates.........................................................................24
4.4.1 Officers' Certificate.................................................................24
4.4.2 Secretary's Certificate...............................................................25
4.5 No Material Changes............................................................................25
4.6 Delivery of Underwriter's Purchase Option......................................................25
4.7 Opinion of Counsel for the Underwriter.........................................................26
5. Indemnification.........................................................................................26
5.1 Indemnification of the Underwriter.............................................................26
5.1.1 General...............................................................................26
5.1.2 Procedure.............................................................................26
5.2 Indemnification of the Company.................................................................27
5.3 Contribution...................................................................................27
iii
Page
----
5.3.1 Contribution Rights...................................................................27
5.3.2 Contribution Procedure................................................................28
6. Intentionally Omitted...................................................................................28
7. Additional Covenants....................................................................................28
7.1 Board Designee.................................................................................28
7.2 Insider Sales..................................................................................28
7.3 Press Releases.................................................................................29
7.4 Form S-8 or any Similar Form...................................................................29
7.5 Compensation and Other Arrangements............................................................29
8. Representations and Agreements to Survive Delivery......................................................29
9. Effective Date of This Agreement and Termination Thereof................................................29
9.1 Effective Date.................................................................................29
9.2 Termination....................................................................................29
9.3 Notice.........................................................................................30
9.4 Expenses.......................................................................................30
9.5 Indemnification................................................................................30
10. Miscellaneous...........................................................................................30
10.1 Notices........................................................................................30
10.2 Headings.......................................................................................31
10.3 Amendment......................................................................................31
10.4 Entire Agreement...............................................................................31
10.5 Binding Effect.................................................................................31
10.6 Governing Law, Jurisdiction....................................................................31
10.7 Execution in Counterparts......................................................................32
10.8 Waiver, Etc....................................................................................32
iv
INDEX OF DEFINITIONS
Term Section
1% or Greater Holders.................................................2.26.1
Act................................................................... 2.1.1
BSE.....................................................................2.21
Closing Date...........................................................1.1.2
Code..................................................................2.23.2
Commission.............................................................2.1.1
Common Stock...........................................................1.1.1
Company.........................................................Introductory
Paragraph
Effective Date.........................................................1.2.2
ERISA.................................................................2.23.2
ERISA Plans...........................................................2.23.2
Exchange Act...........................................................2.1.2
Filing Date...........................................................2.19.2
Firm Securities........................................................1.1.1
Xxxxxx..................................................................2.29
Insiders..............................................................2.26.1
Intangibles.............................................................2.22
NASD..................................................................2.19.1
Nasdaq..................................................................2.21
Option Closing Date....................................................1.2.2
Option Securities......................................................1.2.1
Over-allotment Option..................................................1.2.1
Preliminary Prospectus.................................................2.1.1
Prospectus.............................................................2.1.1
Public Securities......................................................1.2.1
Registration Statement.................................................2.1.1
Regulations............................................................2.1.1
SAS......................................................................4.3
Secondary Market Trading Memorandum...................................3.12.3
Securities.............................................................1.3.1
Transfer Agent..........................................................3.22
Unaudited Financials....................................................2.28
Underwriter.....................................................Introductory
Paragraph
Underwriter's Purchase Option..........................................1.3.1
Underwriter's Securities...............................................1.3.1
Underwriter's Shares...................................................1.3.1
Underwriter's Warrants.................................................1.3.1
Warrant(s).............................................................1.1.1
Warrant Agreement.......................................................2.25
v
PIVOT RULES, INC.
1,500,000 Shares of Common Stock
and
1,500,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
New York, New York
________ __, 0000
XXX Securities Corp.
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, Pivot Rules, Inc., a New York corporation
("Company"), hereby confirms its agreement with GKN Securities Corp. (being
referred to herein variously as "you" or the "Underwriter") as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Securities. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter and the Underwriter agrees to purchase from the Company 1,500,000
shares of the Company's Common Stock ("Common Stock") at a purchase price (net
of commissions) of $_____ per share and 1,500,000 Redeemable Common Stock
Purchase Warrants ("Warrant(s)") at a purchase price (net of commissions) of
$_____ per Warrant, each Warrant to purchase one share of Common Stock at an
initial purchase price of $____ per share commencing one year after the
Effective Date (as hereinafter defined) until the fifth anniversary of the
Effective Date (these shares of Common Stock and Warrants being referred to
herein as "Firm Securities").
1.1.2 Payment and Delivery. Delivery and payment for the
Firm Securities shall be made at 10:00 A.M., New York time, on or before the
third business day following the date that the Firm Securities commence
trading or at such earlier time as the Underwriter shall determine, or at such
other time as shall be agreed upon by the Underwriter and the Company at the
offices of the Underwriter or at such other place as shall be agreed upon by
the Underwriter and the Company. The hour and date of delivery and payment for
the Firm Securities are called the "Closing Date." Payment for the Firm
Securities shall be made on the Closing Date at the Underwriter's election by
wire transfer or by certified or bank cashier's check(s) in New York Clearing
House funds, payable to the
1
order of the Company upon delivery to you of certificates (in form and
substance satisfactory to the Underwriter) representing the Firm Securities
for the account of the Underwriter. The Firm Securities shall be registered in
such name or names and in such authorized denominations as the Underwriter may
request in writing at least two full business days prior to the Closing Date.
The Company will permit the Underwriter to examine and package the Firm
Securities for delivery at least one full business day prior to the Closing
Date. The Company shall not be obligated to sell or deliver the Firm
Securities except upon tender of payment by the Underwriter for all the Firm
Securities.
1.2 Over-Allotment Option.
1.2.1 Option Securities. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm
Securities, the Underwriter is hereby granted an option to purchase up to an
additional 225,000 shares of Common Stock and/or 225,000 Warrants from the
Company ("Over-allotment Option"). Such additional 225,000 shares of Common
Stock and 225,000 Warrants are hereinafter referred to as the "Option
Securities." The Firm Securities and the Option Securities are, together with
the shares of Common Stock issuable upon exercise of the Warrants, hereinafter
referred to collectively as the "Public Securities." The purchase price to be
paid for the Option Securities will be the same price per Option Security as
the price per Firm Security set forth in Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Underwriter as to all
or any part of the Option Securities at any time, from time to time, within
forty-five days after the effective date ("Effective Date") of the
Registration Statement (as hereinafter defined). The Underwriter will not be
under any obligation to purchase any Option Securities prior to the exercise
of the Over-allotment Option. The Overallotment Option granted hereby may be
exercised by the giving of oral notice to the Company from the Underwriter,
which must be confirmed by a letter or telecopy setting forth the number of
Option Securities to be purchased, the date and time for delivery of and
payment for the Option Securities and stating that the Option Securities
referred to therein are to be used for the purpose of covering over-allotments
in connection with the distribution and sale of the Firm Securities. If such
notice is given at least two full business days prior to the Closing Date, the
date set forth therein for such delivery and payment will be the Closing Date.
If such notice is given thereafter, the date set forth therein for such
delivery and payment will not be earlier than five full business days after
the date of the notice, unless we mutually agree to an earlier date. If such
delivery and payment for the Option Securities does not occur on the Closing
Date, the date and time of the closing for such Option Securities will be as
set forth in the notice (hereinafter "Option Closing Date"). Upon exercise of
the Over-allotment Option, the Company will become obligated to convey to the
Underwriter, and, subject to the terms and conditions set forth herein, the
Underwriter will become obligated to purchase, the number of Option Securities
specified in such notice.
1.2.3 Payment and Delivery. Payment for the Option
Securities will be at the Underwriter's election by wire transfer or by
certified or bank cashier's check(s) in New York Clearing House funds, payable
to the order of the Company at the offices of the Underwriter or at such other
place as shall be agreed upon by the Underwriter and the Company upon delivery
to you of certificates representing such securities for the Underwriter. The
certificates representing the Option Securities to be delivered will be in
such denominations and registered in such names as the
2
Underwriter requests not less than two full business days prior to the Closing
Date or the Option Closing Date, as the case may be, and will be made
available to the Underwriter for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less
than one full business day prior to such Closing Date.
1.3 Underwriter's Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue
and sell to the Underwriter (and/or its designees) on the Closing Date, for an
aggregate purchase price of $100, an option ("Underwriter's Purchase Option")
exercisable for a period of four years commencing one year from the Effective
Date, for the purchase of an aggregate of 150,000 shares of Common Stock
("Underwriter's Shares") at an initial exercise price of 110% of the initial
offering price of a share of Common Stock (i.e., $ per share of Common Stock)
and/or 150,000 Warrants ("Underwriter's Warrants") at an initial exercise
price 110% of the initial offering price of a Warrant (i.e. $ per Warrant).
Each of the Underwriter's Shares and the Underwriter's Warrants is identical
to the Firm Securities. The Underwriter's Purchase Option, the Underwriter's
Shares, the Underwriter's Warrants and the shares of Common Stock issuable
upon exercise of the Underwriter's Warrants are hereinafter referred to
collectively as the "Underwriter's Securities." The Public Securities and the
Underwriter's Securities are hereinafter referred to collectively as the
"Securities."
1.3.2 Payment and Delivery. Delivery and payment for the
Underwriter's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriter, upon payment therefor, certificates for the
Underwriter's Purchase Option in the name or names and in such authorized
denominations as the Underwriter may request.
2. Representations and Warranties of the Company. The Company represents
and warrants to the Underwriter as follows:
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form SB-2 (No. 333-22895), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Securities under the Securities Act of 1933, as amended
("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 ("Regulations") of the Commission under the Act. 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 430A of the Regulations), is hereinafter called the
"Registration Statement," and the form of the final prospectus dated the
Effective Date (or, if applicable, the form of final prospectus filed with the
Commission pursuant to Rule 424 of the Regulations), is hereinafter called the
"Prospectus." The Registration Statement has been declared effective by the
Commission on the date hereof.
3
2.1.2 Pursuant to the Exchange Act. The Company has filed
with the Commission a registration statement on Form 8-A (No. 0-________)
providing for the registration under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), of the Common Stock and Warrants. Such registration
of the Common Stock and Warrants has been declared effective by the Commission
on the date thereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of
the Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has
instituted or, to the best of the Company's knowledge, threatened to institute
any proceedings with respect to such an order.
2.3 Disclosures in Registration Statement.
2.3.1 Securities Act and Exchange Act Representation. At the
time the Registration Statement became effective and at all times subsequent
thereto up to and including the Closing Date and the Option Closing Date, if
any, the Registration Statement and the Prospectus and any amendment or
supplement thereto contained and will contain all material statements which
are required to be stated therein in accordance with the Act and the
Regulations, and conformed and will conform in all material respects to the
requirements of the Act and the Regulations; neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, during
such time period and on such dates, contained or will contain any untrue
statement of a material fact or omitted or will omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, nor did they or will they contain any untrue statement of a
material fact nor did they or will they 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. When
any Preliminary Prospectus was first filed with the Commission (whether filed
as part of the Registration Statement for the registration of the Securities
or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and
when any amendment thereof or supplement thereto was first filed with the
Commission, such Preliminary Prospectus and any amendments thereof and
supplements thereto complied or will comply in all material respects with the
applicable provisions of the Act and the Regulations and did not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order 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 2.3.1 does
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to
the Underwriter expressly for use in the Registration Statement or Prospectus
or any amendment thereof or supplement thereto.
2.3.2 Disclosure of Contracts. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate and presents fairly the information required to be disclosed and
there are no contracts or other documents required to be described in the
Registration Statement or the Prospectus or to be filed with the Commission as
exhibits to the Registration Statement which have not been so described or
filed. Each contract or other instrument (however characterized or described)
to which the Company is a party or by which its property or business is or may
be bound or affected and (i) which is referred to in the Prospectus, or (ii)
is material to the Company's business, has been duly and validly executed, is
in full force and effect in
4
all material respects and is enforceable against the parties thereto in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and 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. None of such contracts or instru
ments has been assigned by the Company, and neither the Company nor, to the
best of the Company's knowledge, any other party is in default thereunder and,
to the best of the Company's knowledge, no event has occurred which, with the
lapse of time or the giving of notice, or both, would constitute a default
thereunder. None of the material provisions of such contracts or instruments
violates or will result in a violation of any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court
having jurisdiction over the Company or any of its assets or businesses,
including, without limitation, those relating to environmental laws and
regulations.
2.3.3 Prior Securities Transactions. No securities of the
Company have been sold by the Company or by or on behalf of, or for the
benefit of, any person or persons controlling, controlled by, or under common
control with the Company within the three years prior to the date hereof,
except as disclosed in the Registration Statement.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, except as otherwise specifically stated therein, (i) there has
been no material adverse change in the condition, financial or otherwise, or
in the results of operations, business or business prospects of the Company,
including, but not limited to, a material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, whether or not arising in the ordinary course of
business, and (ii) there have been no transactions entered into by the
Company, other than those in the ordinary course of business, which are
material with respect to the condition, financial or otherwise, or to the
results of operations, business or business prospects of the Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not (i) issued any securities
or incurred any liability or obligation, direct or contingent, for borrowed
money; or (ii) declared or paid any dividend or made any other distribution on
or in respect to its capital stock.
2.5 Independent Accountants. Xxxxx Xxxxxxxx LLP, whose report is
filed with the Commission as part of the Registration Statement, are
independent accountants as required by the Act and the Regulations.
2.6 Financial Statements. The financial statements, including the
notes thereto and supporting schedules 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
5
accepted accounting principles, consistently applied throughout the periods
involved; and the supporting schedules included in the Registration Statement
present fairly the information required to be stated therein. The pro forma
financial information set forth in the Registration Statement reflects all
significant assumptions and adjustments relating to the business and
operations of the Company.
2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions and adjustments stated in the Registration Statement
and the Prospectus, the Company will have on the Closing Date the adjusted
stock capitalization set forth therein. Except as set forth in the
Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date there will be no options, warrants, or other rights to purchase
or otherwise acquire any authorized but unissued shares of Common Stock of the
Company, including any obligations to issue any shares pursuant to
anti-dilution provisions, or any security convertible into shares of Common
Stock of the Company, or any contracts or commitments to issue or sell shares
of Common Stock or any such options, warrants, rights or convertible
securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; 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 issued in
violation of the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company. The outstanding
options and warrants to purchase shares of Common Stock constitute the valid
and binding obligations of the Company, enforceable in accordance with their
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification provision may be
limited under the 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 authorized Common Stock and
outstanding options and warrants to purchase shares of Common Stock conform to
all statements relating thereto contained in the Registration Statement and
the Prospectus. The offers and sales of the outstanding Common Stock, options
and warrants to purchase shares of Common Stock were at all relevant times
either registered or qualified under the Act and the applicable state
securities or Blue Sky Laws or exempt from such registration requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The
Securities 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 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 has been duly and validly
taken. When issued, the Underwriter's Purchase Option, the Underwriter's
Warrants and the Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby
6
and the Underwriter's Purchase Option, the Underwriter's Warrants and the
Warrants will be enforceable against the Company in accordance with their
respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification provision may
be limited under the 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.
2.9 Registration Rights of Third Parties. Except as set forth in the
Prospectus, no holders of any securities of the Company or of any options or
warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register
any such securities of the Company under the Act or to include any such
securities in a registration statement to be filed by the Company.
2.10 Validity and Binding Effect of Agreements. This Agreement, the
Underwriter's Purchase Option, and the Warrant Agreement (as hereinafter
defined) have been duly and validly authorized by the Company, and constitute,
or when executed and delivered, will constitute, the valid and binding
agreements of the Company, enforceable against the Company in accordance with
their respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification provision may
be limited under the 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.
2.11 No Conflicts, Etc. The execution, delivery, and performance by
the Company of this Agreement, the Underwriter's Purchase Option, and the
Warrant Agreement, the consummation by the Company of the transactions herein
and therein contemplated and the compliance by the Company with the terms
hereof and thereof do not and will not, with or without the giving of notice
or the lapse of time or both, (i) result in a breach of, or conflict with any
of the terms and provisions of, or constitute a default under, or result in
the creation, modification, termination or imposition of any lien, charge or
encumbrance upon any 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 may be bound or to which any of the property or assets of
the Company is subject; (ii) result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over
the Company or any of its properties or business; or (iv) have a material
adverse effect on any permit, license, certificate, registration, approval,
consent, license or franchise concerning the Company.
2.12 No Defaults; Violations. Except as described in the Prospectus,
no default exists in the due performance and observance of any term, covenant
or condition of any material 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 material agreement
or
7
instrument to which the Company is a party or by which the Company may be
bound or to which any of the properties or assets of the Company is subject.
The Company is not in violation of any term or provision of its Certificate of
Incorporation or By-Laws or in violation of any franchise, license, permit,
applicable law, rule, regulation, judgment or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business, except as described in the Prospectus.
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite
corporate power and authority, and has all 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, and the Company is
and has been doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates and permits and all federal, state
and local rules and regulations. The disclosures in the Registration Statement
concerning the effects of federal, state and local regulation on the Company's
business as currently contemplated are correct in all material respects and do
not omit to state a material fact.
2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out
the provisions and conditions hereof, 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 valid issuance, sale and delivery, of
the Securities pursuant to this Agreement, the Warrant Agreement and the
Underwriter's Purchase Option, and as contemplated by the Prospectus, except
with respect to applicable federal and state securities laws.
2.14 Title to Property; Insurance. The Company has good and
defensible title to, or valid and enforceable leasehold estates in, all items
of real and personal property (tangible and intangible) owned or leased by it,
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 or arising by
law. The Company has adequately insured its properties against loss or damage
by fire or other casualty and maintains, in adequate amounts, such other
insurance as is usually maintained by companies engaged in the same or similar
business.
2.15 Litigation; Governmental Proceedings. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the best
of the Company's knowledge, threatened against, or involving the properties or
business of, the Company which might materially and adversely affect the
financial position, prospects, value or the operation or the properties or the
business of the Company, or which questions the validity of the capital stock
of the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to, or in connection with, this Agreement. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal, domestic or foreign, naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, its properties or business is bound or subject.
8
2.16 Good Standing. The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of
the state of its incorporation. The Company is duly qualified and licensed and
in good standing as a foreign corporation in each jurisdiction in which
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing, except where the failure to qualify
would not have a material adverse effect on its properties or business.
2.17 Taxes. The Company has filed all returns (as hereinafter
defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof. The Company
has paid all taxes (as hereinafter defined) shown as due on such returns that
were filed and has paid all taxes imposed on or assessed against the Company.
The provisions for taxes payable, if any, shown on the financial statements
filed with or as part of the Registration Statement are sufficient for all
accrued and unpaid taxes, whether or not disputed, and for all periods to and
including the dates of such consolidated financial statements. Except as
disclosed in writing to the Underwriter, (i) no issues have been raised (and
are currently pending) by any taxing authority in connection with any of the
returns or taxes asserted as due from the Company, and (ii) no waivers of
statutes of limitation with respect to the returns or collection of taxes have
been given by or requested from the Company. The term "taxes" mean all
federal, state, local, foreign, and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments, or charges of any kind whatever,
together with any interest and any penalties, additions to tax, or additional
amounts with respect thereto. The term "returns" means all returns,
declarations, reports, statements, and other documents required to be filed in
respect to taxes.
2.18 Employees' Options. No shares of Common Stock are eligible
for sale pursuant to Rule 701 promulgated under the Act.
2.19 Transactions Affecting Disclosure to NASD.
2.19.1 Finder's Fees. Except as set forth on Schedule
2.19.1, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's, consulting or
origination fee with respect to the introduction of the Company to the
Underwriter or the sale of the Securities hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the Company
that may affect the Underwriter's compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
2.19.2 Payments Within Twelve Months. Except as set forth on
Schedule 2.19.2, and other than payments to the Underwriter, the Company has
not made any direct or indirect payments (in cash, securities or otherwise) to
(i) any person, as a finder's fee, investing fee or otherwise, in
consideration of such person raising capital for the Company or introducing to
the Company persons who provided capital to the Company, (ii) to any NASD
member, or (iii) to any person or entity that has any direct or indirect
affiliation or association with any NASD member within the twelve month period
prior to the date on which the Registration Statement was filed with the
Commission ("Filing Date") or thereafter.
9
2.19.3 Use of Proceeds. None of the net proceeds of the
offering will be paid by the Company to any participating NASD member or any
affiliate or associate of any NASD member, except as specifically authorized
herein.
2.19.4 Insiders' NASD Affiliation. No officer or director of
the Company or owner of any of the Company's unregistered securities has any
direct or indirect affiliation or association with any NASD member. The
Company will advise the Underwriter and the NASD if any stockholder of the
Company becomes, directly or indirectly, an affiliate or associated person of
an NASD member participating in the offering.
2.20 Foreign Corrupt Practices Act. Neither the Company nor any of
its officers, directors, employees or agents or any other person acting on
behalf of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
the Company (or assist it in connection with any actual or proposed
transaction) which (i) might subject the Company to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (ii) if not
given in the past, might 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, might adversely affect the assets, business, operations or prospects
of the Company. The internal accounting controls and procedures of the Company
are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
2.21 Nasdaq and The Boston Stock Exchange Eligibility. As of the
Effective Date, the Public Securities have been approved for designation upon
notice of issuance on the Nasdaq SmallCap Market ("Nasdaq") and for listing on
the Boston Stock Exchange ("BSE").
2.22 Intangibles. 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 and other rights
(collectively, "Intangibles") described as being licensed to or owned by it in
the Registration Statement. The Company's Intangibles which have been
registered in the United States Patent and Trademark Office have been fully
maintained and are in full force and effect. There is no claim or action by
any person pertaining to, or proceeding pending or, to the best of the
Company's knowledge, threatened and the Company has not received any notice of
conflict with the asserted rights of others which challenges the exclusive
right of the Company with respect to any Intangibles used in the conduct of
the Company's business except as described in the Prospectus. The Intangibles
and the Company's current products, services and processes do not infringe on
any Intangibles held by any third party. Except for alleged violations and
pending claims set forth on Schedule 2.22, to the best of the Company's
knowledge, no others have infringed upon the Intangibles of the Company.
10
2.23 Relations With Employees.
2.23.1 Employee Matters. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
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. To the best of the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state and local laws and regulations. There is no unfair labor practice charge
or complaint against the Company pending before the National Labor Relations
Board or any strike, picketing, boycott, dispute, slowdown or stoppage pending
or threatened against or involving the Company or any predecessor entity, and
none has ever occurred. No question concerning representation exists
respecting the employees of the Company and no collective bargaining agreement
or modification thereof is currently being negotiated by the Company. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company, if any.
2.23.2 Employee Benefit Plans. Other than as set forth in
the Registration Statement, the Company neither maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multi-employer 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 does
not maintain or contribute to, and has at no time maintained or contributed
to, a defined benefit plan, as defined in Section 3(35) of ERISA. If the
Company does maintain or contribute to a defined benefit plan, any termination
of the plan on the date hereof would not give rise to liability under Title IV
of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Internal Revenue Code of 1986, as amended ("Code"), which could
subject the Company to any tax penalty for prohibited transactions and which
has not adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the Code and ERISA as
they relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multi-employer plan."
2.24 Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel
shall be deemed a representation and warranty by the Company to the
Underwriter as to the matters covered thereby.
2.25 Warrant Agreement. The Company has entered into a warrant
agreement with respect to the Warrants and the Underwriter's Warrants
substantially in the form filed as an exhibit to the Registration Statement
("Warrant Agreement") with American Stock Transfer & Trust Company, in form
and substance satisfactory to the Underwriter, providing for, among other
things, (i) no redemption of the Warrants without the consent of the
Underwriter and (ii) the payment of a warrant solicitation fee as contemplated
by Section 3.10 hereof.
11
2.26 Agreements With Insiders.
2.26.1 Lock-Up Agreements. The Company has caused to be duly
executed legally binding and enforceable agreements pursuant to which all of
the officers and directors of the Company and all holders ("1% or Greater
Holders") of at least one percent (1%) of the outstanding Common Stock of the
Company or warrants or options to purchase, or other securities convertible
into, one percent (1%) or more of the outstanding Common Stock (including
family members who reside in the same household as such persons and affiliates
of such persons) or any option holder who would have the ability to sell the
shares underlying his options under Rule 701 under the Act ("Insiders") agree
not to sell any shares of Common Stock or warrants or options to purchase, or
other securities convertible into Common Stock, owned by them (either pursuant
to Rule 144 of the Regulations or otherwise) for a period of 24 months
following the Effective Date except with the prior consent of the Underwriter
(and, if required by applicable state blue sky laws, the securities
commissions in any such states); provided, however, that, with respect to any
person who is a 1% or Greater Holder (who holds no other position with the
Company and who does not reside in the same household as any other Insider),
such agreement shall continue for only 18 months following the Effective Date.
2.26.2 Insider Sales. The company has caused to be executed
legally binding and enforceable agreements pursuant to which each of its
Insiders has granted to the Underwriter the rights described in Section 7.2 of
this Agreement.
2.27 Subsidiaries. The representations and warranties made by the
Company in this Agreement shall, in the event that the Company has one or more
subsidiaries (a "subsidiary(ies)"), also apply and be true with respect to
each subsidiary, individually and taken as a whole with the Company and all
other subsidiaries, as if each representation and warranty contained herein
made specific reference to the subsidiary each time the term "Company" was
used.
2.28 Unaudited Financials. The Company has furnished to the
Underwriter as early as practicable prior to the date hereof a copy of the
latest available unaudited interim financial statements ("Unaudited
Financials") of the Company (which in no event shall be as of a date more than
thirty days prior to the Effective Date) which have been read by the Company's
independent accountants, as stated in their letter to be furnished pursuant to
Section 4.3 hereof.
2.29 Xxxxxx Financial, Inc. Credit Lines. There exists no default
under the Company's existing credit facilities with Xxxxxx Financial, Inc.
("Xxxxxx") or a legally effective waiver from any such default has been
obtained from Xxxxxx.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver to
the Underwriter, 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 Underwriter
shall reasonably object.
12
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange
Act, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus. If at any time when a Prospectus
relating to the 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 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, 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 Underwriter promptly and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the Act.
3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance satisfactory to the Underwriter) with the
Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years
from the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock and Warrants under the provisions of Section
12 of the Exchange Act.
3.3 Blue Sky Filing. The Company will endeavor in good faith, in
cooperation with the Underwriter, at or prior to the time the Registration
Statement becomes effective, to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as the Underwriter 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 Underwriter agrees that such
action is not at the time necessary or advisable, use all reasonable efforts
to file and make such statements or reports at such times as are or may be
required by the laws of such jurisdiction.
3.4 Delivery to the Underwriter of Prospectuses. The Company will
deliver to the Underwriter, without charge, from time to time during the
period when the Prospectus is required to be delivered under the Act or the
Exchange Act, such number of copies of each Preliminary Prospectus and the
Prospectus as the Underwriter may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes
effective, deliver to you two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of
all exhibits filed therewith or incorporated therein by reference and all
original executed consents of certified experts.
3.5 Events Requiring Notice to the Underwriter. The Company will
notify the Underwriter immediately and confirm the notice in writing (i) of
the effectiveness of the Registration Statement and any amendment thereto,
(ii) of the issuance by the Commission of any stop order or
13
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 for offering or sale
in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the mailing and delivery to the
Commission for filing of any amendment or supplement to the Registration
Statement or Prospectus, (v) of the receipt of any comments or request for any
additional information from the Commission, and (vi) of the happening of any
event during the period described in Section 3.4 hereof which, in the judgment
of the Company, makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or which requires the making
of any changes in the Registration Statement or the Prospectus in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. 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.
3.6 Review of Financial Statements. For a period of five years from
the Effective Date, the Company, at its expense, shall cause its regularly
engaged independent certified public accountants to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters
prior to the announcement of quarterly financial information, the filing of
the Company's Form 10-Q quarterly reports and the mailing of quarterly
financial information to stockholders.
3.7 Reserved.
3.8 Secondary Market Trading and Standard & Poor's. The Company will
take all necessary and appropriate actions to achieve accelerated publication
in Standard and Poor's Corporation Records Corporate Descriptions (within
thirty (30) days after the Effective Date) and to maintain such publication
with updated quarterly information for a period of five years from the
Effective Date, including the payment of any necessary fees and expenses. The
Company shall take such action as may be reasonably requested by the
Underwriter to obtain a secondary market trading exemption in such states as
may be requested by the Underwriter, including the payment of any necessary
fees and expenses and the filing of a Form (e.g. 25101(b)) for secondary
market trading in the State of California on the Effective Date or as soon
thereafter as is permissible.
3.9 Nasdaq and BSE Maintenance. For a period of five years from the
date hereof, the Company will use its best efforts to maintain the quotation
on Nasdaq and the listing on the BSE of the Common Stock and Warrants and, if
the Company satisfies the inclusion standards of the Nasdaq National Market
System, apply for and maintain quotations on the Nasdaq National Market System
of such securities during such period.
3.10 Warrant Solicitation and Registration of Common Stock Underlying
the Warrants.
3.10.1 Warrant Solicitation and Warrant Solicitation Fees.
The Company hereby engages the Underwriter, on a non-exclusive basis, as its
agent for the solicitation of the exercise of the Warrants. The Company, at
its cost, will (i) assist the Underwriter with respect to such solicitation,
if requested by the Underwriter and will (ii) provide to the Underwriter, and
direct the Company's transfer and warrant agent to provide to the Underwriter,
lists of the record and, to the
14
extent known, beneficial owners of the Company's Warrants. Commencing one year
from the Effective Date, the Company will pay to the Underwriter a commission
of five percent of the Warrant exercise price for each Warrant exercised,
payable on the date of such exercise, on the terms provided for in the Warrant
Agreement, if allowed under the rules and regulations of the NASD and only if
the Underwriter has provided bona fide services to the Company in connection
with the exercise of Warrants and has received written confirmation from the
holder that the Underwriter has solicited such exercise. In addition to
soliciting, either orally or in writing, the exercise of Warrants, such
services may also include disseminating information, either orally or in
writing, to Warrantholders about the Company or the market for the Company's
securities, and the assisting in the processing of the exercise of Warrants.
The Underwriter may engage sub-agents who are members of the NASD in its
solicitation efforts, provided, however, nothing herein shall obligate the
Company to make any payment to any such sub-agent. The Company will disclose
the arrangement to pay such solicitation fees to the Underwriter in any
prospectus used by the Company in connection with the registration of the
shares of Common Stock underlying the Warrants. The Company shall not be
obligated to reimburse the Underwriter for any of its expenses incurred in
connection with such solicitation.
3.10.2 Registration of Common Stock. The Company agrees that
prior to the date that the Warrants become exercisable, it shall file with the
Commission a post-effective amendment to the Registration Statement, if
possible, or a new registration statement, for the registration, under the
Act, of the Common Stock issuable upon exercise of the Warrants. In either
case, the Company shall cause the same to become effective at or prior to the
date that the Warrants become exercisable, and maintain the effectiveness of
such registration statement and keep current a prospectus thereunder until the
expiration of the Warrants in accordance with the provisions of the Warrant
Agreement.
3.11 Reserved.
3.12 Reports to the Underwriter.
3.12.1 Periodic Reports, Etc. For a period of five years
from the Effective Date, the Company will promptly furnish to the Underwriter
copies of such financial statements and other periodic and special reports as
the Company from time to time files with any governmental authority or
furnishes generally to holders of any class of its securities, and promptly
furnish to the Underwriter (i) a copy of each periodic report the Company
shall be required to 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) copies of each Form SR, (iv)
a copy of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or
prepared by the Company, (v) a copy of monthly statements setting forth such
information regarding the Company's results of operations and financial
position (including balance sheet, profit and loss statements and data
regarding outstanding purchase orders) as is regularly prepared by management
of the Company, and (vi) such additional documents and information with
respect to the Company and the affairs of any future subsidiaries of the
Company as the Underwriter may from time to time reasonably request.
3.12.2 Transfer Sheets and Weekly Position Listings. For a
period of five years from the Closing Date, the Company will furnish to the
Underwriter at the Company's sole expense such transfer sheets and position
listings of the Company's securities as the Underwriter may request,
15
including the daily, weekly and monthly consolidated transfer sheets of the
transfer agent of the Company and the weekly position listings of the
Depository Trust Company.
3.12.3 Secondary Market Trading Memorandum. Until such time
as the Securities are listed or quoted, as the case may be, on one of the
following: the New York Stock Exchange, the American Stock Exchange or Nasdaq
National Market, the Company shall cause the Underwriter's legal counsel to
deliver to the Underwriter a written opinion detailing those states in which
Securities may be traded in non-issuer transactions under the Blue Sky laws of
the fifty states ("Secondary Market Trading Memorandum") and to update such
memorandum and deliver same to the Underwriter on a timely basis, but in any
event on the Effective Date, and on the first day of every calendar quarter
thereafter. The Company shall pay to the Underwriter's legal counsel a
one-time fee of $5,000 for such services at the Closing.
3.13 Underwriter's Purchase Option. On the Closing Date, the Company
will execute and deliver the Underwriter's Purchase Option to the Underwriter
substantially in the form filed as an exhibit to the Registration Statement.
3.14 Disqualification of Form SB-2. For a period equal to five years
from the date hereof, the Company will not take any action or actions which
may prevent or disqualify the Company's use of Form SB-2 (or other appropriate
form) for the registration of the Warrants and the Underwriter's Purchase
Option and the securities issuable upon exercise of those securities under the
Act.
3.15 Payment of Expenses.
3.15.1 General Expenses. The Company hereby agrees to pay on
each of the Closing Date and the Option Closing Date, if any, to the extent
not paid at Closing Date, all expenses incident to the performance of the
obligations of the Company under this Agreement, including but not limited to
(i) the preparation, printing, filing, delivery and mailing (including the
payment of postage with respect to such mailing) of the Registration
Statement, the Prospectus and the Preliminary Prospectuses and the printing
and mailing of this Agreement and related documents, including the cost of all
copies thereof and any amendments thereof or supplements thereto supplied to
the Underwriter in quantities as may be required by the Underwriter, (ii) the
printing, engraving, issuance and delivery of the shares of Common Stock, the
Warrants and the Underwriter's Purchase Option, including any transfer or
other taxes payable thereon, (iii) the qualification of the Securities under
state or foreign securities or Blue Sky laws, including the filing fees under
such Blue Sky laws, the costs of printing and mailing the "Preliminary Blue
Sky Memorandum," and all amendments and supplements thereto, fees up to an
aggregate of $35,000 and disbursements of the Underwriter's counsel, and fees
and disbursements of local counsel, if any, retained for such purpose, and a
one-time fee of $5,000 payable to the Underwriter's counsel for the
preparation of the Secondary Market Trading Memorandum, (iv) costs associated
with applications for assignments of a rating of the Securities by qualified
rating agencies, (v) filing fees, costs and expenses (including fees up to an
aggregate of $5,000 and disbursements for the Underwriter's counsel) incurred
in registering the offering with the NASD, (vi) costs up to an aggregate of
$30,000 of placing "tombstone" advertisements in The Wall Street Journal, The
New York Times and a third publication to be mutually selected by the
Underwriter, (vii) fees and disbursements of the transfer and warrant agent,
(viii) the Company's expenses associated with "due diligence" meetings
arranged by the Underwriter;
16
(ix) the preparation, binding and delivery of transaction "bibles" in number,
form and style reasonably satisfactory to the Underwriter and transaction
lucite cubes or similar commemorative items in a style and quantity as
reasonably requested by the Underwriter, (x) any listing of the Securities on
Nasdaq SmallCap, and any securities exchange or any listing in Standard &
Poor's, (xi) fees and disbursements of any counsel engaged to review the
Company's intellectual property rights, and (xii) all other costs and expenses
incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section 3.15.1. Since an important
part of the public offering process is for the Company to describe
appropriately and accurately both the background of the principals of the
Company and the Company's competitive position in its industry, the Company
has engaged and will pay for an investigative search firm of the Underwriter's
choice to conduct an investigation of principals of the Company mutually
selected by the Underwriter and the Company. The Underwriter may deduct from
the net proceeds of the offering payable to the Company on the Closing Date,
or the Option Closing Date, if any, the expenses set forth herein to be paid
by the Company to the Underwriter and/or to third parties.
3.15.2 Non-Accountable Expenses. The Company further agrees
that, in addition to the expenses payable pursuant to Section 3.15.1, it will
pay to the Underwriter a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of
the Securities, of which $50,000 has been paid to date, and the Company will
pay the balance on the Closing Date and any additional monies owed
attributable to the Option Securities or otherwise on the Option Closing Date
by certified or bank cashier's check or, at the election of the Underwriter,
by deduction from the proceeds of the offering contemplated herein. If the
offering contemplated by this Agreement is not consummated for any reason
whatsoever then the following provisions shall apply: The Company's liability
for payment to the Underwriter of the non-accountable expense allowance shall
be equal to the sum of the Underwriter's actual out-of-pocket expenses
(including, but not limited to, counsel fees, "road-show" and due diligence
expenses). The Underwriter shall retain such part of the non-accountable
expense allowance previously paid as shall equal such actual out-of-pocket
expenses. If the amount previously paid is insufficient to cover such actual
out-of-pocket expenses, the Company shall remain liable for and promptly pay
any other actual out-of-pocket expenses. If the amount previously paid exceeds
the amount of actual out-of-pocket expenses, the Underwriter shall promptly
remit to the Company any such excess.
3.16 Application of Net Proceeds. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "USE OF PROCEEDS" in the Prospectus.
The Company hereby agrees that, except as so described, the Company will not
apply any net proceeds from the offering to pay (i) any debt for borrowed
funds, or (ii) any debt or obligation owed to any Insider.
3.17 Delivery of Earnings Statements to Security Holders. The Company
will 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 Rule 158(a) under Section 11(a) of the Act) covering a period of
at least twelve consecutive months beginning after the Effective Date.
17
3.18 Key Person Life Insurance. The Company will maintain key person
life insurance in an amount not less than $1,200,000 on the life of E. Xxxxxxx
Xxxxx and pay the annual premiums therefor naming the Company as the sole
beneficiary thereof for at least three years following the Effective Date.
3.19 Stabilization. Neither the Company, nor, to its knowledge, any
of its employees, directors or stockholders has taken or will take, directly
or indirectly, any action designed to or which has constituted or which might
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.
3.20 Internal Controls. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.21 Accountants and Lawyers. For a period of five years from the
Effective Date, the Company shall retain independent public accountants and
securities lawyers with at least $7,500,000 of malpractice insurance covering
offerings of the type contemplated herein, and acceptable to the Underwriter.
Accountants Xxxxx Xxxxxxxx LLP and lawyers Shereff, Friedman, Xxxxxxx &
Xxxxxxx, LLP, are acceptable to the Underwriter.
3.22 Transfer Agent. For a period of five years from the Effective
Date, the Company shall retain a transfer agent for the Common Stock and
Warrants acceptable to the Underwriter. American Stock Transfer & Trust
Company ("Transfer Agent") is acceptable to the Underwriter.
3.23 Sale of Securities. The Company agrees not to permit or cause a
private or public sale or private or public offering of any of its securities
(in any manner, including pursuant to Rule 144 under the Act) owned nominally
or beneficially by the Insiders for a period of 24 months following the
Effective Date without obtaining the prior written approval of the
Underwriter; provided, however, that with respect to any person who is a 1% or
Greater Holder (who holds no other position with the Company and who does not
reside in the same household as any other Insider), the Company shall refuse
to permit or cause any such sale or offering for only 18 months following the
Effective Date.
3.24 Exercise Price of Options. For a period of three years after the
Effective Date, the Company will not grant any option pursuant to the
Company's 1997 Stock Option Plan at an exercise price less than the greater of
[$____] per share or the fair market value of the Common Stock on the date of
the grant.
4. Conditions of the Underwriter's Obligations. The obligations of
the Underwriter to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy of the
18
representations and warranties of the Company as of each of the Closing Date
and the Option Closing Date, if any, to the accuracy 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 and to the following
conditions:
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The
Registration Statement has been declared effective on the date of this
Agreement and, at each of the Closing Date and the Option Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for such 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 Xxxxxxxx Xxxxxx & Xxxxxx,
counsel to the Underwriter.
4.1.2 NASD Clearance. By the Effective Date, the Underwriter
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriter as described in the Registration
Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale
of the Securities in any jurisdiction designated by the Underwriter pursuant
to Section 3.3 hereof shall have been issued on either on the Closing Date or
the Option Closing Date, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
4.2 Company Counsel Matters.
4.2.1 Effective Date Opinion of Counsel. On the Effective
Date, the Underwriter shall have received the favorable opinion of Shereff,
Friedman, Xxxxxxx & Xxxxxxx, LLP, counsel to the Company, dated the Effective
Date, addressed to the Underwriter and in form and substance satisfactory to
Xxxxxxxx Mollen & Xxxxxx, counsel to the Underwriter, to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of
its state of incorporation. The Company is in good standing as a foreign
corporation in each jurisdiction in which it owns or leases any real property
or the character of its operations requires such qualification, except where
the failure to so qualify would not have a material adverse effect on the
business of the Company.
(ii) The Company has all requisite corporate power
and authority, and, to the best of such counsel's knowledge, has all necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental or regulatory officials and bodies to own or lease its
properties and conduct its business as described in the Prospectus, and, to
the best of such counsel's knowledge, the Company is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates and permits. The Company has all corporate power and
authority to enter into this Agreement, the Warrant Agreement and the
Underwriter's Purchase Option and to carry out the provisions and conditions
hereof, and all consents, authorizations, approvals and orders required in
connection therewith have been obtained, except
19
where the failure to obtain such consents, authorizations, approvals and
orders would not have a material adverse effect on the Company. No consents,
approvals, authorizations or orders of, and no filing with, any court or
governmental agency or body (other than such as may be required under the Act
and applicable Blue Sky laws), is required for the valid offer, authorization,
issuance, sale and delivery of the Securities, and the consummation of the
transactions and agreements contemplated by this Agreement, the Warrant
Agreement and the Underwriter's Purchase Option, and as contemplated by the
Prospectus or if so required, all such authorizations, approvals, consents,
orders, registrations, licenses and permits have been duly obtained and are in
full force and effect and have been disclosed to the Underwriter.
(iii) All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; 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 issued in violation of the
preemptive rights of any holders of any security of the Company or, to the
best of such counsel's knowledge after due inquiry, similar contractual rights
granted by the Company. The outstanding options and warrants to purchase
shares of Common Stock constitute the valid and binding obligations of the
Company, enforceable in accordance with their terms, except (a) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws and public policy, and (c) 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 offers and sales of the outstanding
Common Stock and options and warrants to purchase shares of Common Stock were
at all relevant times either registered under the Act and the applicable state
securities or Blue Sky Laws or exempt from such registration requirements. The
authorized and outstanding capital stock of the Company is as set forth under
the caption "Capitalization" in the Prospectus.
(iv) The Securities 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 (except to the extent that
certain shareholders of the Company may be liable for employee wages or
salaries pursuant to Section 630 of the New York Business Corporation Law).
All corporate action required to be taken for the authorization, issuance and
sale of the Securities has been duly and validly taken. When issued, the
Underwriter's Purchase Option, the Underwriter's Warrants and the Warrants
will constitute valid and binding obligations of the Company to issue and
sell, upon exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby and such Warrants, the
Underwriter's Purchase Option, and the Underwriter's Warrants, when issued, in
each case, will be enforceable against the Company in accordance with their
respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provision may
be limited under the federal and state securities laws and public policy, and
(c) 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 certificates representing the Securities are in due and proper form.
20
(v) To the best of such counsel's knowledge after
due inquiry, except as set forth in the Prospectus, no holders of any
securities of the Company or of any options, warrants or securities of the
Company exercisable for or convertible or exchangeable into securities of the
Company have the right to require the Company to register any such securities
of the Company under the Act or to include any such securities in a
registration statement to be filed by the Company.
(vi) To the best of such counsel's knowledge, after
due inquiry, the shares of Common Stock and the Warrants are eligible for
quotation on the Nasdaq SmallCap Market and have been approved for quotation
on the BSE.
(vii) This Agreement, the Underwriter's Purchase
Option and the Warrant Agreement have each been duly and validly authorized
and, when executed and delivered by the Company, and, assuming the due and
valid authorization, execution and delivery of such agreements by all parties
thereto other than the Company, such agreements will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification
provisions may be limited under the federal and state securities laws and
public policy, and (c) 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.
(viii) The execution, delivery and performance by
the Company of this Agreement, the Underwriter's Purchase Option and the
Warrant Agreement, the issuance and sale of the Securities, the consummation
of the transactions contemplated hereby and thereby and the compliance by the
Company with the terms and provisions hereof and thereof, do not and will not,
with or without the giving of notice or the lapse of time, or both, (a)
conflict with, or result in a breach of, any of the terms or provisions of, or
constitute a default under, or result in the creation or modification of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company pursuant to the terms of, any material mortgage, deed of
trust, note, indenture, loan, contract, commitment or other material agreement
or instrument to which the Company is a party or by which the Company or any
of its properties or assets may be bound, except for such breaches, defaults,
liens, security interests, charges or encumbrances as would not have a
material adverse effect on the Company, (b) result in any violation of the
provisions of the Certificate of Incorporation or the By-Laws of the Company,
(c) violate any judgment, order or decree of which such counsel has knowledge,
statute, rule or regulation applicable to the Company of any court, domestic
or foreign, or of any federal, state or other regulatory authority or other
governmental body having jurisdiction over the Company, its properties or
assets, or (d) have a material adverse effect on any permit, certification,
registration, approval, consent, license or franchise of the Company.
(ix) The Registration Statement, each Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations. The Securities and all other
securities issued or issuable by the Company conform in all respects to the
description thereof contained in the Registration Statement and the
Prospectus. The statements in the Prospectus under
21
"Risk Factors," "Business," "Management," "Certain Transactions," "Principal
Shareholders," "Description of Securities" and "Shares Eligible for Future
Sale" have been reviewed by such counsel, and insofar as they contain
descriptions of law, statutes, licenses, rules or regulations or legal
conclusions are correct in all material respects. No statute or regulation or
legal or governmental proceeding required to be described in the Prospectus is
not described as required, nor are any contracts or documents of which such
counsel has knowledge of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement not so described or filed as required.
(x) Counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Underwriter at which the contents of the Registration Statement, the
Prospectus and related matters were discussed and although such counsel is not
passing upon, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus (except as otherwise set forth in counsel's opinion),
subject to the qualification that as to determination of materiality of any
factual matters, such counsel may rely, where such counsel concludes that such
reliance is justifiable, on the views of the Chief Executive Officer of the
Company, no facts have come to the attention of such counsel which lead them
to believe that either the Registration Statement or the Prospectus or any
amendment or supplement thereto contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel
need express no opinion with respect to the financial statements and other
financial and statistical data contained in or omitted from the Registration
Statement or Prospectus).
(xi) The Registration Statement is effective under
the Act, and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
threatened under the Act or applicable state securities laws.
(xii) The Company has good and defensible title to,
or valid and enforceable leasehold estates in, all items of real and personal
property (tangible and intangible) stated in the Prospectus to be owned or
leased by it, 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.
(xiii) Except as described in the Prospectus, to
the best of such counsel's knowledge, no 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 properties or assets of the
Company is subject, except where such defaults, either singly or in the
aggregate, would not have a material adverse effect on the Company or its
operations. The Company is not in violation of any term or provision of its
Certificate of Incorporation or By-Laws. The Company is not in violation of
any judgment, order or decree of which such counsel has knowledge, franchise,
license, permit, law, rule or regulation applicable to
22
the Company, of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business, except
where such violations, either singly or in the aggregate, would not have a
material adverse effect on the Company or its operations.
(xiv) To the best of such counsel's knowledge after
due inquiry, except as described in the Prospectus, the Company does not own
an interest in any corporation, partnership, joint venture, trust or other
business entity.
(xv) To the best of such counsel's knowledge after
due inquiry, except as set forth in the Prospectus, there is no action, suit
or proceeding before or by any court or governmental agency or body, domestic
or foreign, now pending or threatened against the Company, which might result
in any material and adverse change in the condition (financial or otherwise),
business or prospects of the Company, or which might materially and adversely
affect the properties or assets thereof.
(xvi) To the best of such counsel's knowledge after
due inquiry, neither the Company, nor its officers, employees, agents or other
persons acting on their behalf 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 or supplier, any
employee or agent of a customer or supplier, any official or employee of any
governmental agency or body (domestic or foreign), any political party or
candidate for office (domestic or foreign) or any 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 (a) might
subject the Company to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (b) if not given in the past, might
have had a materially adverse effect on the assets, business or operations of
the Company as reflected in the financial statements contained in the
Registration Statement or (c) if not continued in the future, might adversely
affect the assets, business, operations or prospects of the Company. The
Company's internal accounting controls and procedures are sufficient to cause
the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
(xvii) To the best of such counsel's knowledge
after due inquiry, except as described in the Prospectus, 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 financial consulting arrangements or any other arrangements,
agreements, under standings, payments or issuances that may affect the
Underwriter's compensation, as determined by the NASD.
(xviii) The Company is not, and upon consummation
of the transactions contemplated by this Agreement will not be, an "investment
company" within the meaning of Section 3 of the Investment Company Act of
1940, as amended.
Unless the context clearly indicates otherwise, the term
"Company" as used in this Section 4.2.1 shall include each subsidiary of the
Company. The opinion of counsel for the Company and any opinion relied upon by
such counsel for the Company shall include a statement to the effect that it
may be relied upon by counsel for the Underwriter in its opinion delivered to
the Underwriter.
23
4.2.2 Opinion of Intellectual Property Counsel. The opinion
of ____________, intellectual property counsel to the Company, to the effect
that to the best of such counsel's knowledge after due inquiry, the Company
owns or possesses, free and clear of all liens or encumbrances and rights
thereto or therein by third parties, other than as described in the
Prospectus, the requisite licenses or other rights to use all Intangibles and
other rights necessary to conduct its business (including, without limitation,
any such licenses or rights described in the Prospectus as being licensed to,
owned or possessed by the Company), and there is no claim or action by any
person pertaining to, or proceeding, pending or, to the best of such counsel's
knowledge after due inquiry, threatened, which challenges the exclusive rights
of the Company with respect to any Intangibles used in the conduct of its
business (including without limitation any such licenses or rights described
in the Prospectus as being owned or possessed by the Company); to the best of
such counsel's knowledge after due inquiry, the Company's current products,
services and processes do not infringe on any Intangibles held by third
parties except as discussed in the Prospectus.
4.2.3 Closing Date and Option Closing Date Opinions of
Counsel. On each of the Closing Date and the Option Closing Date, if any, the
Underwriter shall have received the favorable opinions of Shereff, Friedman,
Xxxxxxx & Xxxxxxx, LLP, counsel to the Company, and _________, intellectual
property counsel to the Company, dated the Closing Date or the Option Closing
Date, as the case may be, addressed to the Underwriter and in form and
substance satisfactory to Xxxxxxxx Mollen & Xxxxxx, counsel to the
Underwriter, confirming as of the Closing Date and, if applicable, the Option
Closing Date, the statements made by Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
and ____________ in their respective opinions delivered on the Effective Date.
4.2.4 Reliance. In rendering such opinions, such counsel may
rely (i) as to matters involving the application of laws other than the laws
of the United States and jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent specified in such opinions,
if at all, upon an opinion or opinions (in form and substance reasonably
satisfactory to Underwriter's counsel) of other counsel reasonably acceptable
to Underwriter's counsel, familiar with the applicable laws, and (ii) as to
matters of fact, to the extent they deem proper, on certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of
the Company, provided that copies of any such statements or certificates shall
be delivered to Underwriter's counsel if requested. Any opinion relied upon by
counsel for the Company shall include a statement to the effect that it may be
relied upon by counsel for the Underwriter in its opinion delivered to the
Underwriter.
4.2.5 Secondary Market Trading Memorandum. On the Effective
Date the Underwriter shall have received the written Secondary Market Trading
Memorandum.
4.3 Cold Comfort Letter. At the time this Agreement is executed, and
at each of the Closing Date and the Option Closing Date, if any, you shall
have received a letter, addressed to the Underwriter and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to
Xxxxxxxx Xxxxxx & Xxxxxx, counsel for the Underwriter, from Xxxxx Xxxxxxxx
LLP, dated, respectively, as of the date of this Agreement and as of the
Closing Date and the Option Closing Date, if any:
24
(i) confirming that they are independent
accountants with respect to the Company within the meaning of the Act and the
applicable Regulations;
(ii) 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;
(iii) stating that, based on the performance of
procedures specified by the American Institute of Certified Public Accountants
for a review of the latest available unaudited interim financial statements of
the Company (as described in Statement on Auditing Standards ("SAS") No. 71 --
"Interim Financial Information"), with an indication of the date of the latest
available unaudited interim financial statements, a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that (a) the unaudited financial statements
of the Company included in the Registration Statement do not comply as to form
in all material respects with the applicable accounting requirements of the
Act and the Regulations or any material modification should be made to the
unaudited interim financial statements included in the Registration Statement
for them to be 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 later than five days prior to the Effective Date, Closing Date or
Option Closing Date, as the case may be, there was any change in the capital
stock or long-term debt of the Company, or any decrease in the shareholders'
equity of the Company as compared with amounts shown in the December 31, 1996
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, 1996 to a specified date not later than five days prior to
the Effective Date, Closing Date or Option Closing Date, as the case may be,
there was any decrease in revenues, net earnings or net earnings per share of
Common Stock, in each case as compared with the corresponding period in the
preceding year and as compared with the corresponding period in the preceding
quarter, other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of
such decrease;
(iv) setting forth, at a date not later than five
days prior to the Effective Date, the amount of liabilities of the Company
(including a break-down of commercial papers and notes payable to banks);
(v) 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,
and work sheets, of the Company 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;
25
(vi) stating that they have not during the
immediately preceding five year period brought to the attention of the
Company's management any reportable condition related to internal structure,
design or operation as defined in SAS No. 60 -- "Communication of Internal
Control Structure Related Matters Noted in an Audit," in the Company's
internal controls; and
(vii) statements as to such other matters incident
to the transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Underwriter shall have received a
certificate of the Company signed by the President and the Chief Financial
Officer of the Company, dated the Closing Date or the Option Closing Date, as
the case may be, respectively, to the effect that the Company has performed
all covenants and complied with all conditions required by this Agreement to
be performed or complied with by the Company prior to and as of the Closing
Date, or the Option Closing Date, as the case may be, and that the conditions
set forth in Section 4.5 hereof have been satisfied as of such date and that,
as of Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof
are true and correct. In addition, the Underwriter will have received such
other and further certificates of officers of the Company as the Underwriter
may reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date
and the Option Closing Date, if any, the Underwriter shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force
and effect, (ii) that the resolutions relating to the public offering
contemplated by this Agreement are in full force and effect and have not been
modified, (iii) all correspondence between the Company or its counsel and the
Commission, (iv) all correspondence between the Company or its counsel and the
NASD concerning inclusion of the Securities on Nasdaq, (v) all correspondence
between the Company or its counsel and the BSE concerning listing on the BSE,
and (vi) as to the incumbency of the officers of the Company. The documents
referred to in such certificate shall be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and
the Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material 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, not in 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
materially adverse to the Company, taken as a whole, (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 material 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
have been pending or threatened against
26
the Company or affecting any of its property or business before or by any
court or federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition or income of
the Company, 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 threatened by the Commission, and (vii)
the Registration Statement and the Prospectus and any amendments or
supplements thereto contain all material statements which are required to be
stated therein in accordance with the Act and the Regulations and conform in
all material respects to the requirements of the Act and the Regulations, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto contains any 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.
4.6 Delivery of Underwriter's Purchase Option. The Company has
delivered to the Underwriter an executed copy of the Underwriter's Purchase
Option.
4.7 Opinion of Counsel for the Underwriter. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to Xxxxxxxx Xxxxxx & Xxxxxx, counsel to the Underwriter, and you shall
have received from such counsel a favorable opinion, dated the Closing Date
and the Option Closing Date, if any, with respect to such of these proceedings
as you may reasonably require. On or prior to the Effective Date, the Closing
Date and the Option Closing Date, as the case may be, counsel to the
Underwriter shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in this Section 4.7, or in order
to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
5. Indemnification.
5.1 Indemnification of the Underwriter.
5.1.1 General. Subject to the conditions set forth below,
the Company agrees to indemnify and hold harmless the Underwriter, its
directors, officers, agents and employees and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened,
whether arising out of any action between the Underwriter and the Company or
between the Underwriter and any third-party or otherwise) to which they or any
of them may become subject under the Act, the Exchange Act or 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 (i) any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time each may be
amended and supplemented); (ii) in any post-effective amendment or amendments
or any new registration statement and prospectus in which are included
securities of the Company issued or issuable upon exercise of the
Underwriter's Purchase Option; or (iii) any application or other document or
written communication (in this Section 5 collec-
27
tively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify
the Securities under the securities laws thereof or filed with the Commission,
any state securities commission or agency, Nasdaq 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, in the light of
the circumstances under which they were made, not misleading, unless such
statement or omission was made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be.
The Company agrees promptly to notify the Underwriter of the commencement of
any litigation or proceedings against the Company or any of its officers,
directors or controlling persons in connection with the issue and sale of the
Securities or in connection with the Registration Statement or Prospectus.
5.1.2 Procedure. If any action is brought against the
Underwriter or controlling person in respect of which indemnity may be sought
against the Company pursuant to Section 5.1.1, the Underwriter shall promptly
notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment and
fees of counsel (subject to the approval of the Underwriter) and payment of
actual expenses. The Underwriter or controlling person 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 the Underwriter or controlling person
unless (i) the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action, or (ii)
the Company shall not have employed counsel to have charge of the defense of
such action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are
different from or additional to those available to the Company (in which case
the Company shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events the fees
and expenses of not more than one additional firm of attorneys selected by the
Underwriter and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if the Underwriter
or controlling person shall assume the defense of such action as provided
above, the Company shall have the right to approve the terms of any settlement
of such action which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company. The Underwriter agrees to
indemnify and hold harmless the Company against any and all loss, liability,
claim, damage and expense described in the foregoing indemnity from the
Company to the Underwriter, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions directly
relating to the transactions effected by the Underwriter in connection with
this offering made in any Preliminary Prospectus, the Registration Statement
or Prospectus or any amendment or supplement thereto or in any application in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in such Preliminary Prospectus, the Registration Statement
or Prospectus or any amendment or supplement thereto or in any such
application. In case any action shall be brought against the Company or any
other person so indemnified based on any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
any application, and in respect of which indemnity may be sought against the
Underwriter, the Underwriter shall have the rights and duties
28
given to the Company, and the Company and each other person so indemnified
shall have the rights and duties given to the Underwriter by the provisions of
Section 5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. 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 5 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 5 provides for indemnification in such case, or (ii)
contribution under the Act, the Exchange Act or otherwise may be required on
the part of any such person in circumstances for which indemnification is
provided under this Section 5, then, and in each such case, the Company and
the Underwriter shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and the Underwriter, as incurred, in such proportions
that the Underwriter are responsible for that portion represented by the
percentage that the underwriting discount appearing on the cover page of the
Prospectus bears to the initial offering price appearing thereon and the
Company is responsible for the balance; provided, that, 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. Notwithstanding the provisions of this Section
5.3, the Underwriter shall not be required to contribute any amount in excess
of the amount by which the total price at which the Securities underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which the Underwriter has otherwise been required to pay in
respect of such losses, liabilities, claims, damages and expenses. For
purposes of this Section, each director, officer and employee of the
Underwriter, and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act, shall have the same rights to contribution
as the Underwriter.
5.3.2 Contribution Procedure. Within fifteen 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
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so 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 its
representative of the commencement thereof within the aforesaid fifteen 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 on account of any settlement of any claim, action
or proceeding which was effected by the party seeking contribution without the
written consent of the contributing party. The contribution provisions
contained in this Section are intended to supersede, to the extent permitted
by law, any right to contribution under the Act, the Exchange Act or otherwise
available.
29
6. Intentionally Omitted.
7. Additional Covenants.
7.1 Board Designee. For a period of four years from the Effective
Date, the Company will recommend and use its best efforts to elect a designee
of the Underwriter as a member of the Board of Directors of the Company. Such
designee shall receive no more or less compensation than is paid to other
non-management directors of the Company. If the Underwriter does not exercise
its option to designate a member of the Company's Board of Directors, the
Underwriter shall nevertheless have the right to send a representative (who
need not be the same individual from meeting to meeting) to observe each
meeting of the Board of Directors. Such person, whether a member of the Board
of Directors or a representative, shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings, including, but
not limited to, food, lodging and transportation. The Company agrees to give
the Underwriter written notice of each such meeting and to provide the
Underwriter with an agenda and minutes of the meeting no later than it gives
such notice and provides such items to the directors.
7.2 Insider Sales. During the four year period following the
Effective Date, the Underwriter shall have the right to purchase for the
Underwriter's account or to sell for the account of the Insiders any
securities sold on any United States securities market or exchange, including,
but not limited to, open market sales or sales pursuant to Rule 144 under the
Act. Each of the Insiders will agree to consult with the Underwriter with
regard to any such sales and will offer the Underwriter the exclusive
opportunity to purchase or sell such securities on terms at least as favorable
to the Insiders as they can secure elsewhere. If the Underwriter fails to
accept in writing any such proposal for sale by the Insiders within one
business day after receipt of a notice containing such proposal, then the
Underwriter shall have no claim or right with respect to any such sales
contained in any such notice. If, thereafter, such proposal is modified in any
material respect, the Insiders shall adopt the same procedures as with respect
to the original proposal.
7.3 Press Releases. The Company will not issue a press release or
engage in any other publicity until 25 days after the Effective Date without
the Underwriter's prior written consent.
7.4 Form S-8 or any Similar Form. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period
of one year from the Effective Date without the Underwriter's prior written
consent.
7.5 Compensation and Other Arrangements. The Company hereby agrees
that for a period of three years from the Effective Date, all compensation and
other arrangements between the Company and its officers, directors and
affiliates shall be approved by the Compensation Committee of the Company's
Board of Directors, a majority of the members of which shall have no
affiliation or other relationship with the Company other than as directors.
8. 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,
30
warranties and agreements of the Underwriter and Company, including the
indemnity agreements contained in Section 5 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf
of the Underwriter, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities
to the Underwriter until the earlier of the expiration of any applicable
statute of limitations and the seventh anniversary of the later of the Closing
Date or the Option Closing Date, if any, at which time the representations,
warranties and agreements shall terminate and be of no further force and
effect.
9. Effective Date of This Agreement and Termination Thereof.
9.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective.
9.2 Termination. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will
in the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the American
Stock Exchange, The Boston 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 maximum ranges for prices for securities shall have been fixed,
or maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction, or (iii) if the United States shall
have become involved in a war or major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or (v)
if a moratorium on foreign exchange trading has been declared which materially
adversely impacts the United States securities market, or (vi) if the Company
shall have sustained a material loss 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 opinion, make it
inadvisable to proceed with the delivery of the Securities, or (vii) if E.
Xxxxxxx Xxxxx shall no longer serve the Company in his present capacity, or
(viii) if the Company has breached any of its representations, warranties or
obligations hereunder, or (ix) if the Underwriter shall have become aware
after the date hereof of such a material adverse change in the condition
(financial or otherwise), business, or prospects of the Company, or such
adverse material change in general market conditions, as in the Underwriter's
judgment would make it impracticable to proceed with the offering, sale and/or
delivery of the Securities or to enforce contracts made by the Underwriter for
the sale of the Securities.
9.3 Notice. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, the
Company shall be notified on the same day as such election is made by you by
telephone or telecopy, confirmed by letter.
9.4 Expenses. In the event that this Agreement shall not be carried
out for any reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms herein, the obligations of the
Company to pay the expenses related to the transactions contemplated herein
shall be governed by Section 3.15 hereof.
31
9.5 Indemnification. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 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.
10. Miscellaneous.
10.1 Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telecopied and confirmed
If to the Underwriter:
GKN Securities Corp.
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Coventry, Vice President
Copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
If to the Company:
Pivot Rules, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: E. Xxxxxxx Xxxxx, Chief Executive Officer
Copy to:
Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
10.2 Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
10.3 Amendment. This Agreement may be amended only by a written
instrument executed by each of the parties hereto.
32
10.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with
this Agreement) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
10.5 Binding Effect. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 5 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.
10.6 Governing Law, Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New
York, without giving effect to conflicts of law. The Company hereby agrees
that any action, proceeding or claim against it arising out of, relating in
any way to this Agreement shall be brought and enforced in the courts of the
State of New York or the United States District Court for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to
such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in
Section 10.1 hereof. Such mailing shall be deemed personal service and shall
be legal and binding upon the Company in any action, proceeding or claim. The
Company agrees that the prevailing party(ies) in any such action shall be
entitled to recover from the other party(ies) all of its reasonable attorneys'
fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
10.7 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto.
10.8 Waiver, Etc. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this
Agreement. No waiver of any breach, non-compliance or non-fulfillment of any
of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver
of any other or subsequent breach, non-compliance or non-fulfillment.
33
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,
PIVOT RULES, INC.
By:
--------------------------------
Name: E. Xxxxxxx Xxxxx
Title: President and Chief
Executive Officer
Accepted as of the date first above written.
New York, New York
GKN SECURITIES CORP.
By:
--------------------------
Name:
Title:
34
