EXHIBIT 1.1
1,000,000 Common Shares
Xxxxxxxx Equipment & Engineering Company, Inc.
(a Florida corporation)
UNDERWRITING AGREEMENT
----------------------
----------, 1998
Discovery Capital Group, Inc.
0000 Xxxxx Xxxxxx, Xxxxx X
Xxxxxx Xxxx, Xxxxxxx 00000
Gentlemen:
Xxxxxxxx Equipment & Engineering Company, Inc. (the "Company") confirms its
agreement with you (the "Underwriter"), with respect to the sale by the
Company of up to 1,000,000 Shares of common stock (the "Shares"), $.0002 par
value, and the employment of the Underwriter as the Company's exclusive agent to
offer and sell to the public a minimum of 350,000 Shares and a maximum of
1,000,000 Shares on a "best efforts" basis. Such minimum and maximum represents,
depending upon market conditions, no less than approximately 9% nor more than
approximately 23% (assuming conversion of all outstanding convertible Notes but
without giving effect the Warrant Purchase Agreement hereinafter described) of
the total equity of the Company to be outstanding after the offering. The Shares
will be offered to the public at a price (the "Initial Offering Price") of $7.25
per Share for total gross offering price of $7,250,000 maximum and $2,537,500
minimum.
As more fully described hereinafter, upon completion of the offering, the
Underwriter will be sold a Warrant to purchase up to a number of shares equal to
4% of the Shares sold to the public ("Warrant Shares") exercisable for a period
of four years commencing one year after the Effective Date of the Registration
Statement at 120% of the Initial Offering Price ("Underwriter's Warrant").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (No. 333-56107) and a
related preliminary prospectus for the registration of the Shares, under the
Securities Act of 1933,as amended (the "1933 Act"), and has filed such
amendments thereto, such amended preliminary prospectus pursuant to Rule 424(b)
of the Act, a copy of each of each of which heretofore has been delivered to
you. The registration statement was declared effective by the Commission on
________, 1998. The registration statement, as amended by the pre-effective
amendment(s), (including exhibits previously filed or filed therewith) and the
amended prospectus on file with the Commission at the time the registration
statement becomes effective are hereinafter called the "Registration
Statement" and the "Prospectus", respectively, except that if the prospectus
filed by the Company pursuant to Rule 424(c) under the 1933 Act differs from the
prospectus on file at the time the Registration Statement becomes effective, the
term "Prospectus" shall refer to the Rule 424(c) prospectus from and after the
time it is mailed to the Commission for filing.
The Company understands that the Underwriter proposes to make a public
offering of the Shares as soon as the Underwriter deems it advisable after the
Registration Statement becomes effective. The Underwriter may, at its
discretion, negotiate with other underwriters who shall be members in good
standing of the National Association of Dealers, Inc. ("NASD") who acting
severally would offer and sell portions of the Shares on a best efforts basis.
SECTION 1. Representations and Warranties.
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(a) The Company represents and warrants to the Underwriter as follows:
(i) At the time the Registration Statement becomes effective, the
Registration Statement will comply in all material respects with the
requirements of the 1933 Act and the rules and regulations thereunder (the "1933
Act Regulations") and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and at the time the Registration
Statement becomes effective (unless the term "Prospectus" refers to the Rule
424(c) prospectus, in which case at the time it is mailed to the Commission for
filing) and at Closing Time referred to in Section 2, the Prospectus will not
contain any untrue statement of material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to statements
in or omissions from the Registration Statement or Prospectus made in reliance
upon and in conformity with information furnished to the Company in writing by
the Underwriter expressly for use in the Registration Statement or Prospectus.
(ii) The accountants who certified the financial statements included
in the Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
(iii) The financial statements, related notes and supporting schedules
included in the Registration Statement present fairly the financial position of
the Company as and at the dates indicated and the results of its operations for
the periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis; and the supporting schedules included in the
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Registration Statement, if any, present fairly the information required to be
stated therein. There has been no adverse change or development involving a
prospective change in the condition, financial or otherwise, or in the
Prospectus, value, operation, properties, business or results of operations of
the Company whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement and the
Prospectus.
(iv) Since the respective dates as of which information is given in the
Registration Statement, except as otherwise stated therein, (A) there has been
no material adverse change in the condition, financial or otherwise, of the
Company, or in the earnings, affairs or business prospects of the Company
whether or not arising in the ordinary course of business, (B) there have been
no material transactions entered into by the Company, and (C) there have been no
dividends or distributions of any kind declared, paid or made by the Company on
its capital stock.
(v) The Company has been duly incorporated and validly exists as a
corporation in good standing under the laws of the State of Florida with
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement; and the Company
is duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases substantial properties
or in which the conduct of its business requires such qualification except for
such jurisdictions in which the failure to qualify in the aggregate would not
have a material and adverse effect on the earnings, affairs or business
prospects of the Company.
(vi) The Company does not have any subsidiaries and does not own any
interest in any other corporation, partnership, joint venture or other entity.
(vii) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Registration Statement under "Capitalization;" the shares
of issued and outstanding Common Stock and the Convertible Notes as set forth
thereunder have been duly authorized and validly issued and are fully paid for
and nonassessible; the Shares have been duly authorized for issuance and sale to
the public pursuant to this Agreement and, when issued and delivered by the
Company pursuant to this Agreement against payment of the consideration set
forth in Section 2 hereof, will be validly issued and fully paid and
nonassessable; the Common Stock conforms to all the statements relating thereto
contained in the Registration Statement; and the Shares, are not subject to
preemptive rights.
(viii) The Warrant Shares have been duly authorized for issuance and sale
to the Underwriter substantially in the form filed as an Exhibit to the
Registration Statement with such changes therein, if any, as may be agreed upon
by the Company and the
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Underwriter or by their respective counsel all as set forth and subject to the
provisions of Section 5 hereof.
(ix) This Agreement and the transactions contemplated herein have been duly
and validly authorized and this Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding agreement, enforceable in
accordance with its terms, except as enforceability of such agreements may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws relating to or affecting generally the enforcement of creditors'
rights.
(x) The Company has good and marketable title to all properties and assets
described in the Prospectus as owned by it free and clear of all liens, charges,
encumbrances or restrictions, except such as are described or referred to in the
Prospectus or are not materially significant or important in relation to the
business of the Company; all of the leases and subleases under which the Company
is the lessor or sublessor of properties or assets as lessee or sublessee, if
any and as described in the Prospectus, are in full force and effect, and the
Company is not in default in any material respect in respect of any of the terms
or provision of any such leases or subleases, and to the best of the Company's
rights to the continued possession of the leased or subleased premises or assets
under any such lease or sublease.
(xi) There is no pending or threatened, action, suit or proceeding to which
the Company is a party before or by any court or governmental agency or body,
which might result in any material adverse change in the condition (financial or
other), business or prospects of the Company as a whole or might materially and
adversely affect the properties or assets of the Company as a whole nor are
there any actions, suits or proceedings against the Company related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race; and no labor disturbance by the employees of the Company
individually exists or is, to the knowledge of the Company, imminent which might
be expected to materially and adversely affect the conduct of the business,
property, operations, financial condition or earnings of the Company as a whole.
(xii) The Company is not in violation of its charter documents or bylaws or
in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material bond, debenture, note
or other evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to which the
Company is a party or by which it or any of its properties are bound; and the
execution and delivery of this Agreement, the Warrant Purchase Agreement, the
incurrence of the obligations herein set forth and the consummation of the
transactions herein contemplated will not conflict with, or result in a breach
of any of the terms, conditions or provisions of, or
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constitute a default under, the charter documents or bylaws of the Company or
any material bond, debenture, note or other evidence of indebtedness or any
contract, indenture, mortgage, loan agreement, lease, joint venture or other
agreement or instrument to which the Company is a party of by which it or any of
its properties are bound, or relate in any material violation by the Company of
any law, administrative regulation or court decree.
(xiii) The Company is not in violation of its charter documents or bylaws
or in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material bond, debenture, note
or other evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to which the
Company is a party or by which it or any of its properties are bound; and the
execution and delivery of this Agreement, the Warrant Purchase Agreement, the
occurrence of the obligations herein set forth and the consummation of the
transactions herein contemplated will not conflict with, or result in a breach
of any of the terms, conditions or provisions of, or constitute a default under,
the charter documents or bylaws of the Company or any material bond, debenture,
note or other evidence of indebtedness or any contract, indenture, mortgage,
loan agreement, lease, joint venture or other agreement or instrument to which
the Company is a party or by which it or any of its properties are bound, or
result in any material violation by the Company of any law, administrative
regulation or court decree.
(xiv) Except as set forth in the Registration Statement and Prospectus,
there is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of the
Company, threatened against or affecting, the Company which might result in any
material and adverse change in the condition (financial or otherwise), business
or prospects of the Company.
(xv) There are no contracts or documents of the Company which would be
required to be filed as exhibits to the Registration Statement by the 1933 Act
or by the 1933 Act Regulations which have not been previously filed or filed
as exhibits to the Registration Statement; each contract to which the Company is
a party and which has been previously filed or filed as an exhibit to the
Registration Statement is in full force and effect or has terminated in
accordance with its terms or as set forth in the Registration Statement; and no
party to any such contract has given notice of the cancellation of or has the
intention to cancel any such contract.
(xvi) The Company owns or possesses, or can acquire on reasonable terms,
adequate patent rights or licenses or other rights to use patent rights,
inventions, trademarks, service marks, trade names, government permits and
copyrights necessary to conduct the business now operated by it, and the Company
has not received
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any notice of infringement of or conflict with asserted rights of others with
respect to any patent, patent rights, inventions, trademarks, service marks,
trade names or copyrights which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would materially adversely affect
the conduct of the business, operations, financial condition or income of the
Company.
(xvii) The Company possesses the franchises, grants, authorizations,
licenses, permits, easements, consents, certificates and orders ("franchises")
necessary to conduct the business now operated by it, and the Company has not
received any notice of proceedings relating to the revocation or modification of
any franchises which, singly or in the aggregate, if the subject of any
unfavorable decision, ruling or finding, would materially adversely affect the
conduct of the business, operations, financial condition or income of the
Company.
(xviii) Except as set forth in the Registration Statement, the Company
maintains insurance, which is in full force and effect, of the types and in the
amounts adequate for its businesses and in line with insurance maintained by
similar companies and businesses, including but not limited to, insurance
covering all personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against.
(xix) There are no outstanding claims for services either in the nature
of a finder's fee, brokerage fee or otherwise, with respect to this financing
for which he Company or the Underwriter may be responsible.
(xx) The Company has not taken, and will not take, directly or indirectly,
any action designed to constitute or which has constituted or which might
reasonably be expected to cause or result in the stabilization of the price of
the Shares or a violation of Rule 10b-6 under the Securities Exchange Act of
1934, as amended (the "1934 Act"), or in a manipulation of the price of any
security issued by the Company.
(xxi) The Company has not at any time (i) made any contributions to any
candidate for political office in violation of law, or failed to disclose fully
any such contribution, or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasipublic duties, other than payments required or allowed by applicable law.
(xxii) Except as may be disclosed in the Prospectus, the Company has
properly prepared and filed all necessary federal, state, local and foreign
income and franchise tax returns, has paid all taxes shown as due thereon, has
established adequate reserves for such taxes which are not yet due and payable,
and does not have
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any tax deficiency or claims outstanding, proposed or assessed against it.
(xxiii) On each closing date, all transfer or other taxes (other than
income taxes) which may required to be paid in connection with the sale and
issuance of the Securities, will have been fully paid or provided for by the
Company and all laws imposing such taxes will have been fully compiled with.
(b) Any certificate signed by any officer of the Company and delivered to
the Underwriter or to counsel for the Underwriter shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
SECTION 2. Sale and Delivery; Closing. On the basis of the
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representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company agrees to employ the Underwriter as its
exclusive agent to sell to the public a minimum of 350,000 and a maximum of
1,000,000 Shares on a best efforts as exclusive agent for the Company to sell to
the public the Shares.
The Initial Offering Price shall be $7.25 per Share and the Underwriter
shall receive a commission of .5075 for each Share sold which amount shall be
deducted from the proceeds payable to the Company pursuant to the provisions of
this Section.
The agency between the Company and the Underwriter shall continue until all
of the Shares are sold or until 90 days after the Effective Date of the
Registration Statement, whichever event occurs first. This period may be
extended up to an additional 30 days in the Underwriter's sole discretion.
The agency is subject to release of the Underwriter as more fully described
in Section 10(b) hereof (1) in the event of war; (2) in the event of any
material change in the business; property or financial condition of the Company
(of which events Underwriter shall be sole judge); (3) in the event of any
action, suit or proceeding at law or in equity against the Company or by
Federal, state or other political subdivision, the Commission, board or agency
or court whereby any unfavorable decision could materially adversely affect the
business, property, financial condition, income or prospects of the Company; or
(4) in the event of adverse market conditions of which the Underwriter is to be
the sole judge.
Prior to the termination of the agency, all proceeds received from the sale
of the Shares will be deposited in an escrow account entitled "Xxxxxxxx
Equipment & Engineering Company/Escrow Account" with SunTrust,_________________,
in accordance with Rule 15c2-4 under the 1934 Act. If all of the Shares are not
sold following 90 days after the Effective Date of the Registration Statement
(or up to an additional 30 days if extended in writing by
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the Underwriter), all proceeds received from the sale of the Shares will be
returned to the respective purchasers in accordance with Rule 10b-9 under the
1934 Act.
Payment of the purchase price for, and delivery of certificates for the
Shares to be purchased by members of the public shall be made at the office of
_____________________, or at such other place as shall be agreed upon by the
Underwriter and the Company, at 9:00 a.m. Eastern Standard Time, on the business
day set for closing in a notice from the Underwriter to the Company stating that
not less than the minimum Shares have been sold or such other time not later
than 30 business days after the completion of the sale of all of the Shares as
shall be agreed upon by the Underwriter and the Company, (such time and date of
payment and delivery being herein called "Closing Time"). Payment shall be made
to the Company in an amount equal to the Initial Offering Price less the
commission payable to the Underwriter multiplied by the number of Shares sold
less the expense allowance set forth in Section 4 hereof by certified or bank
cashier's check or were transfer payable to the order of the Company, against
delivery to the Underwriter for the respective accounts of the members of the
public who purchased the Shares of certificates for the Shares to be purchased
by them. Certificates for the Shares shall be in such denominations and
registered in such names as the Underwriter may request at or prior to Closing
Time. The certificates for the Shares will be made available for examination and
packaging by the Underwriter not later than 10:00 a.m. on the last business day
prior to Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with the
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Underwriter as follows:
(a) The Company will notify the Underwriter or its counsel
immediately, and confirm the notice in writing, (i) of the
effectiveness of the Registration Statement and any amendment
thereto, (ii) of the receipt of any comments from the Commission,
(iii) of any request by the Commission for any amendment or
supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company will
make every reasonable effort to prevent the issuance of any stock
order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
(b) The Company will give the Underwriter notice of its intention to
file any amendment to the Registration Statement or any amendment
or supplement to the Prospectus (including a prospectus filed
pursuant
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to Rule 424(c) which differs from the prospectus on file at the
time the Registration Statement becomes effective) and will not
file any such amendment or supplement to which the Underwriter or
counsel for the Underwriter shall reasonably object.
(c) The Company will deliver to the Underwriter as many signed copies
of the registration statement as originally filed and of each
amendment thereto (including exhibits filed therewith or
incorporated by reference therein) as the Underwriter many
reasonable request and also deliver to the Underwriter a conformed
copy of the registration statement as originally filed and of each
amendment thereto (without exhibits filed therewith or
incorporated by reference therein).
(d) The Company will furnish to the Underwriter, from time to time
during the period when the Prospectus is required to be delivered
under the 1933 Act, such number of copies of the Prospectus (as
amended or supplemented) as the Underwriter may reasonably request
for the purposes contemplated by the 1933 Act or the 1933 Act
Regulations.
(e) If any event shall occur as a result of which it is necessary, in
the opinion of counsel for the Underwriter to amend or supplement
the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is
delivered to a purchaser, the Company will forth with amend or
supplement the Prospectus by preparing a furnishing to the
Underwriter a reasonable number of copies of an amendment or
amendments of, or a supplement or supplements to, the Prospectus
(in form and substance satisfactory to counsel for the
Underwriter), so that, as so amended or supplemented, the
Prospectus will not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at
the time it is delivered to a purchaser, not misleading.
(f) The Company will endeavor, in cooperation with the Underwriter
and counsel for the Underwriter, to do whatever is necessary to
qualify or register the Shares, the Underwriter's Warrants and the
Warrant Shares for offer and sale under the applicable securities
laws of such states and other jurisdictions of the United States
as the Underwriter may designate in its sole discretion, and will
maintain such qualifications in effect for
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as long as may be required for the distribution of such
securities. The Company shall not, however, be obligated to file
any general consent to service of process or to qualify as a
foreign corporation or as dealer in securities in any jurisdiction
in which it is not so qualified. The Company will file such
statements and reports as may be required by the laws of each
jurisdiction in which the above securities have been qualified as
above provided. The Company further agrees to provide the
Underwriter with any information and to take any steps the
Underwriter deems necessary to obtain the approval of the National
Association of Securities Dealers, Inc. ("NASD") of the proposed
offering.
(g) The Company will make generally available to its security
holders, in the manner contemplated by Rule 158(b) under the
Securities Act, as soon as practicable, but not later than 90 days
after the close of the period covered thereby, an earnings
statements (in form complying with the provisions of Section 11(a)
of the 1933 Act, which need not be certified by independent public
accountants unless required by the 1933 Act or the 1933 Act
Regulations) covering a twelve (12) month period beginning not
later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
(h) The Company for a period of three (3) years from the Effective
Date of the Registration Statement shall hold meetings of its
Board of Director at least quarterly, upon proper notice, with
respect to which an agenda, financial report and minutes of the
last meeting shall be mailed to each director prior thereto and a
copy of said reports and minutes shall be furnished directly to
the Underwriter; and as soon as the same shall be sent to the
Company's shareholders, shall furnish directly to the Underwriter
copies of any annual or interim reports of the Company to its
shareholders, and it will, for the same period, also furnish to
the Underwriter the following:
(i) as soon as practicable after the end of each fiscal year, one
copy of the annual independent public accountants' report,
including therein the accountants' certificate, the consolidated
balance sheet of the Company and its subsidiaries, if any, and the
related consolidated statements of income, retained earnings and
changes in financial position;
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(ii) copies of any report, application or document which the
Company shall file with the Commission, the National Quotation
Bureau, the National Association of Securities Dealers Automated
Quotation System (NASDAQ), or any securities exchange; and
(iii) as soon as the same shall be sent to shareholders, each
communication which shall be sent to the Company's shareholders as
a class; and
(iv) the Company, shall provide the Underwriter with copies of the
Company's daily transfer sheets if requested by Underwriter to do
so.
(i) The Company will apply the net proceeds for the sale of the Shares
sold by it hereunder for the purposes set forth under "Use of
Proceeds" in the Prospectus in substantially the amounts indicated
hereunder and shall file such reports with the Commission with
respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463
under the Securities Act. At the Closing Time, the Company will
deliver to the Underwriter a written intended schedule of
expenditures of such proceeds and will report to the Underwriter in
writing monthly on the actual expenditures thereof in at least as
much detail as set forth under "Use of Proceeds" in the Prospectus
(j) The Company will comply with the safeguards proposed for transient
or "inadvertent" investment companies as set forth in rule 3a-2 of
the Investment Company Act for temporary exclusion from its
requirements.
(k) For a period of (180 days or up to two (2) years) beginning on the
Effective Date of the Registration Statement, the Company will not,
issue any shares of Common Stock, except with the written consent
of the Underwriter, such consent not to be unreasonably withheld.
Additionally, for a period of two years, beginning on the Effective
Date of Registration Statement, the Company shall not issue any
warrants, options, or other rights to purchase or acquire Common
Stock to any officer, director, or principal shareholder of the
Company or any affiliate or associate thereof except with the
written consent of the Underwriter, such consent not to be
unreasonably withheld.
(l) The Company agrees that no news releases or other publicity about
the Company shall be issued without the prior written approval of
the Underwriter's counsel prior to the Effective Date and for
period of ninety (90) days thereafter.
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(m) The Company will prepare and file with the Commission a report on
Form SR in accordance with the 1933 Act Regulations and will
supply copies of the Form SR, and any amendments or supplements
thereto, to the Underwriter and counsel for the Underwriter within
five days of its filing with the Commission.
(n) Within 30 days following the Closing Time, the Company will, if
necessary, register its Common Stock under Section 12 (g) of the
1934 Act; will use its best efforts to cause the registration
statement to become effective; and will supply copies of the Form
8-A, and any amendments or supplements thereto, to the Underwriter
and counsel for the Underwriter within five days of its filling
with the Commission.
(o) For as long as the Common Stock is registered under the 1934 Act,
the Company will comply in all material respects with the 1934 Act
and the rules and regulations thereunder and will hold an annual
meeting of shareholders for the election of directors within 180
days following the end of the Company's fiscal year.
(p) The Company will obtain a CUSIP number for its Common Stock by the
first day of trading of such securities and use its best efforts
to have such securities listed on NASDAQ as soon as is practicable
after such securities of the Company become eligible therefor,
with NASDAQ symbols mutually agreeable to the Company and the
Underwriter.
(q) As soon as is practicable after its securities become eligible
therefore, the Company will apply for listing in Xxxxx'x Over-the-
Counter Industrial Manual and Standard & Poor's Corporation
Description Manual.
(r) Subject to the sale of all of the Shares, the Company shall
appoint a transfer agent satisfactory to the Underwriter to
transfer the Shares.
(s) The Company will utilize its best efforts to obtain, at its
expense, insurance against liabilities under all applicable
securities laws and regulations in an amount at least equal to the
gross offering price of the Shares, plus the cost of defending
claims, which insurance will cover the Company, the Underwriter
(and any other underwriters), the Company's counsel and
Underwriter's counsel.
(t) The Underwriter shall have a preferential right for a period of
three (3) years from the Effective Date to purchase for its
account or to sell for the account of the Company or any of its
stockholders owning at least five percent (5%) of the Company's
common stock either currently or immediately prior
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to the Effective Date of the Registration Statement (the "Principal
Stockholders") any securities pursuant to a registration under the
1933 Act or otherwise. The Company and its Principal Stockholders will
consult the Underwriter with regard to any such offering and will
offer the Underwriter the opportunity to purchase or sell any such
securities on terms not less favorable to the Company or its Principal
Stockholders than they can secure elsewhere. If the Underwriter fails
to accept in writing such proposal for financing made by the Company
or its Principal Stockholders, within thirty (30) business days after
the mailing of a notice containing such proposal by registered mail
addressed to the Underwriter, then the Underwriter shall have no
further claim or right with respect to the financing proposal
contained in such notice. If, thereafter, such proposal is modified,
the Company or its Principal Stockholders shall adopt the same
procedure as with respect to the original proposal. Should the
Underwriter not avail itself of such opportunity to act as
underwriter, this will not affect any preferential rights for future
financings hereunder. The Company agrees that any breach by the
Company of the rights of first refusal granted herein shall be
enforceable by the Underwriter through injunctive relief. The Company
represents and warrants that no other person or entity has any right
to participate in any offer, sale, or distribution or securities with
respect to which the Underwriter shall have preferential right.
Section 4 Payment of Expenses; Merger and Acquisition Agreement.
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(a) Whether or not this Agreement becomes effective or is terminated or
the sale of the Shares to the Underwriters is consummated, the Company shall be
responsible for and shall bear all expenses directly and necessarily incurred in
connection with the public offering of the Shares, including but not limited to,
the costs of preparing, printing and filing with the Commission the
Registration Statements and amendments, post-effective amendments and
supplements thereto; preparing, printing and delivering exhibits thereto and
copies of the preliminary, final and supplemental prospectuses; preparing
printing and delivering all underwriting and selling documents, including but
not limited to this Agreement, any selling agreement, any agreement among
underwriters, blue sky surveys and stock certificates; blue sky filing expenses
and fees, (including counsel's fees and disbursements), NASD filing fees; and
disbursements of Underwriter's counsel, and fees and disbursements of the
transfer agent; the issuance and delivery of the Shares, the Underwriter's
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Warrants and underlying shares; the fees and disbursements to its counsel and
accountants; printing and delivery of appropriate copies of all of the foregoing
as necessary or appropriate. The Company shall pay to the Underwriter a
non-accountable expense allowance equal to three percent (3%) of the total
proceeds of the offering of which approximately $52,000 all have been paid prior
to the execution of this Agreement. If the public offering of the Shares is not
completed because the Underwriter prevents its completion (except if such
prevention is based upon a breach by the Company of any covenant,
representation, warranty or agreement contained in this Underwriting Agreement),
the Company shall not be liable for the expense allowance set forth in this
Section, except that the Underwriter may in all events be reimbursed for or
retain that portion actually expended by it. If the public offering of the
Shares is not completed because the Company prevents it or because of a breach
by the Company of any such covenants, representations, warranties or agreement
contained in this Underwriting Agreement, the Company's liability for such
expense allowance shall be equal to $52,000. The provisions of Section 6 and 10
(b) hereof shall control the matters set forth in the two (2) immediately
preceding sentences.
(b) The Company hereby agrees with the Underwriter that:
(i) That the Underwriter will be paid an finder's fee, of from five
percent (5%) of the first $1,000,000 ranging in $1,000,000 increments down
to two percent (2%) of the excess, if any, over $3,000,000 of the
consideration involved in any transaction (including mergers, acquisitions,
joint ventures, and any other business for the Company introduced by the
Underwriter) consummated by the Company, in an "Introduced, Consummated
Transaction", in which the Underwriter introduced the other party to the
Company during a period ending five years from the Closing Time;
(ii) That any such finder's fee due to the Underwriter will be paid in
cash at the closing of the particular Introduced, Consummated Transaction
for which the finder's fee is due.
Section 5. Underwriter's Warrants
----------------------
9. At the Closing Time, the Company will sell to the Underwriter, for a
price of $100 (the "Underwriter's Warrants") a number of shares equal to 4% of
the Shares sold to the Public ("Warrant Shares") exercisable for a period of
four (4) years commencing one (1) year after the Effective Date at 120% of the
Initial Offering Price. The Warrant Shares will in all respects be identical to
the Shares sold to the public. The Underwriter's Warrants shall not be
transferred, sold, assigned or hypothecated for one year after the Effective
Date except that they may be assigned in whole or in part during such period to
any officer or partner of the Underwriter, any other underwriter or member of
the
14
selling group. The Company agrees to register expeditiously on one (1) occasion
the Underwriter's Warrants and will file a registration statement under the 1933
Act, covering such securities, within twenty (20) business days after receipt of
such request provided that appropriate financial statements for the Company are
or should be then available for inclusion in such registration statement in
accordance with Commission Rules and Regulations. The request to register
Underwriter Warrants may be made commencing two (2) years from the Effective
Date and ending five (5) years from the Effective Date. In connection with the
request the Company shall bear all expenses attendant to registering the
securities up to a maximum of $12,000. In addition, for a period of six (6)
years beginning one (1) year after the Effective Date the holders of the
Underwriter's Warrants or the Warrant Shares shall have the right to include
such securities as part of any other registration of securities filed by the
Company and the Company agrees to give the holders thereof not less than thirty
(30) days written notice thereof, including any terms or conditions, prior to
the filing of any such registration statement with the Commission.
SECTION 6. Conditions of Underwriter's Obligations.
---------------------------------------
The obligations of the Underwriter hereunder are subject to the accuracy of the
representations and warranties of the Company herein contained, to the
performance by the Company of its obligations hereunder, and to the following
further conditions:
(a) The Registration Statement shall have become effective not later
than 4:00 P.M., Orlando, Florida time, on the date hereof, or with the
Underwriter's consent, at a later time and date not later, however, than
4:00 P.M., Orlando, Florida time, on the first business day following the
date hereof, or at such later time and date as may be approved by the
Underwriter; and at the Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the
Commission.
(b) At closing time the Underwriter shall have received the favorable
opinion, dated as of Closing Time, of Snyderburn, Rishoi & Xxxxx, counsel
for the Company, in form and substance satisfactory to counsel for the
Underwriter, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Florida;
(ii) The Company has corporate power and authority to own, lease
and operate its properties and conduct is business as described in the
Registration Statement;
15
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which it
owns or leases substantial properties or in which the conduct of its
businesses requires such qualification, except for such jurisdictions in
which the failure to qualify in the aggregate would not have an adverse
effect on the earnings, affairs or business prospects of the Company;
(iv) The Company does not have any subsidiaries and does not own
any interest in any other corporation, partnership, joint venture or other
entity;
(v) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Registration Statement and the shares
of issued and outstanding Common Stock set forth thereunder have been duly
authorized and validly issued and are fully paid and nonassessable;
(vi) The Shares have been duly authorized for issuance and sale
to the public by the Underwriter as exclusive agent for the Company
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set forth
in Section 2 hereof, will be validly issued and fully paid and
nonassessable; and the issuance of the Shares is not subject to preemptive
rights in others;
(vii) The Underwriter's Warrant has been duly authorized for
issuance and sale to the Underwriter and, when issued and delivered by the
Company against payment of the consideration set forth in Section 5 hereof,
will be validly issued and fully paid and nonassessable; the Warrant Shares
have been duly reserved from the Company's authorized but unissued shares
of Common Stock; and the issuance of Underwriter's Warrant is not subject
to preemptive rights in others;
(viii) This Agreement has been duly and validly authorized, and
this Agreement has been duly executed and delivered by the Company, and
this Agreement, when executed and delivered, will constitute a valid and
binding agreement of the Company;
(ix) The Registration Statement is effective under the 1933 Act
and, after reasonable investigation to the best of such counsel's knowledge
and information, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act or proceedings
therefore initiated or threatened by the Commission;
16
(x) Except as set forth in the Registration Statement and
Prospectus, there is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending or, after
reasonable investigation to the best of such counsel's knowledge and
information, threatened against or affecting, the Company, which might result in
any material and adverse change in the condition (financial or otherwise),
business or prospects of the Company, or might materially and adversely affect
the properties or assets thereof;
(xi) The Common Stock, and the Underwriter's Warrants conform to
the descriptions thereof contained in the Registration Statement, and the
certificates used to evidence all such securities are in due and proper form;
and
(xii) No authorization, approval or consent of any court or
governmental authority or agency is required in connection with the sale of the
Shares except as may be required under the 1933 Act and state securities laws;
(c) At Closing Time there shall not have been, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any material adverse change in the condition, financial or otherwise
of the Company, or in the earnings, affairs or business prospects of the
Company, whether or not arising in the ordinary course of business, and the
Underwriter shall have received certificates of the President and Treasurer of
the Company, dated as of Closing Time, to the effect that (I) except as set
forth or contemplated in the Registration Statement, there has been no such
material adverse change, (ii) that the other representations and warranties of
the Company contained in Section 1 are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) that the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to closing Time, and (iv) that no
stop order suspending the effectiveness of the Registration Statement has been
issued and, to the best of such officers' knowledge, no proceedings for the
purpose have been initiated or threatened by the Commission.
(d) At the time of execution of this Agreement, the Underwriter shall
have received a certificate in a form satisfactory to counsel for the
Underwriter executed by the President of the Company and all of the members of
the Board of Directors, attesting to the fact that each
17
has read the Registration Statement and that it neither contains any
material misstatements nor fails to state matters which are necessary to
render the statements made in the Registration Statement not misleading.
(e) At the time of the execution of this Agreement, the Underwriter
shall have received from Xxxx Xxxxx, CPA, a letter dated such date, in form
and substance satisfactory to the Underwriter, to the effect that (I) they
are independent public accountants as required by the 1933 Act and the 1933
Act Regulations and the answer to Item 13 of the Registration Statement is
correct insofar as it relates to them; (ii) it is their opinion that the
financial statements included in the Registration Statement and covered by
their opinion therein comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations; (iii) based upon the limited procedures set forth in detail in
such letter, nothing has come to their attention which causes them to
believe that (A) the audited financial statements of the Company as of
December 31, 1997, the unaudited statements for the three (3) month period
ended March 31, 1998, do not comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the 1933
Act Regulations or are not fairly presented in conformity with generally
accepted accounting principles, or (B) during the period from March 31,
1998, to a specified date not more than five days prior to the date of this
Agreement, there has been any change in the capital stock or funded debt of
the Company, or any decrease in net current assets, net assets or
stockholders' equity as compared with the amounts shown in the March 31,
1998 balance sheet or any decrease in total revenue or total or per share
amounts of earnings of the Company, in each case except as set forth or
contemplated in the Registration Statement; and (iv) they have read in the
Registration Statement the information under "Capitalization" and
"Dilution" and notes thereto and other information specified by the Company
and have performed the procedures set forth in detail in such letter and
found such amounts or information to be in agreement with the relevant
accounting and financial records of the Company;
(f) At Closing Time the Underwriter shall have received from Xxxx
Xxxxx, CPA, a letter, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to
subsection (e) of this Section, except that the specified date referred to
shall be a date not more than five days prior to Closing Time;
18
(g) At Closing Time counsel for the Underwriter shall have been
furnished with such documents and opinions as they may require for the
purpose of enabling them to pass upon the issuance and sale of the Shares
as herein contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Shares as herein
contemplated shall be satisfactory in form and substance to the Underwriter
and counsel for the Underwriter.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Underwriter by written notice to the Company at any time or prior to Closing
time, and such termination shall be without liability of any party to any other
party except as provided in Section 4.
SECTION 7. Indemnification
---------------
(a) The Company and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act jointly and severally agree to
indemnify and hold harmless the Underwriter and each person, if any, who agrees
to participate in the offering of the Shares, to the extent such indemnification
is permissable as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (or any
amendment thereto), or the omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact, contained in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, unless such untrue statement or omission was
made in reliance upon and in conformity with written information furnished
to the Company by the Underwriter expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto);
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in settlement
of any litigation, or
19
investigation or proceeding by and governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the prior written
consent of the Company; and
(iii) against any and all expense whatsoever (including the
fees and disbursements of counsel chosen by the Underwriter)
reasonably incurred in investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act to the extent
such indemnification if permissable against any and all loss,
liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, but only with respect to
untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment
thereto) in reliance upon and in conformity with written information
furnished to the Company by such Underwriter expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify any
indemnifying party shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense
of such action. In no event shall the indemnifying parties be liable
for the fees and expenses or more than one counsel for all indemnified
parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
SECTION 8. Contribution. In order to provide for just and equitable
-------------
contribution in circumstances in which the indemnity agreement provided for
in Section 7 is for any reason held to be unenforceable by the Underwriter
or the
20
Company although applicable in accordance with its terms, 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 or the Underwriter, in such proportions that the
Underwriter is responsible for that portion which equals 10% thereon and the
Company is responsible for the balance; provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11 (f) of the
0000 Xxx) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section, each person,
if any, who controls an Underwriter within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any who controls the Company within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as the
Company.
SECTION 9. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Company, and shall survive delivery of the Shares to the
Underwriter.
SECTION 10. Termination of Agreement.
------------------------
(a) The Underwriter, by notice to the Company, or the Company by
notice to the Underwriter, may terminate this Agreement without cause at
any time prior to the earlier of (I) the time the Shares are released by
the Underwriter for sale, or (ii) 4:00 P.M., Eastern Standard time, on the
first business following the date on which the Registration Statement
becomes effective.
(b) The Underwriter may also terminate this Agreement, by notice to
the Company, at any time at or prior to Closing Time (i) if there has been,
since the respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition, financial or otherwise
of the Company or in the earnings, affairs or business prospects of the Company,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any outbreak of hostilities or other calamity or crisis or any other
market conditions of any kind whatsoever, the effect of which on the financial
markets of the United States, or on the marketability of the Shares of Common
Stock is such as to make it, in the Underwriters sole judgment,
21
impracticable to market such securities or enforce contracts for such
securities, or (iii) if trading of the Shares has been suspended by the
Commission, or if trading generally on either the American Stock Exchange or the
New York Stock Exchange has been suspended, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by either of said exchanges or by order of the Commission or any other
governmental authority, or (iv) if a banking moratorium has been declared by any
federal or state authorities, or (v) in the event of any adverse condition which
make it, in the Underwriter's sole judgment, impractical to proceed with the
offering contemplated hereby.
(c) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4.
SECTION 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if
delivered or sent by registered mail or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to Discovery
Capital Group, Inc. at 0000 Xxxxx Xxxxxx, Xxxxx X, Xxxxxx Xxxx, Xxxxxxx, 00000;
notices to the Company shall be directed to Xxxxxxxx Equipment & Engineering
Company at 000 Xxxx Xxxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx, 00000, with a copy to K.
Xxxxxxx Xxxxx, Esquire at 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxx Xxxx,
Xxxxxxx, 00000.
SECTION 12. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the Underwriter and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the parties hereto
and their respective successors and the controlling persons and officers and
directors referred to in Section 7 and Section 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the parties hereto and their legal
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of the Shares shall be deemed to be a
successor by reason of merely such purchase.
SECTION 13. Governing Law. This Agreement shall be governed by the laws
-------------
of the State of Florida. This Agreement shall supersede all prior agreements,
whether written or oral, entered into between the parties hereto.
22
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between the
Underwriter and the Company in accordance with its terms.
Very truly yours,
XXXXXXXX EQUIPMENT & ENGINEERING
COMPANY, INC.
By
----------- -------------------------------------
Date , President
-------------------------------------
, Secretary-Treasurer
Confirmed and Accepted, as
of the date first above written.
DISCOVERY CAPITAL GROUP, INC.
By
--------------------------------
23
