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EXHIBIT 1.1
DIDAX INC.
2,000,000 SHARES OF COMMON STOCK AND
2,000,000 COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
Boca Raton, Florida
, 1997
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Xxxxxx Xxxxx Securities, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Gentlemen:
DIDAX INC. (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell to such Underwriters as named in Schedule A (the
"Underwriters") to the Underwriting Agreement (the "Agreement"), for whom
Xxxxxx Xxxxx Securities, Inc. is acting as a representative (the
"Representative"), pursuant to the terms of this Agreement, on a "firm
commitment" basis, 2,000,000 shares of Common Stock (the "Shares") at $5.00 per
Share and 2,000,000 Redeemable Common Stock Purchase Warrants (the "Warrants")
at $.125 per Warrant. The Shares and the Warrants are collectively referred to
as the "Securities". Each Warrant is exercisable to purchase one (1) share of
Common Stock (the "Common Stock") at $5.75 per share at any time during the
period between the Effective Date and five (5) years from the Effective Date.
The date upon which the Securities and Exchange Commission ("Commission") shall
declare the Registration Statement of the Company effective shall be the
"Effective Date". The Warrants are subject to redemption under certain
circumstances. In addition, the Company proposes to grant to the Underwriters
(or, at the option of the Representative, to the Representative, individually)
the option referred to in Section 2(b) to purchase all or any part of an
aggregate of 300,000 additional Shares and/or 300,000 additional Warrants (the
"Option Securities").
You have advised the Company that you and the other
Underwriters desire to purchase, severally, the Securities, and that you have
been authorized by the Underwriters to execute this Agreement on their behalf.
The Company confirms the agreements made by it with respect to the purchase of
the Securities by the
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several Underwriters on whose behalf you are signing this Agreement, as
follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with each
of the Underwriters as of the Effective Date (as defined above), the Closing
Date (as hereinafter defined) and the Option Closing Date (as hereinafter
defined) that:
(a) A registration statement (File No. ____________ on
Form SB-2 relating to the public offering of the Securities, including a
preliminary form of the prospectus, copies of which have heretofore been
delivered to you, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Commission
thereunder, and has been filed with the Commission under the Act. The Company
has prepared in the same manner and proposes to file, prior to the Effective
Date of such registration statement, an additional amendment or amendments to
such registration statement, including a final form of Prospectus, copies of
which shall be delivered to you. "Preliminary Prospectus" shall mean each
prospectus filed pursuant to the Rules and Regulations under the Act prior to
the Effective Date. The registration statement (including all financial
schedules and exhibits) as amended at the time it becomes effective and the
final prospectus included therein are respectively referred to as the
"Registration Statement" and the "Prospectus", except that (i) if the
prospectus first filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations shall differ from said prospectus as then amended, the term
"Prospectus" shall mean the prospectus first filed pursuant to Rule 424(b), and
(ii) if such registration statement or prospectus is amended or such prospectus
is supplemented, after the effective date of such registration statement and
prior to the Option Closing Date (as hereinafter defined), the terms
"Registration Statement" and "Prospectus" shall include such registration
statement and prospectus as so amended, and the term "Prospectus" shall include
the prospectus as so supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent
thereto up to the Option Closing Date, if any, and during such longer period as
the Prospectus may be required to be delivered in connection with sales by the
Underwriters or Selected Dealers: (i) the Registration Statement and Prospectus
will in all respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make statements
therein, in light of the
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circumstances under which they are made, not misleading; provided, however,
that the Company makes no representations, warranties or agreement as to
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Underwriters specifically for use in the
preparation thereof. It is understood that the statements set forth in the
Prospectus with respect to stabilization, under the heading "Underwriting" and
regarding the identity of counsel to the Underwriters under the heading "Legal
Matters" constitute the only information furnished in writing by the
Underwriters for inclusion in the Prospectus.
(c) Each of the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority (corporate and other) to own its properties and conduct its business
as described in the Prospectus and is duly qualified to do business as a
foreign corporation and is in good standing in all other jurisdictions in which
the nature of its business or the character or location of its properties
requires such qualification, except where failure to so qualify will not
materially affect the Company's business, properties or financial condition.
(d) The authorized, issued and outstanding securities of
the Company as of the date of the Prospectus is as set forth in the Prospectus
under "Capitalization"; all of the issued and outstanding securities of the
Company have been, or will be when issued as set forth in the Prospectus, duly
authorized, validly issued and fully paid and non-assessable; the issuances and
sales of all such securities complied in all material respects with applicable
Federal and state securities laws; the holders thereof have no rights of
rescission against the Company with respect thereto, and are not subject to
personal liability by reason of being such holders; 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;
except as set forth in the Prospectus, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or agreements or other
rights to convert any obligation into, any securities of the Company have been
granted or entered into by the Company; and all of the securities of the
Company, issued and to be issued as set forth in the Registration Statement,
conform to all statements relating thereto contained in the Registration
Statement and Prospectus.
(e) The Shares are duly authorized, and when issued,
delivered and paid for pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable and
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free of preemptive rights of any security holder of the Company. Neither the
filing of the Registration Statement nor the offering or sale of the Securities
as contemplated in this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to the registration of any
securities of the Company, except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued,
delivered and paid for pursuant to this Agreement, will have been duly
authorized, issued and delivered and will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms and
entitled to the benefits provided by the warrant agreement pursuant to which
such Warrants are to be issued (the "Warrant Agreement"), which will be
substantially in the form filed as an exhibit to the Registration Statement.
The shares of Common Stock issuable upon exercise of the Warrants have been
reserved for issuance and when issued in accordance with the terms of the
Warrants and Warrant Agreement, will be duly and validly authorized, validly
issued, fully paid and non-assessable, free of pre-emptive rights and no
personal liability will attach to the ownership thereof. The Warrant exercise
period and the Warrant exercise price may not be changed or revised by the
Company without the prior written consent of the Representative. The Warrant
Agreement has been duly authorized and, when executed and delivered pursuant to
this Agreement, will have been duly executed and delivered and will constitute
the valid and legally binding obligation of the Company enforceable in
accordance with its terms.
The Common Stock Representative Warrants, the Warrant
Representative Warrants, the Underlying Warrants, the shares of Common Stock
issuable upon exercise of the Common Stock Representative Warrants, and the
shares of Common Stock issuable upon exercise of the Underlying Warrants (all
as defined in the Representative's Warrant Agreement described in Section 12
herein), have been duly authorized and, when issued, delivered and paid for,
will be validly issued, fully paid, non-assessable, free of pre-emptive rights
and no personal liability will attach to the ownership thereof, and will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the
Representative's Warrant Agreement.
(f) This Agreement, the Warrant Agreement, the Financial
Advisory Agreement, the Merger and Acquisition Agreement (the "M/A Agreement")
and the Representative's Warrant Agreement have been duly and validly
authorized, executed and delivered by the Company, and assuming due execution
of this Agreement by the
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other party hereto, constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally. The Company has full power and lawful
authority to authorize, issue and sell the Securities to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is
required in connection with such authorization, execution and delivery or with
the authorization, issue and sale of the Securities or the securities to be
issued pursuant to the Representative's Warrant Agreement, except such as may
be required under the Act or state securities laws, or as otherwise have been
obtained.
(g) Except as described in the Prospectus, neither the
Company nor any subsidiary is in material violation, breach of or default
under, and consummation of the transactions herein contemplated and the
fulfillment of the terms of this Agreement will not conflict with, or result in
a breach of, or constitute a material default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the property or
assets of the Company or each subsidiary or any of the terms or provisions of
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or each subsidiary is a party or by which the
Company or each subsidiary may be bound or to which any of the property or
assets of the Company or each subsidiary is subject, nor will such action
result in any material violation of the provisions of the articles of
incorporation or by-laws of the Company or each subsidiary, as amended, or any
statute or any order, rule or regulation applicable to the Company or
subsidiary of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company or each subsidiary.
(h) Subject to the qualifications stated in the
Prospectus, the Company and each subsidiary have good and marketable title to
all properties and assets described in the Prospectus as owned by each of them,
free and clear of all liens, charges, encumbrances or restrictions, except such
as are not materially significant or important in relation to its business; all
of the material leases and subleases under which the Company or each subsidiary
is the lessor or sublessor of properties or assets or under which the Company
or each subsidiary holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, neither the Company nor each subsidiary is in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no claim has been asserted by anyone
adverse to rights of the Company or each subsidiary as lessor,
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sublessor, lessee, or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company or each subsidiary
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus;
and the Company and each subsidiary owns or leases all such properties
described in the Prospectus as are necessary to its operations as now conducted
and, except as otherwise stated in the Prospectus, as proposed to be conducted
as set forth in the Prospectus.
(i) Xxxxxxx, Xxxxxxxx & Xxxxxxxxxx, P.C., who have given
their report on certain financial statements filed and to be filed with the
Commission as part of the Registration Statement, and which are included in the
Prospectus, are with respect to the Company, independent public accountants as
required by the Act and the Rules and Regulations.
(j) The financial statements and schedules, together with
related notes, set forth in the Prospectus and the Registration Statement
present fairly the financial position and results of operations and changes in
financial position of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which they
apply. Said statements and related notes and schedules have been prepared in
accordance with generally accepted accounting principles applied on a basis
which is consistent during the periods involved. The Company's internal
accounting controls and procedures are sufficient to cause the Company and each
subsidiary to prepare financial statements which comply in all material
respects with generally accepted accounting principles applied on a basis which
is consistent during the periods involved. During the preceding five (5) year
period, nothing has been brought to the attention of the Company's management
that would result in any reportable condition relating to the Company's
internal accounting procedures, weaknesses or controls.
(k) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and the Prospectus and
to and including the Option Closing Date, except as set forth in or
contemplated by the Registration Statement and the Prospectus, (i) neither the
Company nor any subsidiary has incurred and will not have incurred any material
liabilities or obligations, direct or contingent, and has not entered into and
will not have entered into any material transactions other than in the ordinary
course of business and/or as contemplated in the Registration Statement and the
Prospectus; (ii) neither the Company nor any subsidiary has and will not have
paid or declared any dividends or have made any other distribution on its
capital stock; (iii) there has not been any change in the capital stock
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of, or any incurrence of long-term debt by, the Company or any subsidiary; (iv)
neither the Company nor any subsidiary has issued any options, warrants or
other rights to purchase the capital stock of the Company or any subsidiary;
and (v) there has not been and will not have been any material adverse change
in the business, financial condition or results of operations of the Company or
any subsidiary, or in the book value of the assets of the Company or any
subsidiary, arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not
pending or, to the knowledge of the Company or any subsidiary, threatened, any
material action, suit, proceeding, inquiry, arbitration or investigation
against the Company or any subsidiary, or any of the officers or directors of
the Company or any subsidiary, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth, or properties of the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the
Company and each subsidiary has filed all necessary federal, state and foreign
income and franchise tax returns and has paid all taxes shown as due thereon;
and there is no tax deficiency which has been or to the knowledge of the
Company might be asserted against the Company or any subsidiary that has not
been provided for in the financial statements.
(n) Except as set forth in the Prospectus, each of the
Company and each subsidiary has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its business
or the ownership of its property as described in the Prospectus and is in all
material respects in compliance therewith and owns or possesses adequate right
to use all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service xxxx registrations, copyrights,
and licenses necessary for the conduct of such business and has not received
any notice of conflict with the asserted rights of others in respect thereof.
To the best of the Company's knowledge, none of the activities or business of
the Company or any subsidiary are in violation of, or cause the Company or any
subsidiary to violate, any law, rule, regulation or order of the United States,
any state, county or locality, or of any agency or body of the United States or
of any state, county or locality, the violation of which would have a material
adverse impact upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company and any
subsidiary.
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(o) Neither the Company nor any subsidiary has, directly
or indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public
or quasi-public duties, other than payments or contributions required or
allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or
other taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the several
Underwriters hereunder will have been fully paid or provided for by the Company
and all laws imposing such taxes will have been fully complied with.
(q) All contracts and other documents which are required
to be described in or filed as exhibits to the Registration Statement have been
so described and/or filed.
(r) Except as described in the Registration Statement and
Prospectus, no holders of Common Stock or of any other securities of the
Company have the right to include such Common Stock or other securities in the
Registration Statement and Prospectus.
(s) Except as set forth in or contemplated by the
Registration Statement and the Prospectus, neither the Company nor any
subsidiary has any material contingent liabilities.
(t) The Company has no subsidiary corporations except as
disclosed in the Registration Statement and Prospectus, nor has it any equity
interest in any partnership, joint venture, association or other entity except
as disclosed in the Registration Statement or Prospectus. Except as described
in the Registration Statement and Prospectus, the Company owns all of the
outstanding securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or
suspending the use of any Preliminary Prospectus with respect to the offer and
sale of the Securities and each Preliminary Prospectus, as of its date, has
conformed fully in all material respects with the requirements of the Act and
the Rules and Regulations and did not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading.
(v) Neither the Company, nor, to the Company's knowledge,
any of its officers, directors, employees or stockholders, have taken or will
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might
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reasonably be expected to constitute, the stabilization or manipulation of the
price of any of the securities of the Company.
(w) Item 26 of Part II of the Registration Statement
accurately discloses all unregistered securities sold by the Company within the
three year period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions which
were exempt from the registration provisions of the Act and not in violation of
Section 5 thereof.
(x) Other than as set forth in the Prospectus, the
Company has not entered into any agreement pursuant to which any person is
entitled, either directly or indirectly, to compensation from the Company for
services as a finder in connection with the proposed offering, and the Company
agrees to indemnify and hold harmless the Underwriters against any losses,
claims, damages or liabilities, joint or several, which shall include, but not
be limited to, all costs to defend against any such claim, so long as such
claim arises out of agreements made or allegedly made by the Company.
(y) Based upon written representations received by the
Company, no officer, director or five percent (5%) or greater stockholder of
the Company or any subsidiary has any direct or indirect affiliation or
association with any member of the National Association of Securities Dealers,
Inc. ("NASD"), except as disclosed to the Representative in writing, and no
beneficial owner of the Company's unregistered securities has any direct or
indirect affiliation or association with any NASD member except as disclosed to
the Representative in writing. The Company will advise the Representative and
the NASD if any five percent (5%) or greater shareholder of the Company or any
subsidiary is or becomes an affiliate or associated person of an NASD member
participating in the distribution.
(z) The Company and each subsidiary 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. There are no
pending investigations involving the Company or any subsidiary by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state or local laws and regulations. There is no
unfair labor practice charge or complaint against the Company or any subsidiary
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or to the knowledge of the
Company, threatened against or involving the
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Company or any subsidiary or any predecessor entity. No question concerning
representation exists respecting the employees of the Company or any subsidiary
and no collective bargaining agreement or modification thereof is currently
being negotiated by the Company or any subsidiary. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company or any subsidiary, if any.
(aa) Neither the Company nor any subsidiary 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"). Neither the Company nor any
subsidiary maintained or contributed to a defined benefit plan, as defined in
Section 3(35) of ERISA.
(ab) Based upon written representations received from the
officers and directors of the Company and each subsidiary, except as disclosed
in the Prospectus, during the past five years, none of the officers or
directors of the Company or any subsidiary have been:
(1) Subject of a petition under the Federal
bankruptcy laws or any state insolvency law filed by
or against them, or by a receiver, fiscal agent or
similar officer appointed by a court for their
business or property, or any partnership in which
either or them was a general partner at or within two
years before the time of such filing, or any
corporation or business association of which either
of them was an executive officer at or within two
years before the time of such filing;
(2) Convicted in a criminal proceeding or a
named subject of a pending criminal proceeding
(excluding traffic violations and other minor
offenses);
(3) The subject of any order, judgment,
or decree not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining either of them
from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission
merchant, introducing broker, commodity
trading advisor, commodity pool operator,
floor broker, leverage transaction merchant,
any other person regulated by the Commodity
Futures Trading Commission, or an
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associated person of any of the foregoing, or
as an investment adviser, underwriter, broker
or dealer in securities, or as an affiliated
person, director or employee of any
investment company, bank, savings and loan
association or insurance company, or engaging
in or continuing any conduct or practice in
connection with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in
connection with the purchase or sale of any
security or commodity or in connection with
any violation of Federal or State securities
law or Federal Commodity laws.
(4) The subject of any order, judgment or
decree, not subsequently reversed, suspended or
vacated of any Federal or State authority barring,
suspending or otherwise limiting for more than sixty
(60) days either of their right to engage in any
activity described in paragraph (3)(i) above, or be
associated with persons engaged in any such activity;
(5) Found by any court of competent
jurisdiction in a civil action or by the Securities
and Exchange Commission to have violated any Federal
or State securities law, and the judgment in such
civil action or finding by the Commission has not
been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent
jurisdiction in a civil action or by the Commodity
Futures Trading Commission to have violated any
Federal Commodities Law, and the judgment in such
civil action or finding by the Commodity Futures
Trading Commission has not been subsequently
reversed, suspended or vacated.
(ac) Based upon written representations received from the
officers and directors of the Company, each of the officers and directors of
the Company has reviewed the sections in the Prospectus relating to their
biographical data and equity ownership position in the Company, and all
information contained therein is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement
and upon the basis of the representations, warranties and
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agreements herein contained, the Company hereby agrees to issue and sell to the
Underwriters an aggregate of 2,000,000 Shares at $4.50 per Share and 2,000,000
Warrants at $.1125 per Warrant, (the public offering price less ten percent
(10%)), at the place and time hereinafter specified, in accordance with the
number of Shares and/or Warrants set forth opposite the names of the
Underwriters in Schedule A attached hereto, plus any additional Securities
which such Underwriters may become obligated to purchase pursuant to the
provisions of Section 9 hereof. The Securities shall consist of 2,000,000
Shares and 2,000,000 Warrants to be purchased from the Company, and the price
at which the Underwriters shall sell the Securities to the public shall be
$5.00 per Share and $.125 per Warrant.
Delivery of the Securities against payment therefor shall take
place at the offices of Xxxxxx Xxxxx Securities, Inc., 0000 Xxxx Xxxxxx Xxxx,
Xxxx Xxxxx, Xxxxxxx 00000 (or at such other place as may be designated by the
Representative) at 10:00 a.m., Eastern Time, on such date after the
Registration Statement has become effective as the Representative shall
designate, but not later than ten (10) business days (holidays excepted)
following the first date that any of the Securities are released to you, such
time and date of payment and delivery for the Securities being herein called
the "Closing Date".
(b) In addition, subject to the terms and conditions of
this Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants an option to the
Underwriters (or, at the option of the Representative, to the Representative,
individually) to purchase all or any part of an aggregate of an additional
300,000 Shares and 300,000 Warrants at the same price per Share and Warrant as
the Underwriters shall pay for the Securities being sold pursuant to the
provisions of subsection (a) of this Section 2 (such additional Securities
being referred to herein as the "Option Securities"). This option may be
exercised within forty-five (45) days after the Effective Date of the
Registration Statement upon notice by the Underwriters to the Company advising
as to the amount of Option Securities as to which the option is being
exercised, the names and denominations in which the certificates for such
Option Securities are to be registered and the time and date when such
certificates are to be delivered. Such time and date shall be determined by
the Underwriters (or the Representative, individually) but shall not be later
than ten (10) full business days after the exercise of said option, nor in any
event prior to the Closing Date, and such time and date is referred to herein
as the "Option Closing Date". Delivery of the Option Securities against
payment therefor shall take place at the offices of the Representative. The
Option granted hereunder may be exercised only to cover overallotments in the
sale by the
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Underwriters of the Securities referred to in subsection (a) above. In the
event the Company declares or pays a dividend or distribution on its Common
Stock, whether in the form of cash, shares of Common Stock or any other
consideration, prior to the Option Closing Date, such dividend or distribution
shall also be paid on the Option Closing Date.
(c) The Company will make the certificates for the
Securities to be sold hereunder available to you for inspection at least two
(2) full business days prior to the Closing Date at the offices of the
Representative, and such certificates shall be registered in such names and
denominations as you may request. Time shall be of the essence and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Company to each Underwriter.
Definitive certificates in negotiable form for the Securities
to be purchased by the Underwriters hereunder will be delivered by the Company
to you for the accounts of the several Underwriters against payment of the
respective purchase prices by the several Underwriters, by certified or bank
cashier's checks in New York Clearing House funds, payable to the order of the
Company or by wire transfer in New York Clearing House funds.
In addition, in the event the Underwriters (or the
Representative individually) exercises the option to purchase from the Company
all or any portion of the Option Securities pursuant to the provisions of
subsection (b) above, payment for such Securities shall be made payable in New
York Clearing House funds at the offices of the Representative, or by wire
transfer, at the time and date of delivery of such Securities as required by
the provisions of subsection (b) above, against receipt of the certificates for
such Securities by the Representative for the respective accounts of the
several Underwriters registered in such names and in such denominations as the
Representative may request.
It is understood that the Representative, individually and not
as Representative of the several Underwriters, may (but shall not be obligated
to) make any and all payments required pursuant to this Section 2 on behalf of
any Underwriters whose check or checks shall not have been received by the
Representative at the time of delivery of the Securities to be purchased by
such Underwriter or Underwriters. Any such payment by the Representative shall
not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder. It is also understood that the Representative
individually, rather than all of the Underwriters, may (but shall not be
obligated to) purchase the Option Securities referred to in subsection (b) of
this Section 2, but only to cover overallotments.
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It is understood that the several Underwriters propose to
offer the Securities to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement is declared effective by the Commission.
3. Covenants of the Company. The Company covenants and
agrees with the several Underwriters that:
(a) The Company, upon notification from the Commission
that the Registration Statement has become effective, will so advise you and
will not at any time, whether before or after the Effective Date, file any
amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously been advised and furnished with a copy or to
which you or your counsel shall have objected in writing, acting reasonably, or
which is not in compliance with the Act and the Rules and Regulations. At any
time prior to the later of (i) the completion by the Underwriters of the
distribution of the Securities as contemplated hereby; or (ii) 25 days after
the date on which the Registration Statement shall have become or been declared
effective, the Company will prepare and file with the Commission, promptly upon
your request, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary or advisable in connection with the
distribution of the Securities and as mutually agreed by the Company and the
Representative.
After the Effective Date and as soon as the Company is advised
thereof, the Company will advise you, and confirm the advice in writing, of the
receipt of any comments of the Commission, of the effectiveness of any
post-effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made by
the Commission for amendment of the Registration Statement or for supplementing
of the Prospectus or for additional information with respect thereto, of the
issuance by the Commission or any state or regulatory body of any stop order or
other order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such
purposes, and will use its best efforts to prevent the issuance of any such
order, and, if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus and Definitive Prospectus, and the Company
15
has consented and hereby consents to the use of such copies for the purposes
permitted by the Act. The Company authorizes the Underwriters and Selected
Dealers to use the Prospectus in connection with the sale of the Securities for
such period as in the opinion of counsel to the Underwriters the use thereof is
required to comply with the applicable provisions of the Act and the Rules and
Regulations. In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in connection with sales
by the Underwriters or Selected Dealers, of any event of which the Company has
knowledge and which materially affects the Company or the securities of the
Company, or which in the opinion of counsel for the Company or counsel for the
Underwriters, should be set forth in an amendment to the Registration Statement
or a supplement to the Prospectus, in order to make the statements therein not
then misleading, in light of the circumstances existing at the time the
Prospectus is required to be delivered to a purchaser of the Securities, or in
case it shall be necessary to amend or supplement the Prospectus to comply with
law or with the Act and the Rules and Regulations, the Company will notify you
promptly and forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which
they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters.
The Company will comply with the Act, the Rules and
Regulations thereunder, the Securities Exchange Act of 1934 (the "1934 Act"),
and the rules and regulations thereunder in connection with the offering and
issuance of the Securities.
(b) The Company will act in good faith and use its best
efforts and cooperate with you and your counsel to qualify to register the
Securities for sale under the securities or "blue sky" laws of such
jurisdictions as the Representative may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent to service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Securities. The Company
will, from time to time, prepare and file such statements and reports as are or
16
may be required to continue such qualification in effect for so long a period
as the Underwriters may reasonably request.
(c) If the sale of the Securities provided for herein is
not consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not limited
to, all such expenses itemized in Section 8(a) and 8(c) hereof, and either (i)
the out-of-pocket expenses of the Representative, not to exceed the $50,000
previously paid if the Representative elects to terminate the offering for any
reason; or (ii) the out-of-pocket expenses of the Representative if the Company
elects to terminate the offering for any reason. For the purposes of this
sub-paragraph, the Representative shall be deemed to have assumed such expenses
when they are billed or incurred, regardless of whether such expenses have been
paid. The Representative shall not be responsible for any expenses of the
Company or others, or for any charges or claims relative to the proposed public
offering if it is not consummated.
(d) The Company will deliver to you at or before the
Closing Date two signed copies of the Registration Statement, including all
financial statements and exhibits filed therewith, and of each amendment or
supplement thereto. The Company will deliver to or upon the order of the
several Underwriters, from time to time until the Effective Date of the
Registration Statement, as many copies of any Preliminary Prospectus filed with
the Commission prior to the Effective Date of the Registration Statement as the
Underwriters may reasonably request. The Company will deliver to the
Underwriters on the Effective Date of the Registration Statement and thereafter
for so long as a Prospectus is required to be delivered under the Act, from
time to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented as the several Underwriters may from time to time
reasonably request.
(e) For so long as the Company is a reporting company
under either Section 12 or 15 of the 1934 Act, the Company, at its expense,
will furnish to the Representative during the period ending five (5) years from
the Effective Date, (i) as soon as practicable after the end of each fiscal
year, a balance sheet of the Company and any of its subsidiaries as at the end
of such fiscal year, together with statements of income, surplus and cash flow
of the Company and any subsidiaries for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon of
independent accountants; (ii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iii) as soon as they
are available, a copy of all non-confidential documents, including annual
reports, periodic reports and financial statements,
17
furnished to or filed with the Commission under the Act and the 1934 Act; (iv)
copies of each press release, news item and article with respect to the
Company's affairs released by the Company; and (v) such other information as
you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will make generally available to its
stockholders and to the registered holders of its Warrants and deliver to you
as soon as it is practicable, but in no event later than the first day of the
sixteenth full calendar month following the Effective Date, an earnings
statement (which need not be audited) covering a period of at least twelve
consecutive months beginning with the Effective Date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the
necessary action to become a reporting company under Section 12 of the 1934
Act, and the Company will make all filings required to, and will have obtained
approval for, the listing of the Shares and Warrants on The Nasdaq Small Cap
Market System, and will use its best efforts to maintain such listing for at
least seven (7) years from the date of this Agreement.
(i) For such period as the Company's securities are
registered under the 1934 Act, the Company will hold an annual meeting of
stockholders for the election of Directors within 180 days after the end of
each of the Company's fiscal years and, within 150 days after the end of each
of the Company's fiscal years will provide the Company's stockholders with the
audited financial statements of the Company as of the end of the fiscal year
just completed prior thereto. Such financial statements shall be those
required by Rule 14a-3 under the 1934 Act and shall be included in an annual
report pursuant to the requirements of such Rule.
(j) The Company will apply the net proceeds from the sale
of the Securities substantially in accordance with its statement under the
caption "Use of Proceeds" in the Prospectus, and will file such reports with
the Commission with respect to the sale of the Securities and the application
of the proceeds therefrom as may be required by Sections 12, 13 and/or 15 of
the 1934 Act and pursuant to Rule 463 under the Act.
18
(k) The Company will, promptly upon your request, prepare
and file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of counsel to the Underwriters and the Company
may be reasonably necessary or advisable in connection with the distribution of
the Securities and will use its best efforts to cause the same to become
effective as promptly as possible.
(l) On the Closing Date, the Company shall execute and
deliver to you the Representative's Warrant Agreement. The Representative's
Warrant Agreement and Warrant Certificates will be substantially in the form of
the Representative's Warrant Agreement filed as an Exhibit to the Registration
Statement.
(m) The Company will reserve and keep available for
issuance that maximum number of its authorized but unissued securities which
are issuable upon exercise of the Representative's Warrants outstanding from
time to time.
(n) All beneficial owners of the Company's securities
(including Warrants, Options and Common Stock of the Company), as of the
Effective Date, shall agree in writing, in a form satisfactory to the
Representative, not to sell, transfer or otherwise dispose of any of such
securities or underlying securities for a period of eighteen (18) months from
the Effective Date, or any longer period required by the NASD, Nasdaq, or any
State, without the prior written consent of the Representative. All sales of
the Company's securities by officers and/or directors of the Company shall be
effected through the Representative.
(o) The Company will obtain, on or before the Closing
Date, key person life insurance on each of the lives of Xx. Xxxxxx X. Xxxxxx,
Xxxx X. Xxxx and Xxxxxxx X. Xxxxxx in an amount of not less than $1,000,000
each, and will use its best efforts to maintain such insurance for a period of
at least five (5) years from the Effective Date.
(p) Prior to the Closing Date, the Company shall, at its
own expense, undertake to list the Company's securities in the appropriate
recognized securities manual or manuals published by Standard & Poor's
Corporation and such other manuals as the Representative may designate, such
listings to contain the information required by such manuals and the Uniform
Securities Act. The Company hereby agrees to use its best efforts to maintain
such listing for a period of not less than five (5) years. The Company shall
take such action as may be reasonably requested by the Representative to obtain
a secondary market
19
trading exemption in such states as may be reasonably requested by the
Representative.
(q) During the one hundred eighty (180) day period
commencing on the Closing Date, the Company will not, without the prior written
consent of the Representative, grant options or warrants to purchase the
Company's Common Stock at a price less than the initial per share public
offering price.
(r) Prior to the Closing Date, neither the Company nor
any subsidiary will issue, directly or indirectly, without your prior consent,
any press release or other communication or hold any press conference with
respect to the Company or its activities or the offering of the Securities
other than routine customary advertising of the Company's products and
services, and except as required by any applicable law or the directives of any
relevant regulatory authority in any relevant jurisdiction.
(s) At the Closing Date, the Company will engage the
Representative as a non-exclusive financial advisor to the Company for a period
of thirty-six (36) months commencing on the first day of the month following
the Company's receipt of the proceeds of this offering, at an aggregate fee of
$108,000, all of which shall be payable to the Representative on the Closing
Date. The financial advisory agreement will provide that the Representative
shall, at the Company's request, provide advice and consulting services to the
Company concerning potential merger and acquisition proposals and the obtaining
of short or long-term financing for the Company, whether by public financing or
otherwise.
(t) The Company shall employ the services of a firm of
independent certified public accountants in connection with the preparation of
the financial statements to be included in any registration statement or
similar disclosure document to be filed by the Company hereunder, or any
amendment or supplement thereto. For a period of five (5) 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 (3) fiscal quarters
prior to the announcement of quarterly financial information, the filing of the
Company's quarterly report and the mailing of quarterly financial information
to stockholders.
(u) The Company shall retain American Stock Transfer &
Trust Company as the transfer agent for the securities of the Company, or such
other transfer agent as you may agree to in writing. In addition, the Company
shall direct such transfer agent to furnish the Representative with daily
transfer sheets as
20
to each of the Company's securities as prepared by the Company's transfer agent
and copies of lists of stockholders and warrantholders as reasonably requested
by the Representative, for a five (5) year period commencing from the Closing
Date.
(v) The Company shall cause the Depository Trust Company,
or such other depository of the Company's securities, to deliver a "special
security position report" to the Representative on a daily and weekly basis at
the expense of the Company, for a five (5) year period from the Effective Date.
(w) Following the Effective Date, the Company shall, at
its sole cost and expense, prepare and file such Blue Sky applications with
such jurisdictions as the Representative shall designate and the Company may
reasonably agree.
(x) On the Effective Date and for a period of three (3)
years thereafter, the Company's Board of Directors shall consist of a minimum
of five (5) persons, two (2) of whom shall be independent and not otherwise
affiliated with the Company or associated with any of the Company's affiliates.
The Representative shall have the opportunity to invite an observer to attend
Board of Directors meetings of the Company at the expense of the Company.
(y) On the Closing Date, the Company shall execute and
deliver to you a non-exclusive M/A Agreement with the Representative in a form
satisfactory to the Representative, providing:
(1) that the Representative will be paid a
finder's fee, of from five percent (5%) of the first
$1,000,000 ranging in $1,000,000 increments down to one
percent (1%) of the excess, if any, over $4,000,000 of the
consideration involved in any transaction introduced in
writing by the Representative (including mergers,
acquisitions, joint ventures, and any other business for the
Company introduced by the Representative) consummated by the
Company, as an "Introduced, Consummated Transaction", by which
the Representative introduced the other party to the Company
during a period ending five (5) years from the date of the M/A
Agreement; and
(2) that any such finder's fee due to the
Representative will be paid in cash or stock as mutually
agreed at the closing of the particular Introduced,
Consummated Transaction for which the finder's fee is due.
21
(3) In the event an Introduced, Consummated
Transaction is completed pursuant to this Agreement during the
initial three (3) year term of this Agreement, the Company
shall receive a $108,000 credit against any finder's fee due
the Finder.
(z) After the Closing Date, the Company shall prepare and
publish "tombstone" advertisements of at least 5 x 5 inches in publications to
be designated by the Representative at a total cost not to exceed $15,000.
(aa) For such period as any Warrants are outstanding, the
Company shall use its best efforts to cause post-effective amendments to the
Registration Statement or a new Registration Statement to become effective in
compliance with the Act and without any lapse of time between the effectiveness
of any such post-effective amendments and cause a copy of each Prospectus, as
then amended, to be delivered to each holder of record of a Warrant and to
furnish to each of the Underwriters and each dealer as many copies of each such
Prospectus as such Underwriter or such dealer may reasonably request. Such
post-effective amendments or new Registration Statements shall also register
the Representative's Warrants and all the securities underlying the
Representative's Warrants. The Company shall not call for redemption of any of
the Warrants unless a Registration Statement covering the securities underlying
the Warrants has been declared effective by the Commission and remains current
at least until the date fixed for redemption. In addition, the Warrants shall
not be redeemable during the first year after the Effective Date without the
written consent of the Representative.
(ab) Until such time as the securities of the Company are
listed or quoted on either the New York Stock Exchange or the American Stock
Exchange, the Company shall engage the Company's legal counsel to deliver to
the Representative a written opinion detailing those states in which the Shares
and Warrants of the Company may be traded in non-issuer transactions under the
Blue Sky laws of the fifty states ("Secondary Market Trading Opinion"). The
initial Secondary Market Trading Opinion shall be delivered to the
Representative on the Effective Date, and the Company shall continue to update
such opinion and deliver same to the Representative on a timely basis, but in
any event at the beginning of each fiscal quarter, for a five (5) year period,
if required.
(ac) As promptly as practicable after the Closing Date, the
Company will prepare, at its own expense, hard cover "bound volumes" relating
to the offering, and will distribute such volumes to the individuals designated
by the Representative or counsel to the Representative.
22
4. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Securities
which they have agreed to purchase hereunder from the Company are subject, as
of the date hereof and as of the Closing Date and the Option Closing Date, to
the continuing accuracy of, and compliance with, the representations and
warranties of the Company herein, to the accuracy of statements of officers of
the Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become
effective not later than 5:00 p.m., Eastern Time, on the date of this
Agreement, or at such later time or on such later date as you may agree to in
writing; (ii) at or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
Commission and no proceeding for that purpose shall have been initiated or
pending, or shall be threatened, or to the knowledge of the Company,
contemplated by the Commission; (iii) no stop order suspending the
effectiveness of the qualification or registration of the Securities under the
securities or "blue sky" laws of any jurisdiction (whether or not a
jurisdiction which you shall have specified) shall be threatened or to the
knowledge of the Company contemplated by the authorities of any such
jurisdiction or shall have been issued and in effect; (iv) any request for
additional information on the part of the Commission or any such authorities
shall have been complied with to the satisfaction of the Commission and any
such authorities, and to the satisfaction of counsel to the Underwriters; and
(v) after the date hereof no amendment or supplement to the Registration
Statement or the Prospectus shall have been filed unless a copy thereof was
first submitted to the Underwriters and the Underwriters did not object
thereto.
(b) At the Closing Date, since the respective dates as of
which information is presented in the Registration Statement and the
Prospectus, (i) there shall not have been any material change in the capital
stock or other securities of the Company or any subsidiary or any material
adverse change in the long-term debt of the Company or any subsidiary except as
set forth in or contemplated by the Registration Statement, (ii) there shall
not have been any material adverse change in the general affairs, business,
properties, condition (financial or otherwise), management, or results of
operations of the Company or any subsidiary, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth in or contemplated by the Registration Statement or Prospectus; (iii)
neither the Company nor any subsidiary shall have sustained
23
any material interference with its business or properties from fire, explosion,
flood or other casualty, whether or not covered by insurance, or from any labor
dispute or any court or legislative or other governmental action, order or
decree, which is not set forth in the Registration Statement and Prospectus;
and (iv) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be
stated therein in accordance with the Act and the Rules and Regulations, and
shall in all material respects conform to the requirements thereof, and neither
the Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstance under which they are made, not
misleading.
(c) Except as set forth in the Prospectus, there is not
pending or, to the knowledge of the Company or any subsidiary, threatened, any
material action, suit, proceeding, inquiry, arbitration or investigation
against the Company or any subsidiary, or any of the officers or directors of
the Company or any subsidiary, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth, or properties of the Company or any subsidiary.
(d) Each of the representations and warranties of the
Company contained herein shall be true and correct as of this date and at the
Closing Date as if made at the Closing Date, and all covenants and agreements
herein contained to be performed on the part of the Company and all conditions
herein contained to be fulfilled or complied with by the Company at or prior to
the Closing Date shall have been duly performed, fulfilled or complied with.
(e) At each Closing Date, you shall have received the
opinion, together with copies of such opinion for each of the other several
Underwriters, dated as of each Closing Date, from Xxxxxx Xxxxx & Xxxxxxx, P.A.,
counsel for the Company, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation,
with full corporate power and authority to own its properties
and conduct its business as described in the Registration
Statement and Prospectus and is duly
24
qualified or licensed to do business as a foreign corporation
and is in good standing in each other jurisdiction in which
the ownership or leasing of its properties or conduct of its
business requires such qualification except for jurisdictions
in which the failure to so qualify would not have a material
adverse effect on the Company and each subsidiary as a whole;
(ii) the authorized capitalization of the Company is
as set forth under "Capitalization" in the Prospectus; all
shares of the Company's outstanding stock and other securities
requiring authorization for issuance by the Company's Board of
Directors have been duly authorized, validly issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; the outstanding shares of Common
Stock of the Company and other securities have not been issued
in violation of the preemptive rights of any shareholder and
the shareholders of the Company do not have any preemptive
rights or, to such counsel's knowledge, other rights to
subscribe for or to purchase securities of the Company, nor,
to such counsel's knowledge, are there any restrictions upon
the voting or transfer of any of the securities of the
Company, except as disclosed in the Prospectus; the Common
Stock, the Shares, the Warrants, and the securities contained
in the Representative's Warrant Agreement conform to the
respective descriptions thereof contained in the Prospectus;
the Common Stock, the Shares, the Warrants, the shares of
Common Stock to be issued upon exercise of the Warrants and
the securities contained in the Representative's Warrant
Agreement, have been duly authorized and, when issued,
delivered and paid for, will be duly authorized, validly
issued, fully paid, non-assessable, free of pre-emptive rights
and no personal liability will attach to the ownership
thereof; all prior sales by the Company of the Company's
securities have been made in compliance with or under an
exemption from registration under the Act and applicable state
securities laws and no shareholders of the Company have any
rescission rights against the Company with respect to the
Company's securities; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the
Warrants and the Representative Warrants, and to the best of
such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the
Securities as contemplated by this Agreement gives rise to any
registration rights or other rights, other than those which
have been waived or satisfied or described in the Registration
Statement;
25
(iii) this Agreement, the Representative's Warrant
Agreement, the Warrant Agreement, the Financial Advisory
Agreement and the M/A Agreement have been duly and validly
authorized, executed and delivered by the Company and,
assuming the due authorization, execution and delivery of this
Agreement by the Representative, are the valid and legally
binding obligations of the Company, enforceable in accordance
with their terms, except (a) as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect
which effect creditors' rights generally; and (b) no opinion
is expressed as to the enforceability of the indemnity
provisions or the contribution provisions contained in this
Agreement;
(iv) the certificates evidencing the outstanding
securities of the Company, the Shares, the Common Stock and
the Warrants are in valid and proper legal form;
(v) to the best of such counsel's knowledge,
except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company, threatened, any material
action, suit, proceeding, inquiry, arbitration or
investigation against the Company or any subsidiary or any of
the officers of directors of the Company or any subsidiary,
nor any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might materially and
adversely affect the condition (financial or otherwise),
business prospects, net worth, or properties of the Company or
any subsidiary;
(vi) the execution and delivery of this Agreement,
the Representative's Warrant Agreement, the Warrant Agreement,
the Financial Advisory Agreement and the M/A Agreement, and
the incurrence of the obligations herein and therein set forth
and the consummation of the transactions herein or therein
contemplated, will not result in a violation of, or constitute
a default under (a) the Articles of Incorporation or By-Laws
of the Company and each subsidiary; (b) to the best of such
counsel's knowledge, any material obligations, agreement,
covenant or condition contained in any 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 or any
subsidiary is a party or by which it or any of its properties
is bound; or (c) to the best of such counsel's knowledge, any
material order, rule, regulation, writ, injunction, or decree
of any government, governmental instrumentality or court,
domestic or foreign;
26
(vii) the Registration Statement has become
effective under the Act, and to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement is in effect, and no proceedings for
that purpose have been instituted or are pending before, or
threatened by, the Commission; the Registration Statement and
the Prospectus (except for the financial statements and other
financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form
in all material respects with the applicable requirements of
the Act and the Rules and Regulations; and
(viii) no authorization, approval, consent, or
license of any governmental or regulatory authority or agency
is necessary in connection with the authorization, issuance,
transfer, sale or delivery of the Securities by the Company,
in connection with the execution, delivery and performance of
this Agreement by the Company or in connection with the taking
of any action contemplated herein, or the issuance of the
Representative's Warrants or the Securities underlying the
Representative's Warrants, other than registrations or
qualifications of the Securities under applicable state or
foreign securities or Blue Sky laws and registration under the
Act.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law, upon opinions of
counsel satisfactory to you and counsel to the Underwriters. The opinion of
such counsel to the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Representative and
they are justified in relying thereon.
Such counsel shall also include a statement to the effect that
such counsel has participated in the preparation of the Registration Statement
and the Prospectus and nothing has come to the attention of such counsel to
lead such counsel to believe that the Registration Statement or any amendment
thereto at the time it became effective contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or that the Prospectus
or any supplement thereto contains any untrue statement of a material fact or
omits to
27
state a material fact required to be stated therein or necessary in order to
make statements therein, in light of the circumstances under which they are
made, not misleading (except, in the case of both the Registration Statement
and any amendment thereto and the Prospectus and any supplement thereto, for
the financial statements, notes thereto and other financial information and
statistical data contained therein, as to which such counsel need express no
opinion).
(f) You and the several Underwriters shall have received
on each Closing Date a certificate dated as of each Closing Date, signed by the
Chief Executive Officer and the Chief Financial Officer of the Company and such
other officers of the Company as the Underwriters may request, certifying that:
(i) No Order suspending the effectiveness of the
Registration Statement or stop order regarding the sale of the
Securities in effect and no proceedings for such purpose are
pending or are, to their knowledge, threatened by the
Commission;
(ii) They do not know of any litigation instituted
or, to their knowledge, threatened against the Company or any
subsidiary or any officer or director of the Company or any
subsidiary of a character required to be disclosed in the
Registration Statement which is not disclosed therein; they do
not know of any contracts which are required to be summarized
in the Prospectus which are not so summarized; and they do not
know of any material contracts required to be filed as
exhibits to the Registration Statement which are not so filed;
(iii) They have each carefully examined the
Registration Statement and the Prospectus and, to the best of
their knowledge, neither the Registration Statement nor the
Prospectus nor any amendment or supplement to either of the
foregoing contains an untrue statement of any material fact or
omits to state any material fact required to be stated therein
or necessary to make the statement therein, in light of the
circumstances under which they are made, not misleading; and
since the Effective Date, to the best of their knowledge,
there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set
forth;
(iv) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any material adverse change in
the condition of the Company or any subsidiary, financial or
otherwise, or in the results of its operations, except as
28
reflected in or contemplated by the Registration Statement and
the Prospectus and except as so reflected or contemplated
since such date, there has not been any material transaction
entered into by the Company or any subsidiary;
(v) The representations and warranties set forth
in this Agreement are true and correct in all material
respects and the Company has complied with all of its
agreements herein contained;
(vi) Neither the Company nor any subsidiary is
delinquent in the filing of any federal, state and municipal
tax return or the payment of any federal, state or municipal
taxes; they know of no proposed redetermination or
re-assessment of taxes, adverse to the Company or any
subsidiary, and the Company and each subsidiary has paid or
provided by adequate reserves for all known tax liabilities;
(vii) They know of no material obligation or
liability of the Company or any subsidiary, contingent or
otherwise, not disclosed in the Registration Statement and
Prospectus;
(viii) This Agreement, the Representative's Warrant
Agreement, the Warrant Agreement, the Financial Advisory
Agreement and the M/A Agreement, the consummation of the
transactions therein contemplated, and the fulfillment of the
terms thereof, will not result in a breach by the Company of
any terms of, or constitute a default under, its Articles of
Incorporation or By-Laws, any indenture, mortgage, lease, deed
or trust, bank loan or credit agreement or any other material
agreement or undertaking of the Company or any subsidiary
including, by way of specification but not by way of
limitation, any agreement or instrument to which the Company
or any subsidiary is now a party or pursuant to which the
Company or any subsidiary has acquired any right and/or
obligations by succession or otherwise;
(ix) The financial statements and schedules filed
with and as part of the Registration Statement present fairly
the financial position of the Company as of the dates thereof
all in conformity with generally accepted principles of
accounting applied on a consistent basis throughout the
periods involved. Since the respective dates of such
financial statements, there have been no material adverse
change in the condition or general affairs of the Company,
financial or otherwise, other than as referred to in the
Prospectus;
29
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, except as may otherwise be indicated therein,
neither the Company nor any subsidiary has, prior to the
Closing Date, either (i) issued any securities or incurred any
material liability or obligation, direct or contingent, for
borrowed money, or (ii) entered into any material transaction
other than in the ordinary course of business. The Company
has not declared, paid or made any dividend or distribution of
any kind on its capital stock;
(xi) They have reviewed the sections in the
Prospectus relating to their biographical data and equity
ownership position in the Company, and all information
contained therein is true and accurate; and
(xii) Except as disclosed in the Prospectus, during
the past five years, they have not been:
(1) Subject of a petition under the Federal
bankruptcy laws or any state insolvency law filed by
or against them, or by a receiver, fiscal agent or
similar officer appointed by a court for their
business or property, or any partnership in which
either or them was a general partner at or within two
years before the time of such filing, or any
corporation or business association of which either
of them was an executive officer at or within two
years before the time of such filing;
(2) Convicted in a criminal proceeding or a
named subject of a pending criminal proceeding
(excluding traffic violations and other minor
offenses);
(3) The subject of any order, judgment,
or decree not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining either of them
from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission
merchant, introducing broker, commodity
trading advisor, commodity pool operator,
floor broker, leverage transaction merchant,
any other person regulated by the Commodity
Futures Trading Commission, or an associated
person of any of the foregoing, or as an
investment adviser, underwriter, broker or
dealer in securities, or as an affiliated
person, director or employee of any
investment company, bank, savings and loan
association or insurance
30
'
company, or engaging in or continuing any
conduct or practice in connection with any
such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in
connection with the purchase or sale of any
security or commodity or in connection with
any violation of Federal or State securities
law or Federal Commodity laws.
(4) The subject of any order, judgment or
decree, not subsequently reversed, suspended or
vacated of any Federal or State authority barring,
suspending or otherwise limiting for more than sixty
(60) days either of their right to engage in any
activity described in paragraph (3)(i) above, or be
associated with persons engaged in any such activity;
(5) Found by any court of competent
jurisdiction in a civil action or by the Securities
and Exchange Commission to have violated any Federal
or State securities law, and the judgment in such
civil action or finding by the Commission has not
been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent
jurisdiction in a civil action or by the Commodity
Futures Trading Commission to have violated any
Federal Commodities Law, and the judgment in such
civil action or finding by the Commodity Futures
Trading Commission has not been subsequently
reversed, suspended or vacated.
(g) The Underwriters shall have received from Xxxxxxx,
Xxxxxxxx & Xxxxxxxxxx, P.C., independent auditors to the Company, certificates
or letters, one dated and delivered on the Effective Date and one dated and
delivered on the Closing Date, in form and substance satisfactory to the
Underwriters, stating that:
(i) they are independent certified public
accountants with respect to the Company within the meaning of
the Act and the applicable Rules and Regulations;
(ii) the financial statements and the schedules
included in the Registration Statement and the Prospectus were
examined by them and, in their opinion, comply as to form in
all material respects with the applicable accounting
requirements of the Act, the Rules and Regulations and
31
instructions of the Commission with respect to Registration
Statements on Form SB-2;
(iii) on the basis of inquiries and procedures
conducted by them (not constituting an examination in
accordance with generally accepted auditing standards),
including a reading of the latest available unaudited interim
financial statements or other financial information of the
Company (with an indication of the date of the latest
available unaudited interim financial statements), inquiries
of officers of the Company who have responsibility for
financial and accounting matters, review of minutes of all
meetings of the shareholders and the Board of Directors of the
Company and other specified inquiries and procedures, nothing
has come to their attention as a result of the foregoing
inquiries and procedures that causes them to believe that:
(a) during the period from (and including)
the date of the financial statements in the
Registration Statement and the Prospectus to a
specified date not more than five days prior to the
date of such letters, there has been any change in
the Common Stock, long-term debt or other securities
of the Company (except as specifically contemplated
in the Registration Statement and Prospectus) or any
material decreases in net current assets, net assets,
shareholder's equity, working capital or in any other
item appearing in the Company's financial statements
as to which the Underwriters may request advice, in
each case as compared with amounts shown in the
balance sheet as of the date of the financial
statement in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus
discloses have occurred or will occur;
(b) during the period from (and including)
the date of the financial statements in the
Registration Statement and the Prospectus to such
specified date there was any material decrease in
revenues or in the total or per share amounts of
income or loss before extraordinary items or net
income or loss, or any other material change in such
other items appearing in the Company's financial
statements as to which the Underwriters may request
advice, in each case as compared with the fiscal
period ended as of the date of the financial
statement in the Prospectus, except in each case for
increases, changes or decreases which the Prospectus
discloses have occurred or will occur;
32
(c) the unaudited interim financial
statements of the Company appearing in the
Registration Statement and the Prospectus (if any) do
not comply as to form in all material respects with
the applicable accounting requirements of the Act and
the Rules and Regulations or are not fairly presented
in conformity with generally accepted accounting
principles and practices on a basis substantially
consistent with the audited financial statements
included in the Registration Statements or the
Prospectus.
(iv) they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the
Company set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and
information may be derived from the general accounting
records, including work sheets, of the Company and excluding
any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter
and found them to be in agreement; and
(v) they have not during the immediately
preceding five (5) year period brought to the attention of the
Company's management any reportable condition related to the
Company's internal accounting procedures, weaknesses and/or
controls.
Such letters shall also set forth such other information as
may be requested by counsel for the Underwriters. Any changes, increases or
decreases in the items set forth in such letters which, in the judgment of the
several Underwriters, are materially adverse with respect to the financial
position or results of operations of the Company shall be deemed to constitute
a failure of the Company to comply with the conditions of the obligations to
the several Underwriters hereunder.
(h) Upon exercise of the option provided for in Section
2(b) hereof, the obligation of the several Underwriters (or, at its option, the
Representative, individually) to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, and no stop order
suspending the effectiveness thereof shall have been issued
and no proceedings for that purpose shall have been instituted
or
33
shall be pending, or, to your knowledge or the knowledge of
the Company, shall be contemplated by the Commission, and any
reasonable request on the part of the Commission for
additional information shall have been complied with to the
satisfaction of counsel to the Underwriters.
(ii) At the Option Closing Date, there shall have
been delivered to you the signed opinion from Xxxxxx Xxxxx &
Xxxxxxx, P.A., counsel for the Company, dated as of the Option
Closing Date, in form and substance satisfactory to counsel to
the Underwriters, which opinion shall be substantially the
same in scope and substance as the opinion furnished to you at
the Closing Date pursuant to Section 4(e) hereof, except that
such opinion, where appropriate, shall cover the Option
Securities.
(iii) At the Option Closing Date, there shall have
been delivered to you a certificate of the Chief Executive
Officer and Chief Financial Officer of the Company, dated the
Option Closing Date, in form and substance satisfactory to
counsel to the Underwriters, substantially the same in scope
and substance as the certificate furnished to you at the
Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have
been delivered to you a letter in form and substance
satisfactory to you from Xxxxxxx, Xxxxxxxx & Xxxxxxxxxx, P.C.,
independent auditors to the Company, dated the Option Closing
Date and addressed to the several Underwriters confirming the
information in their letter referred to in Section 4(g) hereof
and stating that nothing has come to their attention during
the period from the ending date of their review referred to in
said letter to a date not more than five business days prior
to the Option Closing Date, which would require any change in
said letter if it were required to be dated the Option Closing
Date.
(v) All proceedings taken at or prior to the
Option Closing Date in connection with the sale and issuance
of the Option Securities shall be satisfactory in form and
substance to the Underwriters, and the Underwriters and
counsel to the Underwriters shall have been furnished with all
such documents, certificates, and opinions as you may request
in connection with this transaction in order to evidence the
accuracy and completeness of any of the representations,
warranties or statements of the Company or its compliance with
any of the covenants or conditions contained herein.
34
(i) No action shall have been taken by the Commission or
the NASD, the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Common Stock and no proceedings for the taking of such action
shall have been instituted or shall be pending, or, to the knowledge of the
several Underwriters or the Company, shall be contemplated by the Commission or
the NASD. The Company represents that at the date hereof it has no knowledge
that any such action is in fact contemplated by the Commission or the NASD.
The Company shall advise the Representative of any NASD affiliations of any of
its officers, directors, or stockholders or their affiliates in accordance with
paragraph 1(y) of this Agreement.
(j) At the Effective Date, you shall have received from
counsel to the Company, dated as of the Effective Date, in form and substance
satisfactory to counsel for the Underwriter, a written Secondary Market Trading
Opinion detailing those states in which the Shares and Warrants may be traded
in non-issuer transactions under the Blue Sky laws of the fifty (50) states
after the Effective Date, in accordance with paragraph 3(ab) of this Agreement.
(k) The authorization and issuance of the Securities and
delivery thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the several Underwriters, and such counsel shall be furnished with such
documents, certificates and opinions as they may reasonably request to enable
them to pass upon the matters referred to in this sub-paragraph.
(l) Prior to the Effective Date, the Representative shall
have received clearance from the NASD as to the amount of compensation
allowable or payable to the Representative, as described in the Registration
Statement.
(m) If any of the conditions herein provided for in this
Section shall not have been fulfilled as of the date indicated, this Agreement
and all obligations of the several Underwriters under this Agreement may be
canceled at, or at any time prior to, the Closing Date and/or the Option
Closing Date by the Representative and/or the Underwriters notifying the
Company of such cancellation in writing or by telegram at or prior to the
applicable Closing Date. Any such cancellation shall be without liability of
the several Underwriters to the Company.
5. Conditions of the Obligations of the Company. The
obligation of the Company to sell and deliver the Securities is subject to the
following conditions:
(i) The Registration Statement shall have become
effective not later than 5:00 p.m., Eastern Time, on the
35
date of this Agreement, or on such later time or date as the
Company and the Representative may agree in writing; and
(ii) At the Closing Date and the Option Closing
Date, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued under the Act or
any proceedings therefore initiated or threatened by the
Commission.
If the conditions to the obligations of the Company provided
for in this Section have been fulfilled on the Closing Date but are not
fulfilled after the Closing Date and prior to the Option Closing Date, then
only the obligation of the Company to sell and deliver the Securities on
exercise of the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and
holds harmless each Underwriter and each person, if any, who controls the
Underwriter within the meaning of the Act against any losses, claims, damages
or liabilities, joint or several (which shall, for all purposes of this
Agreement, include but not be limited to, all reasonable costs of defense and
investigation and all attorneys' fees), to which the Underwriter or such
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (i) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(ii) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by
the Company and filed in any state or other jurisdiction in order to qualify
any or all of the Securities under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such cases to the extent, but only to the extent, that any
such losses, claim, damages or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriters specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary
36
Prospectus or the Prospectus or any such amendment or supplement thereto.
Notwithstanding the foregoing, the Company shall have no liability under this
section if such untrue statement or omission made in a Preliminary Prospectus
is cured in the Prospectus and the Prospectus is not delivered to the person or
persons alleging the liability upon which indemnification is being sought.
This indemnity will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter, severally, but not jointly, indemnifies
and holds harmless the Company, each of its directors, each nominee (if any)
for director named in the Prospectus, each of its officers who have signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys' fees)
to which the Company or any such director, nominee, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statements or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by you or by any
Underwriter through you specifically for use in the preparation thereof.
Notwithstanding the foregoing, the Underwriters shall have no liability under
this section if such untrue statement or omission made in a Preliminary
Prospectus is cured in the Prospectus and the Prospectus is not delivered to
the person or persons alleging the liability upon which indemnification is
being sought through no fault of the Underwriter. This indemnity agreement
will be in addition to any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify in writing the indemnifying party
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve
37
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the reasonable judgment of
the Representative, it is advisable for the Representative or such Underwriters
or controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the Underwriter or such controlling person, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for all such Underwriters and controlling persons,
which firm shall be designated in writing by you). No settlement of any action
against an indemnified party shall be made without the consent of the
indemnifying party, which shall not be unreasonably withheld in light of all
factors of importance to such indemnifying party.
7. Contribution. In order to provide for just and
equitable contribution under the Act in any case in which (i) each Underwriter
makes claim for indemnification pursuant to Section 6 hereof but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction
38
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 the express provisions of Section 6 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of
any Underwriter, then the Company and each person who controls the Company, in
the aggregate, and any such Underwriter shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys'
fees) in either such case (after contribution from others) in such proportions
that all such Underwriters are responsible in the aggregate for that portion of
such losses, claims, damages or liabilities represented by the percentage that
the underwriting discount per Share appearing on the cover page of the
Prospectus bears to the public offering price appearing thereon, and the
Company shall be responsible for the remaining portion, provided, however, that
(a) if such allocation is not permitted by applicable law then the relative
fault of the Company and the Underwriter and controlling persons, in the
aggregate, in connection with the statements or omissions which resulted in
such damages and other relevant equitable considerations shall also be
considered. The relative fault shall be determined by reference to, among
other things, whether in the case of an untrue statement of a material fact or
the omission to state a material fact, such statement or omission relates to
information supplied by the Company, or the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if the respective obligations of
the Company and the Underwriters to contribute pursuant to this Section 7 were
to be determined by pro rata or per capita allocation of the aggregate damages
(even if the Underwriters and their controlling persons in the aggregate were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
first sentence of this Section; and (b) that the contribution of each
contributing Underwriter shall not be in excess of its proportionate share
(based on the ratio of the number of Securities purchased by such Underwriter
to the number of Securities purchased by all contributing Underwriters) of the
portion of such losses, claims, damages or liabilities for which the
Underwriters are responsible. No person ultimately determined to be guilty of
a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not ultimately
determined to be guilty of such fraudulent misrepresentation. As used in this
paragraph, the term
39
"Underwriter" includes any officer, director, or other person who controls the
Underwriter within the meaning of Section 15 of the Act, and the word "Company"
includes any officer, director, or person who controls the Company within the
meaning of Section 15 of the Act. If the full amount of the contribution
specified in this paragraph is not permitted by law, then the Underwriter and
each person who controls the Underwriter shall be entitled to contribution from
the Company, its officers, directors and controlling persons to the full extent
permitted by law. This foregoing agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Underwriter. No contribution shall be
requested with regard to the settlement of any matter from any party who did
not consent to the settlement; provided, however, that such consent shall not
be unreasonably withheld in light of all factors of importance to such party.
8. Costs and Expenses. (a) Whether or not this
Agreement becomes effective or the sale of the Securities to the Underwriters
is consummated, the Company will pay all costs and expenses incident to the
performance of this Agreement by the Company including but not limited to the
fees and expenses of counsel to the Company and of the Company's accountants;
the costs and expenses incident to the preparation, printing, filing and
distribution under the Act of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto),
Preliminary Prospectus and the Prospectus, as amended or supplemented; the fee
of the National Association of Securities Dealers, Inc. ("NASD") in connection
with the filing required by the NASD relating to the offering of the Securities
contemplated hereby; all state filing fees, expenses and disbursements and
legal fees of counsel to the Company who shall serve as Blue Sky counsel to the
Company in connection with the filing of applications to register the
Securities under the state securities or blue sky laws; the cost of printing
and furnishing to the several Underwriters copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selected Dealers Agreement, the Agreement Among Underwriters, Underwriters
Questionnaire, Underwriters Power of Attorney and the Blue Sky Memorandum; the
cost of printing the certificates evidencing the securities comprising the
Securities; the cost of preparing and delivering to the Underwriters and its
counsel bound volumes containing copies of all documents and appropriate
correspondence filed with or received from the Commission and the NASD and all
closing documents; and the fees and disbursements of the transfer agent for the
Company's securities. The Company shall pay any and all taxes (including any
original issue, transfer, franchise, capital stock or other tax imposed by any
jurisdiction) on sales to the Underwriters hereunder. The Company will also
pay all costs and expenses
40
incident to the furnishing of any amended Prospectus or of any supplement to be
attached to the Prospectus. The Company shall also engage the Company's
counsel to provide the Representative with a written Secondary Market Trading
Opinion in accordance with paragraphs 3(ab) and 4(j) of this Agreement.
(b) In addition to the foregoing expenses, the Company
shall at the Closing Date pay to the Representative a non-accountable expense
allowance equal to three percent (3%) of the gross proceeds received from the
sale of the Securities, of which an advance of $50,000 has been paid to date.
In the event the overallotment option is exercised, the Company shall pay to
the Representative at the Option Closing Date an additional amount equal to
three percent (3%) of the gross proceeds received upon exercise of the
overallotment option.
(c) Other than as disclosed in the Registration Statement, no
person is entitled either directly or indirectly to compensation from the
Company, from the Representative or from any other person for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Representative and the other Underwriters
against any losses, claims, damages or liabilities, joint or several which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees, to which the
Representative or such other Underwriter may become subject insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon the claim of any person (other than an employee of the
party claiming indemnity) or entity that he or it is entitled to a finder's fee
in connection with the proposed offering by reason of such person's or entity's
influence or prior contact with the indemnifying party.
9. Substitution of Underwriters. If any of the
Underwriters shall for any reason not permitted hereunder cancel their
obligations to purchase the Securities hereunder, or shall fail to take up and
pay for the number of Securities set forth opposite their respective names in
Schedule A hereto upon tender of such Securities in accordance with the terms
hereof, then:
(a) if the aggregate number of Securities which such
Underwriter or Underwriters agreed but failed to purchase does not exceed ten
percent (10%) of the total number of Securities, the other Underwriters shall
be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Securities which such defaulting Underwriter or
Underwriters agreed but failed to purchase.
41
(b) If any Underwriter or Underwriters so default and the
agreed number of Securities with respect to which such default or defaults
occurs is more than ten percent (10%) of the total number of Securities, the
remaining Underwriters shall have the right to take up and pay for (in such
proportion as may be agreed upon among them) the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If such
remaining Underwriters do not, at the Closing Date, take up and pay for the
Securities which the defaulting Underwriter or Underwriters agreed but failed
to purchase, the time for delivery of the Securities shall be extended to the
next business day to allow the several Underwriters the privilege of
substituting within twenty-four hours (including non-business hours) another
Underwriter or Underwriters satisfactory to the Company. If no such
Underwriter or Underwriters shall have been substituted as aforesaid, within
such twenty-four period, the time of delivery of the Securities may, at the
option of the Company, be again extended to the next following business day, if
necessary, to allow the Company the privilege of finding within twenty-four
hours (including non-business hours) another Underwriter or Underwriters to
purchase the Securities which the defaulting Underwriter or Underwriters agreed
but failed to purchase. If it shall be arranged for the remaining Underwriters
or substituted Underwriters to take up the Securities of the defaulting
Underwriter or Underwriters as provided in this Section, (i) the Company or the
Representative shall have the right to postpone the time of delivery for a
period of not more than seven (7) business days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary; and (ii) the respective
numbers of Securities to be purchased by the remaining Underwriters or
substituted Underwriters shall be taken at the basis of the underwriting
obligation for all purposes of this Agreement.
If in the event of a default by one or more Underwriters and
the remaining Underwriters shall not take up and pay for all the Securities
agreed to be purchased by the defaulting Underwriters or substitute another
Underwriter or Underwriters as aforesaid, and the Company shall not find or
shall not elect to seek another Underwriter or Underwriters for such Securities
as aforesaid, then this Agreement shall terminate.
If, following exercise of the option provided in Section 2(b)
hereof, any Underwriter or Underwriters shall for any reason not permitted
hereunder cancel their obligations to purchase Option Securities at the Option
Closing Date, or shall fail to take up and pay for the number of Option
Securities, which they
42
become obligated to purchase at the Option Closing Date upon tender of such
Option Securities in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Securities of the defaulting Underwriters in the manner provided in Section
9(b) hereof. If the remaining Underwriters or substituted Underwriters shall
not take up and pay for all Option Securities, the Underwriters shall be
entitled to purchase the number of Option Securities for which there is no
default or, at their election, the option shall terminate, the exercise thereof
shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any non-defaulting
Underwriter to the Company, provided that the provisions of this Section 9
shall not in any event affect the liability of any defaulting Underwriter to
the Company arising out of such default.
10. Effective Date. The Agreement shall become effective
upon its execution except that you may, at your option, delay its effectiveness
until 11:00 a.m., Eastern time, on the first full business day following the
execution of this Agreement; or at such earlier time after the effective date
of the Registration Statement as you in your discretion shall first commence
the public offering by the Underwriters of any of the Securities. The time of
the public offering shall mean the time after the effectiveness of the
Registration Statement when the Securities are first generally offered by you
to the other Underwriters and Selected Dealers. This Agreement may be
terminated by you at any time before it becomes effective as provided above,
except that Sections 3(c), 6, 7, 8, 13, 14, 15, 16, 17 and 18 shall remain in
effect notwithstanding such termination.
11. Termination. (a) This Agreement, except for
Sections 3(c), 6, 7, 8, 13, 14, 15, 16, 17, and 18 hereof, may be terminated at
any time prior to the Closing Date, and the option referred to in Section 2(b)
hereof, if exercised, may be cancelled at any time prior to the Option Closing
Date, by you if in your judgment it is impracticable to offer for sale or to
enforce contracts made by the Underwriters for the resale of the Securities
agreed to be purchased hereunder by reason of: (i) the Company having sustained
a material adverse loss, whether or not insured, by reason of fire, earthquake,
flood, accident or other calamity, or from any labor dispute or court or
government action, order or decree; (ii) trading in securities on the New York
Stock Exchange or the American Stock Exchange having been suspended or limited;
(iii) material governmental restrictions having been imposed on trading in
securities generally (not in force and effect on the date hereof); (iv) a
banking moratorium having been declared by Federal or New York or Florida state
authorities; (v) an outbreak of major international hostilities
43
or other national or international calamity having occurred; (vi) the passage
by the Congress of the United States or by any state legislative body of
similar impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Representative to have a material adverse impact on the business, financial
condition or financial statements of the Company or the market for the
securities offered hereby; (vii) any material adverse change in the financial
or securities markets beyond normal market fluctuations having occurred since
the date of this Agreement; (viii) any material adverse change having occurred,
since the respective dates as of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of the Company, financial or otherwise, whether or not arising in the
ordinary course of business; (ix) a pending or threatened legal or governmental
proceeding or action relating generally to the Company's business, or a
notification having been received by the Company of the threat of any such
proceeding or action, which could, in the reasonable judgment of the
Representative, materially adversely affect the Company; (x) except as
contemplated by the Prospectus, the Company is merged or consolidated into or
acquired by another company or group or there exists a binding legal commitment
for the foregoing or any other material change of ownership or control occurs;
or (xi) the Company shall not have complied in all material respects with any
term, condition or provisions on their part to be performed, complied with or
fulfilled (including but not limited to those set forth in this Agreement)
within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section, the Company shall be
promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
12. Representative's Warrant Agreement. At the Closing Date, the
Company will issue to the Representative and/or persons related to the
Representative, for an aggregate purchase price of $10, and upon the terms and
conditions set forth in the form of Representative's Warrant Agreement annexed
as an exhibit to the Registration Statement, Representative Warrants to
purchase up to an aggregate of 200,000 Shares and 200,000 Warrants, in such
denominations as the Representative shall designate. In the event of conflict
in the terms of this Agreement and the Representative's Warrant Agreement, the
language of the form of Representative's Warrant Agreement shall control.
13. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations, warranties and other
statements of the Company and its principal officers, where appropriate, and
the Underwriters set forth in or made pursuant to this Agreement will
44
remain in full force and effect, regardless of any investigation made by or on
behalf of the Underwriters, the Company or any of its officers or directors or
any controlling person and will survive delivery of and payment for the
Securities and the termination of this Agreement.
14. Notice. All communications hereunder will be in writing and,
except as otherwise expressly provided herein, will be mailed, delivered or
telegraphed and confirmed:
If to the Underwriters: Xxxxxx X. Xxxx, President
Xxxxxx Xxxxx Securities, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Copy to: Xxxxx X. Xxxxxx, P.A.
0000 Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
If to the Company: Xx. Xxxxxx X. Xxxxxx, Chairman
DIDAX INC.
0000 Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Copy to: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxx & Xxxxxxx, P.A.
NationsBank Tower, Suite 3500
000 Xxxxxxxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
15. Parties in Interest. This Agreement herein set forth is made
solely for the benefit of the several Underwriters, the Company and, to the
extent expressed, any person controlling the Company or of the Underwriters,
and directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser of the Securities, as
such purchaser, from the several Underwriters. All of the obligations of the
Underwriters hereunder are several and not joint.
16. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida applicable to contracts made
and to be performed entirely within the State of Florida. The parties agree
that any action brought by any party against another party in connection with
any rights or obligations arising out of this Agreement shall be instituted
properly in a federal or state court of competent jurisdiction with venue only
in the Fifteenth Judicial Circuit Court in and for
45
Palm Beach County, Florida or the United States District Court for the Southern
District of Florida, West Palm Beach Division. A party to this Agreement named
as a Defendant in any action brought in connection with this Agreement in any
court outside of the above named designated county or district shall have the
right to have the venue of said action changed to the above designated county
or district or, if necessary, have the case dismissed, requiring the other
party to refile such action in an appropriate court in the above designated
county or federal district.
17. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
18. Entire Agreement. This Agreement and the agreements referred to
within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreement, understanding, negotiations and discussions,
whether written or oral, of the parties hereto.
19. Representative as Underwriter. In the event the Representative
acts as the sole Underwriter ("Underwriter") in connection with the
underwriting of the securities being offered pursuant to the Registration
Statement, all references to the Representative in this Agreement shall be
replaced by reference to the "Underwriter", and (i) any consents required to be
obtained from the Representative shall be required to be obtained solely from
the Underwriter; (ii) all compensation to be received by the Representative
shall instead be received by the Underwriter; and (iii) the provisions of
section nine (9) of this Agreement shall not apply.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the several Underwriters in
accordance with its terms.
Very truly yours,
DIDAX INC.
BY:
----------------------------------------
Xx. Xxxxxx X. Xxxxxx, Chairman
-------------------------
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
XXXXXX XXXXX SECURITIES, INC.
BY:
----------------------------------------
Xxxxxx X. Xxxx, President
-------------------------------For itself and as Representative
of the several Underwriters
46
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
UNDERWRITER SHARES
---------------------------------------------------------------------------------------
Xxxxxx Xxxxx Securities, Inc. . . . . . . . . . . . . . . . . . . . . . .
---------
2,000,000
UNDERWRITER WARRANTS
---------------------------------------------------------------------------------------
Xxxxxx Xxxxx Securities, Inc. . . . . . . . . . . . . . . . . . . . . . .
---------
2,000,000
