EXHIBIT 1(a)
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FORM OF UNDERWRITING AGREEMENT
_________ , 1996
Xxxxxx & Associates, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Virologix Corporation, a Delaware corporation (the "Company"), hereby
confirms its agreement with Xxxxxx & Associates, Inc. ("you" or the
"Underwriter"), as follows:
1. Description of the Securities.
The Company proposes to issue and sell to the Underwriter 1,150,000 shares
(the "Shares") of common stock, $.0001 par value per share ("Common Stock"), of
the Company (the Shares being sometimes referred to as the "Securities"). The
Company proposes to grant to the Underwriter an option to purchase up to 172,500
additional shares of Common Stock (the "Additional Securities"). The offering of
Securities and Additional Securities contemplated hereby may sometimes be
referred to as the "Offering."
(a) Underwriter's Securities.
The Company will sell to the Underwriter, for nominal consideration,
warrants to purchase up to one share of Common Stock for each ten shares of
Common Stock sold in the Offering excluding the Additional Securities (a maximum
of 115,000 shares of Common Stock) at a price equal to $_______ per share of
Common Stock (the "Underwriter's Warrants"). The Underwriter's Warrants and
shares of Common Stock underlying the Underwriter's Warrants are hereinafter
referred to collectively as the "Underwriter's Securities." The Underwriter's
Warrants shall be non-exercisable and non-transferable (other than to officers
and partners of the Underwriter and to members of the selling group and their
officers or partners) for a period of 12 months following the Effective Date.
Thereafter, the Underwriter's Warrants shall be exercisable and transferable for
a period of four years (provided such transfer is in accordance with the
Securities Act and any other applicable securities laws). If the Underwriter's
Warrants are not exercised during their term, they shall, by their terms,
automatically expire. The Underwriter's Securities shall be registered for sale
to the public and shall be included in the Registration Statement filed in
connection with the Offering.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriter that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement, and one or more
amendments thereto, on Form SB-2 (File No. 333-________), including in each such
registration statement and each such amendment any related preliminary
prospectus ("Preliminary Prospectus"), for the registration of the Securities
under the Securities Act of 1933 (the "Act"). The Company will, if required,
file a further amendment to said registration statement in the form to be
delivered to you and will not, before the registration statement becomes
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effective, file any other amendment thereto to which you shall have reasonably
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time such registration statement becomes
effective (including the prospectus, financial statements, exhibits and all
other documents, as amended, filed as a part thereof), is hereinafter called the
"Registration Statement," and the prospectus, in the form filed with the
Commission pursuant to Rule 424(b) of the General Rules and Regulations of the
Commission under the Act (the "Regulations") or, if no such filing is made, the
definitive prospectus used in the Offering, is hereinafter called the
"Prospectus." The Company has delivered to you copies of each Preliminary
Prospectus as filed with the Commission and has consented to the use of such
copies for purposes permitted by the Act.
(b) The Commission has not issued any orders preventing or
suspending the use of any Preliminary Prospectus, and, as of the date filed with
the Commission, each Preliminary Prospectus conformed in all material respects
with the requirements of the Act and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements or omissions made in
reliance upon and in conformity with written information furnished to the
Company by or on your behalf for use in such Preliminary Prospectus and except
that this representation and warranty does not apply to statements or omissions
that have been cured in a subsequent preliminary prospectus or in the
Prospectus.
(c) When the Registration Statement becomes effective under the Act
and at all times subsequent thereto to and including the Closing Date
(hereinafter defined) and the Option Closing Date (hereinafter defined) and for
such longer periods as a Prospectus is required to be delivered in connection
with the sale of the Securities by the Underwriter, the Registration Statement
and Prospectus, and any amendment thereof or supplement thereto, will contain
all material statements which are required to be stated therein in accordance
with the Act and the Regulations, and will in all material respects conform to
the requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company by you for use in the Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto. It
is understood that the statements set forth in the Prospectus with respect to
(i) the amounts of the selling concession and reallowance; (ii) the identity of
counsel to the Underwriter under the heading "Legal Matters"; (iii) information
under the heading "Underwriting," including the information concerning the
National Association of Securities Dealers, Inc. ("NASD") affiliation of the
Underwriter; and (iv) the stabilization legend in the Prospectus constitute the
only information supplied by you for use in the Registration Statement or
Prospectus.
(d) The Company is, and at the Closing Date and the Option Closing
Date will be, a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company has no
subsidiaries. The Company is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such qualification,
except those jurisdictions in which the failure to so qualify would not have a
material adverse effect on the business or operations of the Company ("Material
Adverse Effect"). The Company has all requisite corporate powers and authority,
and all necessary authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory officials and bodies to own or
lease its properties and conduct its business as described in the Prospectus
except where the failure to have any such authorizations, approvals, orders,
licenses, certificates or permits would not have a Material Adverse Effect, and
the Company is doing business and has been doing business
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during the period described in the Registration Statement in compliance with all
such material authorizations, approvals, orders, licenses, certificates and
permits and all material federal, state and local laws, rules and regulations
concerning the business in which the Company is engaged, except where the
failure to comply with any such authorizations, approvals, orders, licenses,
certificates or permits or any such laws, rules or regulations would not have a
Material Adverse Effect. The disclosures in the Registration Statement
concerning the effects of federal, state and local regulation on the Company's
business as currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact required to be stated therein
in light of the circumstances under which such disclosures were made. The
Company has all corporate power and authority to enter into this Agreement and
carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained or will have been obtained prior to the Closing Date.
(e) This Agreement has been duly and validly authorized and executed
by the Company. The Securities and the Underwriter's Securities have been duly
authorized (and, in the case of the Shares, have been duly reserved for
issuance) and, when issued and paid for in accordance with this Agreement, the
Shares will be validly issued, fully paid and non-assessable; the Securities,
and Underwriter's Securities are not and will not be subject to the preemptive
rights of any stockholder of the Company and conform and at all times up to and
including their issuance will conform in all material respects to all statements
with regard thereto contained in the Registration Statement and Prospectus; and
all corporate action required to be taken for the authorization, issuance and
sale of the Securities, the Additional Securities, and Underwriter's Securities
has been taken, and this Agreement constitutes a valid and binding obligation of
the Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of securities
called for thereby except insofar as enforceability of indemnification and
contribution provisions may be limited by applicable law or policy or equitable
principles, and except as enforceability may be limited by bankruptcy,
reorganization, moratorium, insolvency or other laws affecting the
enforceability of creditors' rights generally and rules of law governing
specific performance, injunctive relief and other equitable remedies.
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
the Certificate of Incorporation or by-laws, in each case as amended, of the
Company or of any evidence of indebtedness, lease, contract or other agreement
or instrument to which the Company is a party or by which the Company or any of
its properties is bound, or under any applicable law, rule, regulation,
judgment, order or decree of any government, professional advisory body,
administrative agency or court, domestic or foreign, having jurisdiction over
the Company or its properties, in each case except for any breach, violation or
default that would not have a Material Adverse Effect, or result in the creation
or imposition of any material lien, charge or encumbrance upon any of the
properties or assets of the Company; and no consent, approval, authorization or
order of any court or governmental or other regulatory agency or body is
required for the consummation by the Company of the transactions on its part
herein contemplated, except such as may be required under the Act or under state
securities or blue sky laws or under the rules and regulations of the NASD, and
except where the breach, violation or failure to obtain such consent, approval,
authorization or order would not have a Material Adverse Effect.
(g) Subsequent to the date hereof, and prior to the Closing Date and
the Option Closing Date, except as otherwise described in or contemplated by the
Prospectus, the Company will not issue or acquire any equity securities.
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(h) The financial statements and notes thereto included in the
Registration Statement and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved.
(i) Except as set forth in the Registration Statement, the Company
is not, and at the Closing Date and at the Option Closing Date the Company will
not be, in violation or breach of, or default in, the due performance and
observance of any term, covenant or condition of any indenture, mortgage, deed
of trust, note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets of the Company is subject, which
violations, breaches, default or defaults, singularly or in the aggregate, would
have a Material Adverse Effect. The Company has not and at the Closing Date or
Option Closing Date the Company will not have taken any action in violation of
the provisions of the Certificate of Incorporation or by-laws, in each case as
amended, of the Company, or any statute or any order, rule or regulation of any
court or regulatory authority or governmental body having jurisdiction over or
application to the Company or its business or properties, except for any
violations that, singularly or in the aggregate, would not have a Material
Adverse Effect.
(j) The Company has, and at the Closing Date and at the Option
Closing Date will have, good and marketable title to all properties and assets
described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances, claims, security interests, restrictions and defects of
any material nature whatsoever, except such as are described or referred to in
the Prospectus and liens for taxes not yet due and payable or such as in the
aggregate will not have a Material Adverse Effect. All of the material leases
and subleases under which the Company is the lessor or sublessor of properties
or assets or under which the Company holds properties or assets as lessee as
described in the Prospectus are, and will on the Closing Date and the Option
Closing Date be, in full force and effect, and except as described in the
Prospectus, the Company is not and will not be in default in respect of any of
the terms or provisions of any of such leases or subleases (except for defaults
which would not have a Material Adverse Effect), and no claim has been asserted
by anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continue possession of the leased or
subleased premises or assets under any such lease or sublease, except as
described or referred to in the Prospectus or such as in the aggregate would not
have a Material Adverse Effect, and the Company owns or leases all such
properties as are necessary to its operations as now conducted and, except as
otherwise stated in the Prospectus, as proposed to be conducted as set forth in
the Prospectus (except where the failure to own or lease such properties would
not have a Material Adverse Effect).
(k) The authorized, issued and outstanding capital stock of the
Company as of the date referenced in the Prospectus is, and the authorized,
issued and outstanding capital stock of the Company on the Closing Date will be,
as set forth in the Prospectus under "Capitalization" (in each case based on the
assumptions set forth therein and except that issuance and sale of the
Additional Securities will not be reflected therein); the shares of issued and
outstanding capital stock of the Company set forth thereunder have been (or as
of the Closing Date will be) duly authorized and validly issued and are (or as
of the Closing Date will be) fully paid and non-assessable; except as set forth
in the Prospectus, no options, warrants or other rights to purchase, agreements
or other obligations to issue, or agreements or other rights to convert any
obligation into, any shares of capital stock of the Company have been granted or
entered into by the Company;
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and the Common Stock and all such options and warrants conform in all material
respects, to all statements relating thereto contained in the Registration
Statement and Prospectus.
(l) Except as described in the Prospectus, the Company does not own
or control any capital stock or securities of, or have any proprietary interest
in, or otherwise participates in any other corporation, partnership, joint
venture, firm, association or business organization (other than those direct or
indirect subsidiaries of the Company disclosed in Exhibit 22 to the Registration
Statement); provided, however, that this provision shall not be applicable to
the investment, if any, of the net proceeds from the sale of the Securities sold
by the Company or other funds thereof in interest-bearing savings accounts,
certificates of deposit, money market accounts, United States government
obligations or other short-term obligations.
(m) Price Waterhouse LLP, who have reported on the financial
statements of the Company which have been filed with the Commission as a part of
the Registration Statement, are independent accountants with respect to the
Company as required by the Act and the Regulations.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money; or (ii) entered into any transaction other than in the
ordinary course of business; or (iii) declared or paid any dividend or made any
other distribution on or in respect of its capital stock; provided, however,
that this provision shall not be applicable to any transaction between or among
the Company and its subsidiaries.
(o) There is no litigation or governmental proceeding pending or to
the knowledge of the Company threatened against, or involving the properties or
business of the Company which might have a Material Adverse Effect, except as
referred to in the Prospectus. Further, except as referred to in the Prospectus,
there are no pending actions, suits or proceedings related to environmental
matters or related to discrimination on the basis of age, sex, religion or race,
nor is the Company charged with or, to its knowledge, under investigation with
respect to any violation of any statutes or regulations of any regulatory
authority having jurisdiction over its business or operations, which violations
might have a Material Adverse Effect, and no labor disturbances by the employees
of the Company exist or, to the knowledge of the Company, have been threatened.
(p) The Company has, and at the Closing Date and at the Option
Closing Date will have, filed all necessary federal, state and foreign income
and franchise tax returns or has requested extensions thereof (except in any
case where the failure so to file would not have a Material Adverse Effect), and
has paid all taxes which it believes in good faith were required to be paid by
it except for any such taxes that currently, or on the Closing Date or Option
Closing Date, as the case may be, are being contested in good faith or as
described in the Prospectus.
(q) The Company has not at any time (i) made any contribution to any
candidate for political office, or failed to disclose fully any such
contribution, in violation of law, or (ii) made any payment to any state,
federal, foreign governmental or professional regulatory agency, officer or
official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required or
allowed by applicable law.
(r) Except as set forth in the Registration Statement, to the
knowledge of the Company, neither the Company nor any officer, director,
employee or agent of the Company has made any payment or transfer of any funds
or assets of the Company or conferred any personal benefit by use of the
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Company's assets or received any funds, assets or personal benefit in violation
of any law, rule or regulation, which is required to be stated in the
Registration Statement or necessary to make the statements therein not
misleading.
(s) On the Closing Date and on the Option Closing Date, all transfer
or other taxes, if any (other than income tax), which are required to be paid,
and are due and payable, in connection with the sale and transfer of the
Securities by the Company to the Underwriter will have been fully paid or
provided for by the Company as the case may be, and all laws imposing such taxes
will have been fully complied with in all material respects.
(t) There are no contracts or other documents of the Company which
are of a character required to be described in the Registration Statement or
Prospectus or filed as exhibits to the Registration Statement which have not
been so described or filed.
(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are executed in
accordance with management's general or specified authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; and (3) access to assets is permitted only
in accordance with management's general or specific authorizations.
(w) Except as set forth in the Prospectus, no holder of any
securities of the Company has the right (which has not been effectively waived
or terminated) to require registration of any securities because of the filing
or effectiveness of the Registration Statement.
(x) The Company has not taken and at the Closing Date will not have
taken, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock or the Warrants
to facilitate the sale or resale of such securities.
(y) To the Company's knowledge, there are no claims for services in
the nature of a finder's origination fee with respect to the sale of the
Securities hereunder, except as set forth in the Prospectus.
(z) No right of first refusal exists with respect to any sale of
securities by the Company.
(aa) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Underwriter was, when made, or as of the
Closing Date or as of the Option Closing Date will be materially inaccurate,
untrue or incorrect.
3. Covenants of the Company.
The Company covenants and agrees with the Underwriter that:
(a) It will deliver to the Underwriter, without charge, two
conformed copies of each Registration Statement and of each amendment or
supplement thereto, including all financial statements and exhibits.
(b) The Company has delivered to the Underwriter, and each of the
Selected Dealers (as hereinafter defined) without charge, as many copies as have
been reasonably requested of each Preliminary Prospectus heretofore filed with
the Commission in accordance with and pursuant to the Commission's Rule 430
under the Act and will deliver to the Underwriter and to others whose names and
addresses are furnished by the Underwriter or a Selected Dealer, without charge,
on the Effective Date, and thereafter from
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time to time during such reasonable period as you may request if, in the
reasonable opinion of counsel for the Underwriter, the Prospectus is required by
law to be delivered in connection with sales by the Underwriter or a dealer, as
many copies of the Prospectus (and, in the event of any amendment of or
supplement to the Prospectus, of such amended or supplemented Prospectus) as the
Underwriter may reasonably request for the purposes contemplated by the Act. The
Company will take all necessary actions to furnish to whomever directed by the
Underwriter, when and as requested by the Underwriter, all necessary documents,
exhibits, information, applications, instruments and papers as may be reasonably
required in order to permit or facilitate the sale of the Securities.
(c) The Company has authorized the Underwriter to use, and make
available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Underwriter, all dealers selected by you in connection with the
distribution of the Securities (the "Selected Dealers") to be purchased by the
Underwriter and all dealers to whom any of such Securities may be sold by the
Underwriter or by any Selected Dealer, to use the Prospectus, as from time to
time amended or supplemented, in connection with the sale of the Securities in
accordance with the applicable provisions of the Act, the applicable Regulations
and applicable state law, until completion of the distribution of the Securities
and for such longer period as you may reasonably request if the Prospectus is
required under the Act, the applicable Regulations or applicable state law to be
delivered in connection with sales of the Securities by the Underwriter or the
Selected Dealers.
(d) The Company will use its best efforts to cause the Registration
Statement to become effective and will notify the Underwriter immediately, and
confirm the notice in writing: (i) when the Registration Statement or any
post-effective amendment thereto becomes effective; (ii) of the receipt of any
comments from the Commission regarding the Registration Statement or of the
receipt of any stop order or of the initiation, or to the best of the Company's
knowledge, the threatening, of any proceedings for that purpose; (iii) the
suspension of the qualification of the Securities and the Underwriter's
Warrants, or underlying securities, for offering or sale in any jurisdiction or
of the initiating, or to the best of the Company's knowledge the threatening, of
any proceeding for that purpose; and (iv) of the receipt of any comments from
the Commission. If the Commission shall enter a stop order at any time, the
Company will make every reasonable effort to obtain the lifting of such order as
promptly as practicable.
(e) During the time when a prospectus relating to the Securities is
required to be delivered under the Act, the Company will use its best efforts to
comply with all requirements imposed upon it by the Act and the Securities
Exchange Act of 1934 (the "Exchange Act"), as now and hereafter amended and by
the Regulations, as from time to time in force, as necessary to permit the
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus and the Company shall use its best efforts
to keep the Registration Statement effective so long as a Prospectus is required
to be delivered in connection with the sale of the Securities or Additional
Securities by the Underwriter or by dealers effecting transactions therein in
connection with the initial public offering thereof. If at any time when a
prospectus relating to the Securities is required to be delivered under the Act,
any event shall have occurred as a result of which, in the reasonable opinion of
counsel for the Company or counsel for the Underwriter, the Prospectus as then
amended or supplemented (or the prospectus contained in a new registration
statement filed by the Company pursuant to Paragraph 3(q)), includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if, in the
reasonable opinion of either such counsel, it is necessary at any time to amend
the Prospectus (or the prospectus contained in such new registration statement)
to comply with the Act, the Company will notify you promptly and prepare and
file with the Commission an
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appropriate amendment or supplement in accordance with Section 10 of the Act and
will furnish to you copies thereof.
(f) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time the Registration Statement becomes effective, to
qualify the Securities for offering and sale under the securities laws or blue
sky laws of such jurisdictions as you may reasonably designate; provided,
however, that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction or to make any changes in its capital structure or
certificate of incorporation or in any other material aspects of its business or
to enter into any material agreement with any Blue Sky commissioner. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable, use
it best efforts to file and make such statements or reports at such times as are
or may reasonably be required by the laws of such jurisdiction to continue such
qualification until none of the Warrants are outstanding.
(g) The Company will make generally available (within the meaning of
Section 11(a) of the Act and the Regulations) to its security holders, as soon
as practicable, but in no event later than the first day of the eighteenth full
calendar month following the Effective Date, an earnings statement of the
Company, which will be in reasonable detail but which need not be audited,
covering a period of at least twelve months beginning after the Effective Date,
which earnings statements shall satisfy the requirements of Section 11(a) of the
Act and the Regulations as then in effect. The Company may discharge this
obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on the Effective Date
(unless the Company shall no longer have a class of equity securities registered
under Section 12(b) or 12(g) of the Exchange Act), the Company will furnish to
its stockholders an annual report (including financial statements audited by its
independent public accountants), in accordance with Rule 14a-3 under the
Exchange Act, and, at its expense, furnish to the Underwriter (i) within 90 days
after the end of each fiscal year of the Company, a consolidated balance sheet
of the Company and its consolidated subsidiaries and a separate balance sheet of
each subsidiary of the Company the accounts of which are not included in such
consolidated balance sheet as of the end of such fiscal year, and consolidated
statements of operations, stockholder's equity and cash flows of the Company and
its consolidated subsidiaries and separate statements of operations,
stockholder's equity and cash flows of each of the subsidiaries of the Company
the accounts of which are not included in such consolidated statements, for the
fiscal year then ended all in reasonable detail and all certified by independent
accountants (within the meaning of the Act and the Regulations), (ii) within 45
days after the end of each of the first three fiscal quarters of each fiscal
year, similar balance sheets as of the end of such fiscal quarter and similar
statements of operations, stockholder's equity and cash flows for the fiscal
quarter then ended, all in reasonable detail, and subject to year end
adjustment, all certified by the Company's principal financial officer or the
Company's principal accounting officer as having been prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
(iii) as soon as available, each report furnished to or filed with the
Commission or any securities exchange and each report and financial statement
furnished to the Company's stockholders generally, and (iv) as soon as
available, such other material as the Underwriter may from time to time
reasonably request regarding the financial condition and operations of the
Company; provided, however, that the Underwriter shall use such other material
only in connection with its activities as Underwriter hereunder and shall
otherwise keep such other material confidential.
(i) For a period of twelve months from the Closing Date, the
Company, at its expense, shall cause its regularly engaged independent
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certified public accountants to review (but not audit), the Company's financial
statements for each of the first three quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q quarterly
report and the mailing,if any, of quarterly financial information to
stockholders.
(j) Prior to the Closing Date or the Option Closing Date (if any),
the Company will not, directly or indirectly, without your prior written
consent, which shall not be unreasonably withheld or delayed, issue any press
release or other public announcement or hold any press conference with respect
to the Company or its activities with respect to the Offering (other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations or otherwise required by
law).
(k) The Company will deliver to you prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and will not file any such amendment or supplement to
which you shall reasonably object after being furnished such copy.
(l) During the period of 120 days commencing on the date hereof, the
Company will not at any time take, directly or indirectly, any action designed
to, or which will constitute or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Securities to
facilitate the sale or resale of any of the Securities.
(m) The Company will apply the net proceeds from the Offering
received by it substantially in the manner set forth under "Use of Proceeds" in
the Prospectus.
(n) Counsel for the Company, the Company's accountants, and the
officers and directors of the Company will, respectively, furnish the opinions,
the letters and the certificates referred to in subsections of Paragraph 9
hereof, and, if the Company shall file any amendment to the Registration
Statement relating to the offering of the Securities or any amendment or
supplement to the Prospectus relating to the offering of the Securities
subsequent to the Effective Date, such counsel, such accountants, and such
officers and directors, respectively, will, at the time of such filing or at
such subsequent time as you shall specify, so long as Securities being
registered by such amendment or supplement are being underwritten by the
Underwriter, furnish to you such opinions, letters and certificates, each dated
the date of its delivery, of the same nature as the opinions, the letters and
the certificates referred to in said Paragraph 9, as you may reasonably request,
or, if any such opinion or letter or certificate cannot be furnished by reason
of the fact that such counsel or such accountants or any such officer or
director believes that the same would be inaccurate, such counsel or such
accountants or such officer or director will furnish an accurate opinion or
letter or certificate with respect to the same subject matter.
(o) The Company will comply in all material respects with all of the
provisions of any undertakings contained in the Registration Statement.
(p) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued shares of Common Stock which are
issuable upon exercise of the Underwriter's Warrants (including the underlying
securities) outstanding from time to time.
(q) The Company will timely prepare and file at its sole cost and
expense one or more post-effective amendments to the Registration Statement or a
new registration statement as required by law as will permit Underwriter's
Warrant holders to be furnished with a current prospectus in the event and at
such time as the Underwriter's Warrants are exercised, and the
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Company will use its best efforts and due diligence to have the same be declared
effective (with the intent that the same be declared effective as soon as the
Underwriter's Warrants become exercisable) and to keep the same effective so
long as the Underwriter's Warrants are outstanding. The Company will deliver a
draft of each such post-effective amendment or new registration statement to the
Underwriter at least ten days prior to the filing of such post-effective
amendment or registration statement.
(r) So long as any of the Underwriter's Warrants remain outstanding,
the Company will timely deliver and supply to its Warrant agent sufficient
copies of the Company's current Prospectus, as will enable such Warrant agent to
deliver a copy of such Prospectus to any Underwriter's Warrant or other holder
where such Prospectus delivery is by law required to be made.
(s) For a period of three years from the Effective Date, the Company
shall continue to employ the services of a firm of independent certified public
accountants reasonably acceptable to the Underwriter in connection with the
preparation of the financial statements to be included in any registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto. During the same period, the Company shall employ the services of a law
firm(s) reasonably acceptable to the Underwriter in connection with all legal
work of the Company, including the preparation of a registration statement to be
filed by the Company hereunder, or any amendment or supplement thereto.
(t) The Company agrees that it will, upon the Effective Date, for a
period of no less than two years, engage a designee of the Underwriter as an
advisor (the "Advisor") to its Board of Directors where such Advisor shall
attend meetings of the Board, receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors. In
addition, such Advisor shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings including, but not limited
to (if reasonably required in connection with any meeting held outside the New
York City metropolitan area), reimbursement for food, lodging and
transportation. The Company further agrees that, during said two year period, it
shall schedule no less than four (4) formal meetings (at least one of which
shall be held "in person" and the others which may be held telephonically) of
its Board of Directors in each such year and such meetings shall be held
quarterly each year and advance notice of such meetings identical to the notice
given to directors shall be given to the Advisor. Further, during such two year
period, the Company shall give notice to the Underwriter with respect to any
proposed acquisitions, mergers, reorganizations or other similar transactions;
provided, however, that the Underwriter agrees to keep all such information
confidential and not to use such information in any way in violation of
applicable securities laws. In lieu of the Underwriter's right to designate an
Advisor, the Underwriter shall have the right during such two-year period, in
its sole discretion, to designate one person for election as a Director of the
Company and the Company will utilize its best efforts to obtain the election of
such person who shall be entitled to receive the same compensation, expense
reimbursements and other benefits as other non-officer Directors, including, but
not limited to (if reasonably required in connection with any meeting held
outside the New York City metropolitan area), reimbursement for food, lodging
and transportation, but excluding any warrants, options or shares of equity
securities issued to any other Directors as an inducement for joining the Board
or for continuing membership on the Board. It is currently anticipated that
Directors shall receive $500 for each board meeting attended in person.
The Company agrees to indemnify and hold the Underwriter and such
Advisor or Director harmless against any and all claims, actions, damages, costs
and expenses, and judgments arising solely out of the attendance and
participation of your designee at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its officers and directors, it agrees, if
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possible, to include the Underwriter's designee as an insured under such policy.
(u) Upon the Closing Date, the Company shall have entered into an
agreement with the Underwriter in form reasonably satisfactory to the
Underwriter (the "Consulting Agreement"), pursuant to which the Underwriter will
be retained as a management and financial consultant for a three-year period
commencing as of the Closing Date, and will be paid a fee of $3,000 a month for
a term of three years, all of which ($108,000) shall be paid upon the Closing
Date.
(v) The Common Stock shall be quoted on the Nasdaq SmallCap Market
("Nasdaq"), not later than the Closing Date. Thereafter, (unless the Company is
acquired) the Company will effect and use its best efforts to maintain such
listing or cause such securities to be listed on a national securities exchange
or in a comparable inter-dealer quotation system for at least five years from
the date of this Agreement (or until such earlier date on which no Warrants
remain outstanding).
(w) The Company will apply for listing in Standard and Poors
Corporation Reports or Moodys OTC Guide and shall use its best efforts to have
the Company included in such publications for at least five years from the
Closing Date (unless the Common Stock is listed on the New York Stock Exchange
or the American Stock Exchange or unless the Company shall no longer have a
class of equity securities registered under Section 12(b) or 12(g) of the
Exchange Act).
(x) The Company has obtained from each person who is currently an
officer or director of the Company or a stockholder of the Company who holds
(after taking into account the issuance of the Securities in the Offering)
greater than 5% of the Company's outstanding securities, a written agreement, in
form and substance reasonably satisfactory to you and your counsel, to the
effect that such person shall not offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, without your prior written consent (or
pursuant to such other agreement with respect to the sale of capital stock as
may be required by state "Blue Sky" laws in order to qualify the Offering in any
such State), any shares of the Common Stock owned by such person or any
securities convertible into, or exchangeable for, or warrants to purchase or
acquire, shares of Common Stock, for a period of eighteen months from the
Effective Date. For a period of eighteen months from the Effective Date, the
Company shall not issue any shares of Common Stock or preferred stock or any
warrants, options or other rights to purchase Common Stock or preferred stock
without the consent of the Underwriter, except for (i) the Securities and the
Additional Securities, (ii) the Underwriter's Securities, (iii) securities
issuable upon the exercise of other options or warrants outstanding as of the
Closing Date, (iv) options to purchase up to 375,000 shares of Common Stock
pursuant to the Company's existing stock option plan and shares of Common Stock
issuable upon the exercise of such options, (v) up to 250,000 options or
warrants issuable in connection with the hiring or retention of senior
executives who are not currently affiliated or associated with the Company, and
(vi) shares of Common Stock or preferred stock or any warrants, options or other
rights to purchase Common Stock or preferred stock in connection with strategic
alliances, partnerships, mergers, acquisitions or joint ventures, with the
consent of the Underwriter which shall not be unreasonably withheld or delayed;
provided, however, that the Underwriter will bear its own expenses incurred in
connection with the granting of such consent (including, but not limited to any
independent due diligence and reimbursement to the Company for any costs
associated with obtaining a fairness opinion at the request of the Underwriter).
(y) The Company will use its best efforts to obtain, as soon after
the Closing Date as is reasonably possible, liability insurance covering its
officers and directors.
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(z) The Company agrees that it will employ the services of a
financial public relations firm reasonably acceptable to the Underwriter for a
period of at least twelve months following the Effective Date.
4. Sale, Purchase and Delivery of Securities; Closing Date; Public
Offering.
(a) On the basis of the warranties, representations and agreements
herein contained, and subject to the satisfaction of all the terms and
conditions of this Agreement, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, the
Securities at a price of $6.00 per share of Common Stock, less, in the case of
each such Security, an underwriting discount of ten percent (10%) of the price
for such Security. The Underwriter may allow a concession not exceeding $. per
share of Common Stock to Selected Dealers who are members of the NASD, and to
certain foreign dealers, and such dealers may reallow to NASD members and to
certain foreign dealers a concession not exceeding $. per share of Common Stock.
(b) Delivery of the Securities and payment therefor shall be made at
10:00 A.M., New York time on the Closing Date, as hereinafter defined, at the
offices of the Underwriter or such other location as may be agreed upon by you
and the Company. Delivery of certificates for the Common Stock (in definitive
form and registered in such names and in such denominations as you shall request
by written notice to the Company delivered at least four business days' prior to
the Closing Date), shall be made to you for the account of the Underwriter
against payment of the purchase price therefor by certified or bank check or
wire transfer payable in New York Clearing House funds to the order of the
Company. The Company will make such certificates available for inspection at
least one business day prior to the Closing Date at such place as you shall
designate.
(c) The "Closing Date" shall be , 1997, or such other date not later
than the fourth business day following the effective date of the Registration
Statement as you shall determine and advise the Company by at least three full
business days' notice.
(d) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Securities by the Company to the
Underwriter shall be borne by the Company. The Company will pay and hold the
Underwriter, and any subsequent holder of the Securities, harmless from any and
all liabilities with respect to or resulting from any failure or delay in paying
federal and state stamp taxes, if any, which are payable in connection with the
original issuance or sale to the Underwriter of the Securities or any portions
thereof.
(e) As soon, on or after the Effective Date, as the Underwriter
deems advisable, the Underwriter shall make a public offering of the Securities
(other than to residents of or in any jurisdiction in which qualification of the
Securities is required and has not become effective) at the initial public
offering prices and upon the other terms set forth in the Prospectus. The
Underwriter may from time to time increase or decrease the public offering
prices of the Securities after the distribution thereof has been completed to
such extent as the Underwriter, in its sole discretion, deems advisable.
5. Sale, Purchase and Delivery of Additional Securities; Option Closing
Date.
(a) Upon the basis of the representations, warranties and agreements
herein contained, and subject to the satisfaction of all the terms and
conditions of this Agreement, the Company agrees to sell to the Underwriter, and
the Underwriter shall have the option (the "Option") to purchase from the
Company, the Additional Securities at the same price per Security as set forth
in Paragraph 4(a) above. Additional Securities may be
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purchased solely for the purpose of covering over-allotments made in connection
with the distribution and sale of the Securities as contemplated by the
Prospectus.
(b) The Option to purchase all or part of the Additional Securities
covered thereby is exercisable by you at any time and from time to time before
the expiration of a period of 45 calendar days from the date of the Effective
Date (the "Option Period") by written notice to the Company setting forth the
number of Additional Securities for which the Option is being exercised, the
name or names in which the certificates for such Additional Securities are to be
registered and the denominations of such certificates. Upon each exercise of the
Option, the Company shall sell to the Underwriter the aggregate number of
Additional Securities specified in the notice exercising such Option.
(c) Delivery of the Additional Securities with respect to which
Options shall have been exercised and payment therefor shall be made at 10:00
A.M., New York time on the Option Closing Date, as hereinafter defined, at the
offices of the Underwriter or at such other locations as may be agreed upon by
you and the Company. Delivery of certificates for Additional Securities shall be
made to you for the account of the Underwriter against payment of the purchase
price therefor by certified or bank check or wire transfer in New York Clearing
House Funds to the order of the Company. The Company will make certificates for
Additional Securities to be purchased at the Option Closing Date available for
inspection at least one business day prior to such Option Closing Date at such
place as you shall designate.
(d) The "Option Closing Date" shall be the date not later than three
business days after the end of the Option Period as you shall determine and
advise the Company by at least three full business days' notice, unless some
other time is agreed upon between you and the Company.
(e) The obligations of the Underwriter to purchase and pay for
Additional Securities at such Option Closing Date shall be subject to compliance
as of such date with all the conditions specified in Paragraph 9 herein and the
delivery to you of opinions, certificates and letters, each dated such Option
Closing Date, substantially similar in scope to those specified in Paragraph 9
herein.
(f) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Additional Securities by the Company to
the Underwriter shall be borne by the Company. The Company will pay and hold the
Underwriter, and any subsequent holder of Additional Securities, harmless from
any and all liabilities with respect to or resulting from any failure or delay
in paying federal and state stamp taxes, if any, which are payable in connection
with the original issuance or sale to the Underwriter of the Additional
Securities or any portion thereof.
6. Intentionally Omitted
7. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the Company that:
(a) The Underwriter is a member in good standing of the NASD, and
has complied with all NASD requirements concerning net capital and compensation
to be received in connection with the Offering.
(b) To the Underwriter's knowledge, there are no claims for services
in the nature of a finder's or origination fee with respect to the sale of the
Securities hereunder, which the Company is, or may become, obligated to pay.
8. Payment of Expenses.
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(a) The Company will pay and bear all costs, fees and expenses
incident to and in connection with: (i) the preparation, printing and filing of
the offering documents and amendments thereto, including NASD, SEC and filing
fees, preliminary and final Prospectus and the printing of the Underwriting
Agreement, the Agreement Among Underwriters and the Selected Dealer's Agreement,
a Blue Sky Memorandum, material to be circulated to any underwriter by the
Underwriter and other incidental material; (ii) the mailing and distribution
costs for the preliminary and final Prospectus; (iii) the issuance and delivery
of certificates representing the Securities, including original issue and
transfer taxes, if any; (iv) the qualification of the Securities and any shares
of Company's Common Stock underlying the Securities under state securities or
Blue Sky Laws, including counsel fees of the Underwriter relating thereto, not
to exceed $30,000 ($10,000 of which shall be due and payable upon the
commencement of Blue Sky filings together with appropriate state filing fees),
plus disbursements relating to, but not limited to, long-distance telephone
calls, photocopying, messengers, excess postage, overnight mail and courier
services; (v) the fees and disbursements of counsel for the Company and the
accountants for the Company; and (vi) advertising costs and expenses, including,
but not limited to, the costs and expenses in connection with the "road show,"
memorabilia and "tombstones" in publications selected by the Underwriter.
(b) In addition to the expenses to be paid and borne by the Company
referred to in Paragraph 8(a) above, the Company shall reimburse you at closing
for expenses incurred by you in connection with the Offering (for which you need
not make any accounting), in the amount of 3% of the price to the public of the
Securities and Additional Securities sold in the Offering. This 3%
non-accountable expense allowance shall cover the fees of your legal counsel,
but shall not include any expenses for which the Company is responsible under
Paragraph 8(a) above, including the reasonable fees and disbursements of your
legal counsel with respect to Blue Sky matters.
9. Conditions of Underwriter's Obligations.
The obligations of the Underwriter to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy in
all material respects of the representations and warranties of the Company
contained herein (except those representations and warranties that speak as of a
specific date) and the accuracy in all material respects of the statements of
the Company and its officers and directors made pursuant to the provisions
hereof, as of the date hereof and as of the Closing Date, and to the performance
by the Company in all material respects of its covenants and agreements
hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., New York time, on the date following the date of this Agreement,
or such later date and time as shall be consented to in writing by you and, on
or prior to the Closing Date, no stop order suspending the effectiveness of the
Registration Statement and no proceedings for that purpose shall have been
instituted or to your knowledge or the knowledge of the Company, shall be
pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriter and after the date hereof
no amendment or supplement shall have been filed to the Registration Statement
or Prospectus without your prior consent, which shall not have been unreasonably
withheld or delayed.
(b) The Underwriter shall not have advised the Company that the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto contains an untrue statement of a fact which, in the Underwriter's
reasonable opinion, is material, or omits to state a fact which, in the
Underwriter's reasonable opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
E-15
(c) Between the time of the execution and delivery of this Agreement
and the Closing Date, there shall be no litigation instituted against the
Company or any of its officers or directors and between such dates there shall
be no proceeding instituted or, to the Company's knowledge, threatened against
the Company or any of its officers or directors before or by any federal, state
or county commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, in which litigation or proceeding an
unfavorable ruling, decision or finding would have a Material Adverse Effect.
(d) The representations and warranties of the Company contained
herein and in each certificate and document contemplated under this Agreement to
be delivered to you shall be true and correct in all material respects at the
Closing Date as if made at the Closing Date, and all covenants and agreements
contained herein to be performed on the part of the Company, and all conditions
contained herein to be fulfilled or complied with by the Company at or prior to
the Closing Date shall be fulfilled or complied with in all material respects.
(e) At the Closing Date, you shall have received the opinion of
Xxxxxxxxx & Xxxxxx, counsel to the Company, dated as of such Closing Date,
addressed to the Underwriter and in form and substance satisfactory to counsel
to the Underwriter, to the effect that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with all
requisite corporate power and authority to own its properties and to conduct its
business as described in the Registration Statement. The Company is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where its ownership, leasing, licensing or use of property and
assets or the conduct of its business makes such qualification necessary, except
where failure to be so qualified or in good standing will not have a Material
Adverse Effect;
(ii) The Company has all requisite corporate power and
authority to execute, deliver and perform the Underwriting Agreement, the
Consulting Agreement (to be entered into as of the Closing Date), and the
Underwriter's Warrants and to consummate the transactions contemplated thereby.
The execution, delivery and performance of the Underwriting Agreement, the
Consulting Agreement, and the Underwriter's Warrants by the Company, the
consummation by the Company of the transactions therein contemplated and the
compliance by the Company with the terms of the Underwriting Agreement, the
Consulting Agreement, and the Underwriter's Warrants have been duly authorized
by all necessary corporate action, the Underwriting Agreement has been duly
executed and delivered by the Company, and each of the Consulting Agreement, and
the Underwriter's Warrants will have been duly executed and delivered by the
Company as of the Closing Date. The Underwriting Agreement is, and, as of the
Closing Date each of the Consulting Agreement and the Underwriter's Warrants
will be, a valid and binding obligation of the Company, enforceable in
accordance with its terms, except insofar as enforceability of indemnification
and contribution provisions may be limited by applicable law or policy or
equitable principles, and except as enforceability may be limited by bankruptcy,
reorganization, moratorium, insolvency or other laws affecting the
enforceability of creditors' rights generally and rules of law governing
specific performance, injunctive relief and other equitable remedies.
(iii) The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement and the Underwriter's Warrants
by the Company, and the consummation by the Company of the transactions therein
or herein contemplated will not, with or without the giving of notice or the
lapse of time, or both, (A) result in a violation of the Certificate of
Incorporation or by-laws of the Company, in each case as the same may be
amended, (B) to the best of such counsel's knowledge, result in a breach of, or
conflict with, any terms or provisions of or constitute a
E-16
default under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to, any indenture,
mortgage, note, contract, commitment or other material agreement or instrument
known to such counsel to which the Company is a party or by which the Company or
any of its properties or assets are bound or affected, except where any of the
foregoing would not have a Material Adverse Effect; (C) to the best of such
counsel's knowledge, violate any existing applicable law, rule or regulation or
judgment, order or decree known to such counsel of any governmental agency or
court, domestic or foreign, having jurisdiction over the Company or any of its
properties or business, which judgment, order or decree is binding on the
Company or to which any of its business or operations is subject, except where
any such violation would not have a Material Adverse Effect; or (D) to the best
of such counsel's knowledge, have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company to own or lease and operate its properties and to conduct its
business or the ability of the Company to make use thereof, in each case in the
State of New York;
(iv) To the best of such counsel's knowledge, no
authorization, approval, consent, order, registration, license or permit of any
court or governmental agency or body (other than under the Act, the Regulations
and applicable state securities or Blue Sky laws) is required for the
authorization, issuance, sale and delivery of the Securities, the Additional
Securities, or the Underwriter's Warrants, and the consummation by the Company
of the transactions contemplated by the Underwriting Agreement, the Consulting
Agreement, or the Underwriter's Warrants;
(v) Such counsel has been advised by the staff of the
Commission that the Registration Statement was declared effective under the Act
by the Commission on , 1997; to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has been issued
by the Commission, and no proceedings for that purpose have been instituted or
are pending or threatened under the Act;
(vi) The Registration Statement and the Prospectus, as of the
Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which such counsel need express no
opinion), comply as to form in all material respects with the requirements of
the Act and Regulations and, to the best of such counsel's knowledge, the
conditions for use of a registration statement on Form SB-2 have been satisfied
by the Company;
(vii) The description in the Registration Statement and the
Prospectus of statutes, regulations, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate summaries of such
statutes, regulations, contracts and other documents in all material respects
and, to the best of such counsel's knowledge, there are no material contracts or
documents of a character required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement,
which are not so described or filed as required.
(viii) Each share of Common Stock outstanding as of the date
of the Prospectus or immediately prior to the Closing Date has been duly
authorized and validly issued and is fully paid and nonassessable. To the best
of such counsel's knowledge, none of the Common Stock outstanding as of either
such date or time has been issued in violation of the preemptive rights of any
stockholder of the Company. The authorized Common Stock conforms in all material
respects to the description thereof contained in the Registration Statement and
Prospectus. To the best of such counsel's knowledge, except as set forth in the
Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise (which has not been waived or terminated), to
have such securities registered under the Act;
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(ix) The issuance and sale of the Securities, the Additional
Securities and the Underwriter's Warrants have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof and thereof,
the Common Stock comprising the Securities will be validly issued, fully paid
and nonassessable. Neither the Securities nor the Additional Securities are
subject to statutory preemptive rights of any stockholder of the Company. The
certificates representing the Securities are in proper legal form;
(x) The Underwriter's Warrants will constitute valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, to issue and sell, upon exercise thereof and payment pursuant
to the terms thereof, the numbers and types of securities of the Company called
for thereby. All corporate action required to be taken for the authorization,
issuance and sale of the Securities has been duly and validly taken. The
Underwriter's Warrants conform in all material respects to the descriptions
thereof contained in the Registration Statement and Prospectus;
(xi) Good title to the Securities, free and clear of all
liens, encumbrances, equities, security interests and claims (except those that
may arise from actions or inactions of the Underwriter), has been transferred to
the Underwriter, provided that the Underwriter purchased the Securities in good
faith and without notice of any such lien, encumbrance, equity, security or
claim or any other adverse claim within the meaning of the New York Uniform
Commercial Code;
(xii) Assuming that the Underwriter exercises the Option to
purchase the Additional Securities and makes payments therefor in accordance
with the terms of the Underwriting Agreement, upon issuance of the Additional
Securities to the Underwriter pursuant hereto, good title to the Additional
Securities, free and clear of any liens, encumbrances, equities, security
interests and claims (except those that may arise from actions or inactions of
the Underwriter), will have been transferred to the Underwriter, provided that
the Underwriter purchased the Additional Securities in good faith and without
notice of any such lien, encumbrance, equity, security or claim or any other
adverse claim within the meaning of the New York Uniform Commercial Code;
(xiii) To the best of such counsel's knowledge, other than as
set forth or contemplated in the Prospectus, there are no claims, actions,
suits, proceedings, arbitrations, investigations or inquiries before any
governmental agency, court or tribunal, or before any private arbitration
tribunal, pending or threatened against the Company or to which its properties
or business is subject, which, individually or in the aggregate, would have a
Material Adverse Effect.
In addition, such counsel shall state that during the course
of the preparation of the Registration Statement and the Prospectus, such
counsel participated in conferences with officers of the Company, and, while
such counsel are not passing upon, has not verified or independently
investigated, and does not assume any responsibility for the accuracy,
completeness or fairness of the statements or documents contained in the
Registration Statement or the Prospectus, during the course of such preparation
and the foregoing conferences, no facts came to such counsel's attention which
caused such counsel to believe that (A) the Registration Statement (except as to
the financial statements and other financial data contained therein, as to which
such counsel need express no opinion), as of the Effective Date, contained any
untrue statement of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or that (B) the Prospectus (except as to the
financial statements and other financial data contained therein, as to which
such counsel need express no opinion), as of its date, contained any untrue
statement or a material fact or omitted to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
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In rendering such opinions, such counsel may limit their
opinions to matters governed by the federal laws of the United States, the laws
of the State of New York and the general corporation laws of the State of
Delaware, and may rely as to matters of fact, to the extent they deem proper, on
certificates and written statements of officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to counsel to the Underwriter.
(f) On or prior to the Closing Date, counsel for the Underwriter
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review the matters
referred to in subparagraph (e) of this Paragraph 9, or in order to evidence the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions herein contained.
(g) Prior to the Closing Date:
(i) There shall have been no material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside the
ordinary course of business, entered into by the Company from the latest date as
of which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is material to the Company, which is (x) required
to be disclosed in the Prospectus or Registration Statement and is not so
disclosed, and (y) likely to have a Material Adverse Effect;
(iii) The Company shall not be in default under any material
provision of any instrument relating to any outstanding indebtedness, except as
described in the Prospectus and except such as will not have a Material Adverse
Effect;
(iv) No material amount of the assets of the Company shall
have been pledged, mortgaged or otherwise encumbered, except as set forth in the
Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or in equity, shall
have been pending or to its knowledge threatened against the Company or
affecting any of its properties or businesses before or by any court or federal
or state commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect, except as set
forth in the Registration Statement and Prospectus;
(vi) No stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or, to the Company's knowledge,
threatened by the Commission; and
(vii) Each of the representations and warranties of the
Company contained in this Agreement and in each certificate and document
contemplated under this Agreement to be delivered to you was, when originally
made and is at the time such certificate is dated, true and correct in all
material respects.
(h) Concurrently with the execution and delivery of this Agreement
and at the Closing Date, you shall have received a certificate of the Company
signed by the Chief Executive Officer of the Company and the principal financial
officer of the Company, dated as of the Closing Date, to the effect that the
conditions set forth in subparagraph (g) above have been satisfied in all
material respects and that, as of the Closing Date, the representations and
warranties of the Company set forth in Paragraph 2 herein
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are true and correct, as if made on and as of the Closing Date, in all material
respects. Any certificate signed by any officer of the Company and delivered to
you or to counsel for the Underwriter shall be deemed a representation and
warranty by the Company to the Underwriter as to the statements made therein.
(i) At the time this Agreement is executed, and at the Closing Date,
you shall have received a letter, addressed to the Underwriter and in form and
substance reasonably satisfactory in all material respects to you and counsel
for the Underwriter, from Price Waterhouse LLP dated as of the date of this
Agreement and as of the Closing Date, substantially in the form of Exhibit A
hereto.
(j) All proceedings taken in connection with the authorization,
issuance or sale of the Securities, Additional Securities and the Underwriter's
Securities as herein contemplated shall be reasonably satisfactory in form and
substance to you and to counsel to the Underwriter, and the Underwriter shall
have received from such counsel an opinion, dated as the Closing Date with
respect to such of these proceedings as you may reasonably require.
(l) The obligation of the Underwriter to purchase Additional
Securities hereunder is subject to the accuracy of the representations and
warranties of the Company contained herein on and as of the Option Closing Date
in all material respects and to the satisfaction on and as of the Option Closing
Date of the conditions set forth herein in all material respects.
(m) On the Closing Date there shall have been duly tendered to you
for your account the appropriate number of shares of Common Stock constituting
the Securities.
10. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Underwriter, each of its agents and counsel and
each person, if any, who controls the Underwriter ("controlling person") within
the meaning of either Section 15 of the Act or Section 20 of the Exchange Act,
against any and all losses, liabilities, claims, damages, actions and expenses
or liability, joint or several, whatsoever (including but not limited to any and
all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), joint or several, to which it or such controlling persons may
become subject under the Act, the Exchange Act or under any other statute or at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any Preliminary Prospectus or the Prospectus (as from time to time
amended and supplemented); in any post-effective amendment or amendments or any
new registration statement and prospectus in which is included the Warrant
Shares of the Company issued or issuable upon exercise of the Underwriter's
Warrants; or in any application or other document or written communication (in
this Paragraph 10 collectively called "application") executed by the Company or
based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the Securities, Additional Securities,
Underwriter's Warrants and Underwriter's Securities under the securities laws
thereof or filed with the Commission or any securities exchange; or the omission
or alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading (in light of the
circumstances under which they were made), unless such statement or omission was
made in reliance upon or in conformity with written information furnished to the
Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in any application, as
the case may be. Notwithstanding the foregoing, the Company shall have no
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liability under this Paragraph 10(a) if any such untrue statement or omission
made in a Preliminary Prospectus, is corrected in the Prospectus and the
Underwriter failed to deliver to the person or persons alleging the liability
upon which indemnification is being sought, at or prior to the written
confirmation of such sale, a copy of the Prospectus. This indemnity will be in
addition to any liability which the Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the
Company and each of the officers and directors of the Company who have signed
the Registration Statement, each of its agents and counsel, and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Underwriter in Paragraph 10(a), but only with
respect to any untrue statement or alleged untrue statement of any material fact
contained in or any omission or alleged omission to state a material fact
required to be stated in any Preliminary Prospectus, the Registration Statement
or Prospectus or any amendment or supplement thereof or necessary to make the
statements therein not misleading or in any application made in reliance upon,
and in conformity with, written information furnished to the Company by you
expressly for use in the preparation of such Preliminary Prospectus, the
Registration Statement or Prospectus with respect to the Underwriter or directly
relating to the transactions effected or to be effected by the Underwriter in
connection with the Offering. This indemnity agreement will be in addition to
any liability which the Underwriter may otherwise have.
(c) If any action is brought against any indemnified party (the
"Indemnitee") in respect of which indemnity may be sought against another party
pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume the
defense of the action, including the employment and fees of counsel (reasonably
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
the employment of such counsel shall have been authorized in writing by the
Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings or any other action against
the Indemnitee in respect of which indemnification is to be sought.
(d) In order to provide for just and equitable contribution under
the Act in any case in which: (i) the Underwriter makes a claim for
indemnification pursuant to Paragraph 10 hereof, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the time to appeal has expired or the last right of appeal has been denied)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Paragraph 10 provides for indemnification of such case; or (ii)
contribution under the Act may be required on the part of the Underwriter in
circumstances for which indemnification is provided under this Paragraph 10,
then, and in each such case, the Company and the Underwriter shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after any contribution from others) in such proportion so that the
Underwriter is responsible for the portion represented by dividing the total
compensation received by the Underwriter herein or in connection with the
Offering by the total purchase price of all Securities sold in the public
offering and the Company is responsible for the remaining portion; provided,
that in any such case, no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
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The foregoing contribution 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. As used in this Paragraph 10,
the term "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 to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent in writing to the settlement.
(e) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission so to notify
the contributing party will not relieve it from any liability it may have to any
other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any party,
and such party notifies a contributing party or his or its representative of the
commencement thereof within the aforesaid fifteen (15) days, the contributing
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing party shall
not be liable to any party seeking contribution on account of any settlement of
any claim, action or proceeding effected by such party seeking contribution
without the written consent of such contributing party. The indemnification
provisions contained in this Paragraph 11 are in addition to any other rights or
remedies which either party hereto may have with respect to the other or
hereunder.
11. Representations, Warranties, Agreements to Survive Delivery.
The respective indemnity and contribution agreements by the
Underwriter and the Company contained in Paragraph 10 hereof, and the covenants,
representations and warranties of the Company and the Underwriter set forth in
this Agreement, shall remain operative and in full force and effect regardless
of (i) any investigation made by the Underwriter or on its behalf or by or on
behalf of any person who controls the Underwriter, or by the Company or any
controlling person of the Company or any director or any officer of the Company,
(ii) acceptance of any of the Securities and payment therefor, or (iii) any
termination of this Agreement, and shall survive the delivery of the Securities;
and any successor of the Underwriter or the Company, or of any person who
controls you or the Company or any other indemnified party, as the case may be,
shall be entitled to the benefit of such respective indemnity and contribution
agreements. The respective indemnity and contribution agreements by the
Underwriter and the Company contained in Paragraph 10 above shall be in addition
to any liability which the Underwriter and the Company may otherwise have.
12. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 10:00 A.M., New York
time, on the first full business day following the day on which you and the
Company receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Underwriter by notifying
the Company at any time on or before the Closing Date, if any domestic or
international event or act or occurrence has materially disrupted, or in your
reasonable opinion will in the immediate future materially disrupt, securities
markets in the United States; or if trading in securities generally on the New
York Stock Exchange, the American Stock Exchange, or in the over-
E-22
the-counter market in the United States shall have been suspended, or minimum or
maximum prices for trading in securities generally shall have been fixed, or
maximum ranges for prices for securities shall have been required, on the
over-the-counter market by the NASD or NASDAQ or by order of the Commission or
any other governmental authority having jurisdiction; or if a moratorium in
foreign exchange trading by major international banks or persons has been
declared in the United States; or if the Company shall have sustained a loss
material or substantial to the Company taken as a whole by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in your
reasonable opinion, make it inadvisable to proceed with the offering, sale and
delivery of the Securities; or if there shall have been a material adverse
change in the conditions of the United States securities market in general, as
in your reasonable judgment would make it inadvisable to proceed with the
offering, sale and delivery of the Securities.
(c) If you elect to terminate this Agreement as provided in this
Paragraph 12, the Company shall be notified promptly by you by telephone or
facsimile, confirmed by letter.
(d) Anything in this Agreement to the contrary notwithstanding, if
this Agreement shall terminate or shall not be carried out within the time
specified herein by reason of any failure on the part of the Company to perform
any undertaking, or to satisfy any condition of this Agreement by it to be
performed or satisfied, the sole liability of the Company to the Underwriter, in
addition to the obligations assumed by the Company pursuant to Paragraph 8
herein, will be to reimburse the Underwriter on an accountable basis for the
following: (i) reasonable Blue Sky counsel fees and expenses to the extent set
forth in Paragraph 8(a)(iv); (ii) Blue Sky filing fees to that same extent; and
(iii) such other reasonable out-of-pocket expenses actually incurred by the
Underwriter (including the reasonable fees and disbursements of their counsel),
to the extent set forth in Paragraph 8(a), in connection with this Agreement and
the proposed offering of the Securities, but in no event to exceed the sum of
$100,000 less such amounts as shall have already been paid pursuant to Section
8(b) or otherwise. The Company shall not in any event be liable to the
Underwriter for the loss of anticipated profits from the transactions covered by
this Agreement.
Anything in this Agreement to the contrary notwithstanding, if this
Agreement shall be terminated by you because you have exercised your rights
pursuant to Paragraph 12(b) above, the Company shall not be under any liability
to you except, on an accountable basis, for the portion of the non-accountable
expense allowance referred to in Paragraph 8(b) for which expenses have actually
been paid or incurred by you, and any balance will be returned by you to the
Company.
13. Notices.
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriter, shall be mailed,
delivered or telegraphed and confirmed to the Underwriter at Xxxxxx &
Associates, Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx
X. Xxxxx, with a copy thereof to Xxxxxx X. Xxxxxxx, Esq., Xxxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
and, if sent to the Company, shall be mailed, delivered or telegraphed and
confirmed to the Company at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxxxx, President, with a copy thereof to Xxxx X.
Xxxxxxxxx, Esq., Xxxxxxxxx & Zivian, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
14. Parties.
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriter, the Company and the controlling persons, directors and
officers referred to in Paragraph 10 hereof, and their
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respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained. No purchaser of any of the Securities or Additional Securities from
the Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
15. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to the
rules governing conflict of laws, and shall supersede any agreement or
understanding, oral or in writing, express or implied, between the Company and
you relating to the sale of any of the Securities.
16. Jurisdiction and Venue.
The Company agrees that the courts of the State of New York shall have
jurisdiction over any litigation arising from this Agreement, and venue shall be
proper in the Southern District of New York.
17. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding between you and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
VIROLOGIX CORPORATION
By:___________________________
Xxxxxx X. Xxxxxx, President
Accepted as of the date first above
written:
XXXXXX & ASSOCIATES, INC.
By:_________________________________
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