EXHIBIT 1.1
800,000 UNITS, EACH UNIT CONSISTING OF
ONE (1) SHARE OF SERIES C CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.0001 PER SHARE
AND
ONE (1) SERIES II REDEEMABLE COMMON STOCK PURCHASE WARRANT
PSI INDUSTRIES, INC.
UNDERWRITING AGREEMENT
----------------------
HOUSTON, TEXAS
FEBRUARY ___, 1999
FAS Wealth Management Services, Inc.
00000 Xxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
PSI Industries, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to you (the "Underwriter"), an aggregate of 800,000 Units,
each consisting of one share of Series C Convertible Preferred Stock, par value
$.0001 per share ("Preferred Stock") and one Series II Redeemable Common Stock
Purchase Warrant ("Warrant"). The Units may be referred to hereinafter as the
"Securities." Each Warrant entitles the registered holder thereof to purchase
one (1) share of Common Stock, par value $.0001 per share ("Common Stock") at an
exercise price of $__________ (115% of the closing market price per share of the
Common Stock on the day immediately preceding the proposed offering of the
Preferred Stock) for a period of four years, commencing ______________ 2000,
[one year from the effective date of the public offering ("Effective Date"),]
through ______________, 2004 (four years from the Effective Date). The Warrants
are subject to redemption by the Company at any time commencing ______________,
2000 (twelve months from the Effective Date) at $.05 per warrant, if the closing
bid price per share of Common Stock has equaled or exceeded $____________ (170%
of the closing bid price of the Common Stock on the Effective Date) for any 20
consecutive trading days ending within ten days of the written notice of
redemption. In addition, the Company proposes to grant to the Underwriter the
option referred to in Section 2(b) to purchase all or any part of an aggregate
of 120,000 additional Units.
You have advised the Company that you desire to purchase the
Securities. The Company confirms the agreements made by it with respect to the
purchase of the Securities by the Underwriter as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to, and agree with you that:
(a) A registration statement (File No. _____) on Form
SB-2 relating to the public offering of the Securities,
including a form of prospectus subject to completion, copies
of which have heretofore been delivered to you, has been
prepared 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 Securities
and Exchange Commission (the "Commission") thereunder, and has
been filed with the Commission under the Act and one or more
amendments to such registration statement may have been so
filed. After the execution of this Agreement, the Company will
file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by
the Commission to be effective under the Act, a prospectus in
the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have
been filed in such registration statement), with such changes
or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been
provided to and approved by you prior to the execution of this
Agreement, or (ii) if such registration statement, as it may
have been amended, has not been declared by the Commission to
be effective under the Act, an amendment to such registration
statement, including a form of such prospectus, a copy of
which amendment has been furnished to and approved by you
prior to the execution of this Agreement. As used in this
Agreement, the term "Company" means PSI Industries, Inc.
and/or each of its subsidiaries (its "Subsidiaries"); the term
"Registration Statement" means such registration
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statement, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits
thereto and including any information omitted therefrom
pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed
with such registration statement or any amendment thereto
(including the prospectus subject to completion, if any,
included in the Registration Statement or any amendment
thereto at the time it was or is declared effective); and the
term "Prospectus" means the prospectus first filed with the
Commission pursuant to Rule 424(b) under the Act, or, if no
prospectus is required to be filed pursuant to said Rule
424(b), such term means the prospectus included in the
Registration Statement; except that 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) Neither the Commission nor the "blue-sky" or
securities authority of any jurisdiction has issued any order
preventing or suspending the use of any Preliminary
Prospectus. At the time the Registration Statement becomes
effective and at all times subsequent thereto up to and on the
First Closing Date (as hereinafter defined) or the Option
Closing Date, as the case may be, (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 not misleading; provided,
however, that the Company makes no representations, warranties
or agreements 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 or on behalf of the Underwriter 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 the
identity of counsel to the Underwriter under the heading
"Legal Matters" constitute for purposes of this Section and
Section 6(b) the only information furnished in writing by or
on behalf of the Underwriter for inclusion in the Registration
Statement and Prospectus, as the case may be.
(c) The Company and its Subsidiaries have been duly
incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation with full corporate power and authority to own
their properties and conduct their business as described in
the Prospectus and are duly qualified or licensed to do
business as foreign corporations and are in good standing in
each other jurisdiction in which the nature of their business
or the character or location of their properties require such
qualification, except where the failure to so qualify will not
materially adversely affect the Company's or Subsidiaries'
business, properties or financial condition.
(d) The authorized, issued and outstanding capital
stock of the Company and its Subsidiaries, including the
predecessors of the Company, is as set forth in the Company's
financial statements contained in the Registration Statement;
the shares of issued and outstanding capital stock of the
Company and its Subsidiaries set forth therein have been duly
authorized, validly issued and are fully paid and
nonassessable; 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 or its Subsidiaries have been granted or entered
into by the Company or its Subsidiaries; and the capital stock
conforms to all statements relating thereto contained in the
Registration Statement and Prospectus.
(e) The shares of Preferred Stock underlying the
Units, when paid for, issued and delivered 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, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the right of
creditors generally or by general equitable principles, and
entitled to the rights and preferences provided by the
Certificate of Incorporation, which will be in the form filed
as an exhibit
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to the Registration Statement. The terms of the Preferred
Stock conform to the description thereof in the Registration
Statement and Prospectus.
The Warrants, when paid for, issued and delivered
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, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the right of
creditors generally or by general equitable principles, 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 upon the exercise of the Warrants 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 and free of preemptive
rights. The Warrant Agreement has been duly authorized and,
when executed and delivered pursuant to this Agreement,
assuming due authorization, execution and delivery by the
transfer agent, 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, except
as enforceability may be limited by bankruptcy, insolvency or
other laws affecting the rights of creditors generally or by
general equitable principles. The Warrants and Warrant
Agreement conform to the respective descriptions thereof in
the Registration Statement and Prospectus.
The Underwriter's Purchase Option (as defined in the
Prospectus), when paid for, issued and delivered pursuant to
this Agreement will constitute valid and legally binding
obligations of the Company enforceable in accordance with its
terms except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors
generally or by general equitable principles. The Securities
issuable upon exercise of the Purchase Option (and the shares
of Common Stock issuable upon exercise of the Warrants) when
issued and paid for in accordance with this Agreement, the
Purchase Option and the Warrant Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and
free of preemptive rights
(f) This Agreement has been duly and validly
authorized, executed and delivered by the Company. The Company
has full power and 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 in connection with the authorization, issuance and
sale of the Securities or the Purchase Option, except such as
may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, or which
would not have a material adverse effect on the condition
(financial or otherwise), business prospects, net worth or
properties of the Company and the Subsidiaries taken as a
whole (a "Material Adverse Effect"), the Company and its
Subsidiaries are not in violation, breach or default of or
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 or
violation of, any of the terms or provisions of, or constitute
a 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 its Subsidiaries pursuant to the
terms of any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the
Company or its Subsidiaries is a party or by which the Company
or its Subsidiaries may be bound or to which any of the
property or assets of the Company or its Subsidiaries is
subject, nor will such action result in any violation of the
provisions of the certificate of incorporation or the by-laws
of the Company or its Subsidiaries, as amended, or any statute
or any order, rule or regulation applicable to the Company or
its Subsidiaries of any court or of any regulatory authority
or other governmental body having jurisdiction over the
Company or its Subsidiaries.
(h) Subject to the qualifications stated in the
Prospectus, the Company and its Subsidiaries have good and
marketable title to all properties and assets described in the
Prospectus as owned by them, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not
materially significant or important in relation to their
business or are otherwise disclosed in the Prospectus and the
financial statements set forth in the Prospectus (the
"Financial Statements");
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all of the material leases and subleases under which the
Company or its Subsidiaries is the lessor or sublessor of
properties or assets or under which the Company and its
Subsidiaries 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, the Company and
its Subsidiaries are not in default in any material respect
with respect to any of the terms or provisions of any of such
leases or subleases, and, to the best knowledge of the
Company, no claim has been asserted by anyone adverse to
rights of the Company or its Subsidiaries as lessor,
sublessor, lessee or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the
right of the Company or its Subsidiaries 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 its Subsidiaries own or
lease all such properties described in the Prospectus as are
necessary to their operations as now conducted and, except as
otherwise stated in the Prospectus, as proposed to be
conducted as set forth in the Prospectus.
(i) Feldman, Sherb, Xxxxxxx & Co., P.C., which has
given its report on certain of the Financial Statements, is
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 present fairly the financial position and
results of operations and changes in cash flow position of the
Company and its Subsidiaries on the basis stated in the
Registration Statement, at the respective dates and for the
respective periods to which they apply. Said statements and
schedules and related notes have been prepared in accordance
with generally accepted accounting principles applied on a
basis which is consistent during the periods involved except
as otherwise disclosed in the Prospectus and Registration
Statement.
(k) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus and except as otherwise disclosed or contemplated
therein, the Company and its Subsidiaries have not incurred
any liabilities or obligations, direct or contingent, not in
the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which
would have a Material Adverse Effect, and there has not been
any change in the capital stock of, or any incurrence of
short-term or long-term debt by, the Company or its
Subsidiaries or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or its
Subsidiaries or any material adverse change or any development
involving, so far as the Company or its Subsidiaries can now
reasonably foresee a prospective adverse change in the
condition (financial or otherwise), net worth, results of
operations, business, key personnel or properties of it which
would have a Material Adverse Effect.
(l) Except as set forth in the Prospectus, there is
not now pending or, to the knowledge of the Company,
threatened, any action, suit or proceeding to which the
Company or its Subsidiaries is a party before or by any court
or governmental agency or body, which might result in any
material adverse change in the financial condition, business
prospects, net worth, or properties of the Company or its
Subsidiaries, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination
on the basis of age, sex, religion or race; and no labor
disputes involving the employees of the Company or its
Subsidiaries exist or to the knowledge of the Company, are
threatened which might be expected to have a Material Adverse
Effect except as otherwise disclosed in the Prospectus and the
Financial Statements.
(m) Except as disclosed in the Prospectus, the
Company and its Subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns required to
be filed as of the date hereof and have paid all taxes shown
as due thereon; and there is no tax deficiency which has been,
or to the knowledge of the party, may be asserted against the
Company or its Subsidiaries.
(n) Except as disclosed in the Prospectus, the
Company and its Subsidiaries have sufficient licenses, permits
and other governmental authorizations currently necessary for
the conduct of their business or the ownership of their
properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses
adequate rights 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
businesses and have not
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received any notice of conflict with the asserted rights of
others in respect thereof. To the best knowledge of the
Company, none of the activities or business of the Company and
its Subsidiaries are in violation of, or cause the Company or
its Subsidiaries 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 Effect.
(o) The Company and its Subsidiaries have not,
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. The
Company's and Subsidiaries' internal accounting controls and
procedures are sufficient to cause the Company and its
Subsidiaries to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (hereinafter 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
Underwriter hereunder will have been fully paid or provided
for by the Company and all laws imposing such taxes will have
been complied with in all material respects.
(q) All contracts and other documents of the Company
which are, under the Rules and Regulations, required to be
filed as exhibits to the Registration Statement have been so
filed.
(r) Except as disclosed in the Registration
Statement, the Company has no Subsidiaries.
(s) Except as disclosed in the Registration
Statement, 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 public offering.
(t) Except as previously disclosed in writing by the
Company to the Underwriter or as disclosed in the Registration
Statement, no officer, director or stockholder of the Company
has any National Association of Securities Dealers, Inc. (the
"NASD") affiliation.
(u) Except as previously disclosed in writing by the
Company to the Underwriter or as disclosed in the Prospectus,
no other firm, corporation or person has any rights to
underwrite an offering of any of the Company's securities.
2. PURCHASE, DELIVERY AND SALE OF THE SECURITIES AND THE OVER-ALLOTMENT OPTION
SECURITIES.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements
herein contained, (i) the Company agrees to issue and sell to the
Underwriter and the Underwriter agrees to buy from the Company at $6.00
per Unit, at the place and time hereinafter specified, 800,000 Units.
$5.75 of the price per Unit is attributed to the Preferred Stock and
the remaining $.25 of the price per Unit is attributed to the Warrants
(collectively the "First Securities").
Delivery of the First Securities registered in such names and
in such denominations as the Underwriter may reasonably request against
payment therefor shall take place at the offices of Sonfield &
Sonfield, 000 Xxxxx Xxxx Xxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (or
at such other place as may be designated by agreement between the
Underwriter and the Company) at 10:00 a.m., Houston time, on
____________, 1999, such time and date of payment and delivery for the
First Securities being herein called the "First 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
Underwriter (the "Over-Allotment Option") to purchase all or any part
of an aggregate of (i) an additional 120,000 Units from the Company to
cover over allotments at the same price per Unit (with respect to
Securities being sold by the Company) and the same price per share of
Preferred Stock and Warrants as the Underwriter shall pay the Company
for the First Securities being sold pursuant to the provisions of
subsection (a) of this Section 2 (such additional Securities being
referred to herein as the "Over-Allotment Option
5
Securities"). The Over-Allotment Option may be exercised within 30 days
after the effective date of the Registration Statement upon written
notice by the Underwriter 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
Underwriter but shall not be earlier than four nor later than ten full
business days after the exercise of the Over-Allotment Option (but in
no event more than 40 days after the First Closing Date), nor in any
event prior to the First Closing Date, and such time and date is
referred to herein as the "Over-Allotment Option Closing Date."
Delivery of the Over-Allotment Option Securities against payment
therefor shall take place at the offices of Sonfield & Sonfield, 000
Xxxxx Xxxx Xxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (or at such other
place as may be designated by agreement between the Underwriter and the
Company). The option granted hereunder may be exercised only to cover
Over-Allotments in the sale by the Underwriter of First Securities
referred to in subsection (a) above. No Over-Allotment Option
Securities shall be delivered unless all First Securities shall have
been delivered to the Underwriter as provided herein.
(c) The Company will make the certificates for the Securities
to be purchased by the Underwriter hereunder available for checking at
least two full business days prior to the First Closing Date or the
Over-Allotment Option Closing Date (which are collectively referred to
herein as the "Closing Dates"). The certificates shall be in such names
and denominations as the Underwriter may request, at least three full
business days prior to the Closing Dates. Delivery of the certificates
at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Securities
to be purchased by the Underwriter hereunder will be delivered by the
Company to the Underwriter against payment of the respective purchase
price by the Underwriter, by wire transfer or certified or bank
cashier's checks in New York Clearing House funds, payable to the order
of the Company registered in such names and in such denominations as
the Underwriter may reasonably request.
In addition, in the event the Underwriter exercises the option
to purchase from the Company all or any portion of the Over-Allotment
Option Securities pursuant to the provisions of subsection (b) above,
payment for such Securities shall be made to or upon the order of the
Company at the offices of Sonfield & Sonfield, 000 Xxxxx Xxxx Xxx Xxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000, by wire transfer or certified or bank
cashier's checks payable in New York Clearing House funds 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 Underwriter for the account of the Underwriter
registered in such names and in such denominations as the Underwriter
may reasonably request. It is understood that the Underwriter proposes
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 becomes effective.
3. COVENANTS OF THE COMPANY.
(a) The Company covenants that it will:
(i) Use its best efforts to cause the Registration
Statement to become effective. If required, the Company will
file the Prospectus and any amendment or supplement thereto
with the Commission in the manner and within the time period
required by Rule 424(b) under the Act. Upon notification from
the Commission that the Registration Statement has become
effective, the Company 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 the Underwriter shall not previously have
been advised and furnished with a copy or to which you or your
counsel shall have reasonably objected in writing or which is
not in compliance with the Act and the Rules and Regulations.
At any time prior to the later of (A) the completion by the
Underwriter of the distribution of the Securities in no event
more than nine months after the date on which the Registration
Statement shall have become or been declared effective) and
(B) 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 the
Underwriter's request, any amendments or supplements to the
Registration Statement or Prospectus which, in the opinion of
counsel to the Company and the Underwriter, may be reasonably
necessary or advisable in connection with the distribution of
the Securities.
6
As soon as the Company is advised thereof, the
Company will advise the Underwriter, and provide you copies of
any written advice, 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 an 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 or threat thereof 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 the
Underwriter copies of each Preliminary Prospectus, and the
Company has consented and hereby consents to the use of such
copies for the purposes permitted by the Act. The Company
authorizes the Underwriter and dealers to use the Prospectus
in connection with the sale of the Securities for such period
as in the opinion of counsel to the Underwriter and the
Company 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 Underwriter or
dealer, of any event of which the Company has knowledge and
which materially affects the Company or the Securities or
which in the opinion of counsel for the Company and counsel
for the Underwriter should be set forth in an amendment of 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 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 Underwriter, except that in case the
Underwriter is required, in connection with the sale of the
Securities to deliver a Prospectus nine months or more after
the effective date of the Registration Statement, the Company
will upon request of and at the expense of the Underwriter,
amend or supplement the Registration Statement and Prospectus
and furnish the Underwriter with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
Comply with the Act, the Rules and Regulations and
the Securities Exchange Act of 1934 (the "Exchange Act") and
the rules and regulations thereunder in connection with the
offering and issuance of the Securities.
(ii) Furnish such information as may be required and
to otherwise cooperate and use its best efforts to qualify or
register the Securities for sale under the securities or "blue
sky" laws of such jurisdictions as you the Underwriter 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 of 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 may be required to continue such qualification in
effect for so long a period as the counsel to the Company and
the Underwriter deem reasonably necessary.
(iii) If the sale of the Securities provided for
herein is not consummated as a result of the Company not
performing its obligations hereunder in all material respects,
the Company shall pay all costs and expenses incurred by it
which are incident to the performance of the Company's
obligations hereunder, including but not limited to, all of
the expenses itemized in Section 8,
7
including the accountable expenses of the Underwriter, up to
$100,000 (including the reasonable fees and expenses of
counsel to the Underwriter).
(iv) Use its best efforts to (i) cause a registration
statement under the Exchange Act to be declared effective
concurrently with the completion of this offering and will
notify you in writing immediately upon the effectiveness of
such registration statement, and (ii) to obtain and keep
current a listing in the Standard & Poors or Xxxxx'x
industrial manual.
(v) For so long as the Company is a reporting company
under either Section 12(g) or 15(d) of the Exchange Act, the
Company, at its expense, will furnish to its stockholders an
annual report (including financial statements audited by
independent public accountants), in reasonable detail and at
its expense, will furnish to the Underwriter during the period
ending five (5) years from the date hereof, (i) as soon as
practicable after the end of each fiscal year, but no earlier
than the filing of such information with the Commission 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 practicable after
the end of each of the first three fiscal quarters of each
fiscal year, but no earlier than the filing of such
information with the Commission, consolidated summary
financial information of the Company for such quarter in
reasonable detail; (iii) as soon as they are publicly
available, a copy of all reports (financial or other) mailed
to security holders; (iv) as soon as they are available, a
copy of all non-confidential reports and financial statements
furnished to or filed with the Commission or any securities
exchange or automated quotation system on which any class of
securities of the Company is listed; and (v) such other
information as you may from time to time reasonably request.
(vi) 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.
(vii) Deliver to the Underwriter at or before the
First Closing Date two signed copies of the Registration
Statement including the Financial Statements and exhibits
filed therewith, and of all amendments thereto, and will
deliver to the Underwriter such number of conformed copies of
the Registration Statement, including the Financial Statements
but without exhibits, and of all amendments thereto, as the
Underwriter may reasonably request. The Company will deliver
to or upon your order, 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
Underwriter may reasonably request. The Company will deliver
to the Underwriter 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 Underwriter may from time to
time reasonably request.
(viii) The Company will make generally available to
its security holders and to the registered holders of its
Warrants and deliver to the Underwriter as soon as it is
practicable to do so but in no event later than 90 days after
the end of twelve months after its current fiscal quarter, an
earnings statement (which need not be audited) covering a
period of at least twelve consecutive months beginning after
the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(ix) Apply the net proceeds from the sale of the
Securities substantially for the purposes set forth under "Use
of Proceeds" in the Prospectus.
(x) Promptly 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 opinion of counsel to the Underwriter and
counsel to 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.
8
(xi) Reserve and keep available the maximum number of
its authorized but unissued securities which are issuable upon
exercise of the Purchase Option outstanding from time to time.
(xii) Upon completion of this offering, the Company
will make all filings required, including registration under
the Exchange Act, to obtain the listing of the Units,
Preferred Stock and the Warrants in the NASDAQ SmallCap Market
system, and will use its best efforts to effect and maintain
such listing for at least five years from the date of this
Agreement.
(xiii) Except for the transactions contemplated by
this Agreement and as disclosed in the Prospectus, the Company
represents that it has not taken and agrees that it will not
take, directly or indirectly, any action designed to or which
has constituted or which might reasonably be expected to cause
or result in the stabilization or manipulation of the price of
any of the Securities.
(xiv) On the First Closing Date and simultaneously
with the delivery of the Securities, the Company shall execute
and deliver to the Underwriter the Underwriter's Purchase
Option. The Underwriter's Purchase Option will be
substantially in the form filed as an Exhibit to the
Registration Statement.
(xv) Intentionally omitted.
(xvi) So long as any Warrants are outstanding, the
Company shall use its best efforts to cause post-effective
amendments to the 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 the Underwriter as many copies of each such
Prospectus as such Underwriter or dealer may reasonably
request. 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.
(xvii) 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 10-Q quarterly report and the mailing of
quarterly financial information to Securityholders, provided
that the Company shall not be required to file a report of
such accountants relating to such review with the Commission.
(xviii) Agrees to pay the Underwriter a warrant
solicitation fee of 4.0% of the exercise price of any of the
Warrants exercised beginning one (1) year after the Effective
Date (not including warrants exercised by the Underwriter) if
(a) the market price of the Company's Common Stock on the date
the Warrant is exercised is lower than the exercise price of
the Warrant, (b) the exercise of the Warrant was solicited by
the Underwriter and the holder of the warrant designates the
Underwriter in writing as having solicited such Warrant, (c)
the Warrant is not held in a discretionary account, (d)
disclosure of the compensation arrangement is made upon the
sale and exercise of the Warrants, (e) soliciting the exercise
is not in violation of Rule 10b-6 under the Securities
Exchange Act of 1934, and (f) solicitation of the exercise is
in compliance with the NASD Notice to Members 81-38 (September
22, 1981).
(xix) For a period of three years from the Effective
Date, at the request of the Underwriter, the Company shall
provide promptly, at the expense of the Company, copies of the
Company's daily transfer sheets furnished to it by its
transfer agent and copies of the securities position listings
provided to it by the Depository Trust Company and/or
Automatic Data Processing.
(xx) Agrees that:
(i) The Company will pay a finder's fee to
the Underwriter, equal to five percent (5%) of the
first $3,000,000 of the consideration involved in any
transaction, 4% of the next $3,000,000 of
consideration involved in the transaction, 3% of the
next $2,000,000, 2% of the next $2,000,000 and 1% of
the excess, if any, over $10,000,000, for future
consummated transactions, if any, introduced by the
Underwriter (including mergers,
9
acquisitions, joint ventures, and any other business
for the Company introduced by the Underwriter)
consummated by the Company (an "Introduced
Consummated Transaction"), in which the Underwriter
introduced the other party to the Company during a
period ending five years following the First Closing
Date; and
(ii) That any such finder's fee due
hereunder will be paid in cash or other consideration
that is acceptable to the Underwriter, at the closing
of the particular Introduced Consummated Transaction.
(xxi) For a period of five (5) years following 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 10-Q quarterly report and the mailing of
quarterly financial information to stockholders, provided that
the Company shall not be required to file a report of such
accountants relating to such review with the Commission. The
Company will retain its present legal counsel and independent
certified public accountants for at least one year from the
Closing Date.
(xxii) For the three (3) year period commencing on
the First Closing Date, the Underwriter shall have the right
to nominate a member of the Company's Board of Directors. If
the Underwriter does not exercise this right, it may appoint
an advisor who will be able to attend all meetings of the
Board of Directors. However, if the Board of Directors
determines that confidential information is to be discussed
during any part of any meeting attended by such advisor, it
shall have the right to exclude the advisor from the meeting
during such discussion. The Underwriter shall also have the
right to obtain copies of the minutes, if requested, from all
Board of Directors meetings for three (3) years following the
Effective Date of the Registration Statement, whether or not a
nominee of the Underwriter attends or participates in any such
Board meeting. The Company agrees to reimburse the Underwriter
immediately upon the Underwriter's request therefor of any
reasonable travel and lodging expenses directly incurred by
the Underwriter in connection with its representative
attending Company Board meetings on the same basis for other
Board members.
4. CONDITIONS OF UNDERWRITER'S OBLIGATION. The obligations of the Underwriter to
purchase and pay for the Securities which it has agreed to purchase hereunder,
are subject to the accuracy (as of the date hereof, and as of the Closing Dates)
of and compliance with the representations and warranties of the Company herein,
to the performance by the Company of its obligations hereunder, and to the
following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M.,
Eastern time, on the day following the date of this Agreement, or at
such later time or on such later date as to which the Underwriter may
agree in writing; on or prior to the Closing Dates no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that or a similar purpose shall have
been instituted or shall be pending or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission; any
request on the part of the Commission for additional information shall
have been complied with to the satisfaction of the Commission; and no
stop order shall be in effect denying or suspending effectiveness of
such qualification nor shall any stop order proceedings with respect
thereto be instituted or pending or threatened. If required, the
Prospectus shall have been filed with the Commission in the manner and
within the time period required by Rule 424(b) under the Act.
(b) At the First Closing Date, the Underwriter shall have
received the opinion, dated as of the First Closing Date, of Atlas,
Xxxxxxxx, Trop & Borkson, P.A., counsel for the Company, in form and
substance satisfactory to counsel for the Underwriter, to the effect
that:
(i) the Company and its Subsidiaries have been duly
incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
organization, with all requisite corporate power and authority
to own their properties and conduct their business as
described in the Registration Statement and Prospectus and are
duly qualified or licensed to do business as foreign
corporations and are in good standing in each other
jurisdiction in which the ownership or leasing of their
properties or conduct of their business requires such
qualification except where the failure to qualify or be
licensed will not have a Material Adverse Effect;
10
(ii) the authorized capitalization of the Company is
as set forth in the Prospectus; the Securities as set forth in
the Prospectus have been duly authorized and upon payment of
consideration therefor, will be validly issued, fully paid and
non-assessable and conform in all material respects to the
description thereof contained in the Prospectus; to such
counsel's knowledge the outstanding shares of capital stock of
the Company and its Subsidiaries have not been issued in
violation of the preemptive rights of any shareholder and to
such counsel's knowledge the shareholders of the Company do
not have any preemptive rights or other rights to subscribe
for or to purchase, nor are there any restrictions upon the
voting or transfer of any of the capital stock except as
provided in the Prospectus or as required by law. The
Securities, the Purchase Option and the Warrant Agreement
conform in all material respects to the respective
descriptions thereof contained in the Prospectus; the shares
of Common Stock underlying the Units, and the shares of Common
Stock issuable upon exercise of Warrants, the Purchase Option,
and the Warrant Agreement will have been duly authorized and,
when issued and delivered in accordance with their respective
terms, will be duly and validly issued, fully paid,
non-assessable, free of preemptive rights to the best of their
knowledge; to the best of their knowledge, 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; a sufficient
number of shares of Common Stock has been reserved for
issuance upon exercise of the Warrants and Common Stock has
been reserved for issuance upon exercise of the Warrants
contained in the Purchase Option 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 other than those which have been waived or satisfied
for or relating to the registration of any shares of Common
Stock;
(iii) this Agreement, the Purchase Option, and the
Warrant Agreement have been duly and validly authorized,
executed and delivered by the Company;
(iv) the certificates evidencing the Securities as
described in the Registration Statement comply in all material
respects with the descriptions set forth therein, and comply
with the Delaware General Corporation Law, as in effect on the
date hereof; each Warrant will be exercisable for one share of
the Common Stock of the Company, respectively, and at the
prices provided for in the Warrant Agreement;
(v) except as otherwise disclosed in the Registration
Statement, such counsel knows of no pending or threatened
legal or governmental proceedings to which the Company or its
Subsidiaries are a party which would materially adversely
affect the business, property, financial condition or
operations of the Company or its Subsidiaries; or which
question the validity of the Securities, this Agreement, the
Warrant Agreement or the Purchase Option, or of any action
taken or to be taken by the Company pursuant to this
Agreement, the Warrant Agreement or the Purchase Option; to
such counsel's knowledge there are no governmental proceedings
or regulations required to be described or referred to in the
Registration Statement which are not so described or referred
to;
(vi) the execution and delivery of this Agreement,
the Purchase Option or the Warrant 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 breach or violation of, or
constitute a default under the certificate of incorporation or
by-laws of the Company or its Subsidiaries, or to the best
knowledge of counsel after due inquiry, in the performance or
observance of any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other
evidence of indebtedness or in any material contract,
indenture, mortgage, loan agreement, lease, joint venture or
other agreement or instrument to which the Company or its
Subsidiaries is a party or by which they or any of their
properties is bound or in violation of any order, rule,
regulation, writ, injunction, or decree of any government,
governmental instrumentality or court, domestic or foreign the
result of which would have a Material Adverse Effect;
(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
11
such counsel need express no opinion) as of the Effective Date
comply as to form in all material respects with the applicable
requirements of the Act and the Rules and Regulations;
(viii) in the course of preparation of the
Registration Statement and the Prospectus such counsel has
participated in conferences with the President of the Company
with respect to the Registration Statement and Prospectus and
such discussions did not disclose to such counsel any
information which gives such counsel reason to believe that
the Registration Statement or any amendment thereto at the
time it became effective contained any untrue statement of a
material fact required to be stated therein or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the Prospectus or any supplement thereto contains any
untrue statement of a material fact or omits to state a
material fact necessary in order to make statements therein,
in light of the circumstances under which they were 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 (including without
limitation, the pro forma financial information) and schedules
contained therein, as to which such counsel need express no
opinion);
(ix) all descriptions in the Registration Statement
and the Prospectus, and any amendment or supplement thereto,
of contracts and other agreements to which the Company or its
Subsidiaries is a party are accurate and fairly present in all
material respects the information required to be shown, and
such counsel is familiar with all contracts and other
agreements referred to in the Registration Statement and the
Prospectus and any such amendment or supplement or filed as
exhibits to the Registration Statement, and such counsel does
not know of any contracts or agreements to which the Company
or its Subsidiaries is a party of a character required to be
summarized or described therein or to be filed as exhibits
thereto which are not so summarized, described or filed;
(x) 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
Purchase Option or the Securities underlying the Purchase
Option, other than registrations or qualifications of the
Securities under applicable state or foreign securities or
Blue Sky laws and registration under the Act; and
(xi) the Units, shares of Common Stock and the
Warrants have been duly authorized for quotation on the NASDAQ
SmallCap Market System ("NASDAQ").
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
other than the law of the United States or of the State of
Florida or Delaware upon opinions of counsel satisfactory to
you, in which case the opinion shall state that they have no
reason to believe that you and they are not entitled to so
rely.
(c) Intentionally Omitted.
(d) All corporate proceedings and other legal matters relating
to this Agreement, the Registration Statement, the Prospectus and other
related matters shall be satisfactory to or approved by Sonfield &
Sonfield, counsel to the Underwriter.
(e) You shall have received a letter prior to the Effective
Date and again on and as of the First Closing Date from Xxxxx Xxxxxxxx,
PC, independent public accountants for the Company, substantially in
the form reasonably acceptable to you, providing you with such "cold
comfort" as you may reasonably require.
(f) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects with the same effect as if made on and
as of the Closing Dates taking into account for the Over-Allotment
Option Closing Dates the effect of the transactions contemplated hereby
and the Company or its Subsidiaries shall have performed all of its
obligations hereunder and satisfied all the conditions on its part to
be satisfied at or prior to such Closing Date; (ii) the Registration
Statement and the Prospectus and any amendments or supplements thereto
shall
12
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 not misleading; (iii) there
shall have been, since the respective dates as of which information is
given, no material adverse change, or to the Company or its
Subsidiaries' knowledge, any development involving a prospective
material adverse change, in the business, properties, condition
(financial or otherwise), results of operations, capital stock,
long-term or short-term debt or general affairs of the Company or its
Subsidiaries from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and
Prospectus indicate might occur after the effective date of the
Registration Statement, and the Company or its Subsidiaries shall not
have incurred any material liabilities or entered into any material
agreement not in the ordinary course of business other than as referred
to in the Registration Statement and Prospectus; (iv) except as set
forth in the Prospectus, no action, suit or proceeding at law or in
equity shall be pending or threatened against the Company or its
Subsidiaries which would be required to be set forth in the
Registration Statement, and no proceedings shall be pending or
threatened against the Company or its Subsidiaries before or by any
commission, board or administrative agency in the United States or
elsewhere, wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of
the Company or its Subsidiaries, and (v) the Underwriter shall have
received, at the First Closing Date, a certificate signed by each of
the President and the principal operating officer of the Company dated
as of the First Closing Date, evidencing compliance with the provisions
of this subsection (f).
(g) Upon exercise of the Over-Allotment Option, the
obligations of the Underwriter 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 Over-Allotment 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 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 the Commission.
(ii) At the Over-Allotment Option Closing Date there
shall have been delivered to the Underwriter the signed
opinion of Atlas, Xxxxxxxx, Trop & Borkson, P.A., counsel to
the Company, dated as of the Over-Allotment Option Closing
Date, in form and substance reasonably satisfactory to
Sonfield & Sonfield, counsel to the Underwriter, which opinion
shall be substantially the same in scope and substance as the
opinion furnished to you at the First Closing Date pursuant to
Sections 4(b) hereof, except that such opinion, where
appropriate, shall cover the Over-Allotment Option Securities.
(iii) At the Option Closing Date there shall have be
delivered to the Underwriter a certificate of the President
and the principal operating officer of the Company, dated the
Option Closing Date, in form and substance reasonably
satisfactory to Sonfield & Sonfield, counsel to the
Underwriter, substantially the same in scope and substance as
the certificate furnished at the First Closing Date pursuant
to Section 4(f) hereof.
(iv) At the Over-Allotment Option Closing Date there
shall have been delivered to you a letter in form and
substance satisfactory to you from Xxxxx Xxxxxxxx, dated the
Over-Allotment Option Closing Date and addressed to the
Underwriter confirming the information in their letter
referred to in Section 4(e) 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 Over-Allotment
Option Closing Date, which would require any change in said
letter if it were required to be dated the Over-Allotment
Option Closing Date.
(v) All proceedings taken at or prior to the
Over-Allotment Option Closing Date in connection with the sale
and issuance of the Over-Allotment Option Securities shall be
reasonably satisfactory in form and substance to you, and you
and Sonfield & Sonfield, counsel to the Underwriter, shall
have been furnished with all such documents, certificates, and
opinions as you
13
may reasonably 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.
(h) 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 Securities and no proceedings for the taking
of such action shall have been instituted or shall be pending, or, to
the knowledge of the Underwriter or the Company, shall be contemplated
by the Commission or the NASD. The Company and the Underwriter
represent that at the date hereof each has no knowledge that any such
action is in fact contemplated against it by the Commission or the
NASD.
(i) If any of the conditions herein provided for in this
Section shall not have been fulfilled in all material respects as of
the date indicated, this Agreement and all obligations of the
Underwriter under this Agreement may be canceled at, or at any time
prior to, each Closing Date by the Underwriter 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 Underwriter 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:
(a) The Registration Statement shall have become effective not
later than 10:00 A.M. Eastern time, on the day following the date of
this Agreement, or on such later date as the Company and the
Underwriter may agree in writing.
(b) At the Closing Dates, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued
under the Act or any proceedings therefor 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 First Closing
Date but are not fulfilled after the First 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 Over-Allotment
Option hereof shall be affected.
6. INDEMNIFICATION.
(a) The Company agrees (i) to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange 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 reasonable attorneys' fees), to which such
Underwriter or such controlling person may become subject, under the
Act or otherwise, and (ii) to reimburse, as incurred, the Underwriter
and such controlling persons for any legal or other expenses reasonably
incurred in connection with investigating, defending against or
appearing as a third party witness in connection with any losses,
claims, damages or liabilities; insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) relating to (i) and (ii)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment
or supplement thereto, (B) any blue sky application or other document
executed by the Company specifically for that purpose containing
written information specifically 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 required to
indemnify the Underwriter and any controlling person or be liable in
any such case to the extent, but only to the extent, that any such
loss, claim, damage 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 Underwriter
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 Prospectus or the Prospectus or any
such amendment or supplement thereto, provided, further that the
indemnity with respect to any Preliminary Prospectus shall not
14
be applicable on account of any losses, claims, damages, liabilities or
litigation arising from the sale of Securities to any person if a copy
of the Prospectus was not delivered to such person at or prior to the
written confirmation of the sale to such person. This indemnity will be
in addition to any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold 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 reasonable 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 statement 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, or any Blue Sky Application in
reliance upon and in conformity with written information furnished to
the Company by the Underwriter specifically for use in the preparation
thereof and for any violation by the Underwriter in the sale of such
Securities of any applicable state or federal law or any rule,
regulation or instruction thereunder relating to violations based on
unauthorized statements by Underwriter or its representative; provided
that such violation is not based upon any violation of such law, rule
or regulation or instruction by the party claiming indemnification or
inaccurate or misleading information furnished by the Company or its
representatives, including information furnished to the Underwriter as
contemplated herein. 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 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 the reasonable 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 indemnified party
and the indemnifying party and in the reasonable judgment of the
counsel to the indemnified party, it is advisable for the indemnified
party 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 such indemnified party, 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 the
indemnified party, which firm shall be designated in writing by the
indemnified party). No settlement of any action against an indemnified
party shall be made without the consent of the indemnified party, which
shall not be unreasonably withheld in light of all factors of
importance to such indemnified party. If it is ultimately determined
that indemnification is not permitted, then an indemnified party will
return all monies advanced to the indemnifying party.
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7. CONTRIBUTION. In order to provide for just and equitable contribution under
the Act in any case in which the indemnification provided in Section 6 hereof is
requested but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that the express provisions of
Section 6 provide for indemnification in such case, then the Company and each
person who controls the Company, in the aggregate, and the 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) (after contribution from others) in such proportions
that the Underwriter is responsible in the aggregate for that portion of such
losses, claims, damages or liabilities represented by the percentage that the
underwriting discount for each of the Securities 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
if such allocation is not permitted by applicable law then allocated in such
proportion as is appropriate to reflect relative benefits but also 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 Underwriter agree that it
would not be just and equitable if the respective obligations of the Company and
the Underwriter to contribute pursuant to this Section 7 were to be determined
by pro rata or per capita allocation of the aggregate damages or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section 7. 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 is not guilty of such fraudulent
misrepresentation. As used in this paragraph, 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, and the Company, its officers,
directors and controlling persons shall be entitled to contribution from the
Underwriter to the full extent permitted by law. 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. 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 Underwriter 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 NASD in connection with the filing
required by the NASD relating to the offering of the Securities
contemplated hereby; all expenses, including reasonable fees and
disbursements of counsel to the Underwriter, in connection with the
qualification of the Securities under the state securities or blue sky
laws which the Underwriter shall designate; the cost of printing and
furnishing to the Underwriter copies of the Registration Statement,
each Preliminary Prospectus, the Prospectus, this Agreement, and the
Blue Sky Memorandum, any fees relating to the listing of the Common
Stock and Warrants on NASDAQ or any other securities exchange, the cost
of printing the certificates representing the Securities; fees for
bound volumes and prospectus memorabilia and the fees of the transfer
agent and warrant agent. The Company shall pay any and all taxes
(including any transfer, franchise, capital stock or other tax imposed
by any jurisdiction) on sales to the Underwriter hereunder. The Company
will also pay all costs and expenses incident to the furnishing of any
amended Prospectus or of any supplement to be attached to the
Prospectus as called for in Section 3(a) of this Agreement except as
otherwise set forth in said Section.
(b) In addition to the foregoing expenses, at the First
Closing Date the Company shall pay to the Underwriter a non-accountable
expense allowance of $144,000. In the event the Over-Allotment Option
is exercised, the Company shall pay to the Underwriter at the Option
Closing Date an additional amount in the
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aggregate equal to 3% of the gross proceeds received upon exercise of
the Over-Allotment Option. In the event the transactions contemplated
hereby are not consummated by reason of any action by the Underwriter
(except if such prevention is based upon a breach by the Company of any
covenant, representation or warranty contained herein or because any
other condition to the Underwriter's obligations hereunder required to
be fulfilled by the Company is not fulfilled) the Company shall not be
liable for any expenses of the Underwriter, including the Underwriter's
legal fees. In the event the transactions contemplated hereby are not
consummated by reason of the Company being unable to perform their
respective obligations hereunder in all material respects, the Company
and the Selling Stockholder, jointly and severally, shall be liable for
the actual accountable out-of-pocket expenses of the Underwriter,
including reasonable legal fees, not to exceed in the aggregate
$100,000.
(c) Except as disclosed in the Registration Statement, no
person is entitled either directly or indirectly to compensation from
the Company, from the Underwriter 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 Underwriter, 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 reasonable attorneys' fees),
to which the Underwriter or person 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. EFFECTIVE DATE. The Agreement shall become effective upon its execution
except that the Underwriter may, at its option, delay its effectiveness until
11:00 A.M., Eastern time on the first full business day following the effective
date of the Registration Statement, or at such earlier time on such business day
after the effective date of the Registration Statement as you in your discretion
shall first commence the public offering of the Securities. The time of the
initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Securities, or the time when the
Securities are first generally offered by the Underwriter to dealers by letter
or telegram, whichever shall first occur. This Agreement may be terminated by
the Underwriter at any time before it becomes effective as provided above,
except that Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 shall remain in effect
notwithstanding such termination.
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10. TERMINATION.
(a) After this Agreement becomes effective, except for
Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 hereof, it may be terminated
at any time prior to the First Closing Date, by the Underwriter if in
its judgment (i) the Company has sustained a material 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 or the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") )having been
suspended or limited, (iii) material governmental restrictions have
been imposed on trading in securities generally (not in force and
effect on the date hereof), (iv) a banking moratorium has been declared
by federal or New York state authorities, (v) an outbreak of major
international hostilities involving the United States or other
substantial national or international calamity has occurred, (vi) a
pending or threatened legal or governmental proceeding or action
relating generally to the Company's business, or a notification has
been received by the Company of the threat of any such proceeding or
action, which would materially adversely affect the Company; (vii)
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; (viii) 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 Underwriter to have a material
adverse impact on the business, financial condition or financial
statements of the Company; (ix) any material adverse change in the
financial or securities markets beyond normal market fluctuations
having occurred since the date of this Agreement, or (x) any material
adverse change having occurred, since the respective dates 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.
(b) If the Underwriter elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 10, the Company shall be promptly notified by the Underwriter,
by telephone or telegram, confirmed by letter.
11. UNDERWRITER'S PURCHASE OPTION. At or before the First Closing Date, the
Company will sell the Underwriter or its designees for a consideration of $100,
and upon the terms and conditions set forth in the form of Underwriter's
Purchase Option annexed as an exhibit to the Registration Statement, a option to
purchase an aggregate of 80,000 Units, each Unit consisting of one (1) share of
Series C Convertible Preferred Stock, par value $.0001 per share and one (1)
Series II Redeemable Common Stock Purchase Warrant. In the event of conflict in
the terms of this Agreement and the Underwriter's Purchase Option with respect
to language relating to the Underwriter's Purchase Option, the language of the
Underwriter's Purchase Option shall control.
12. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER. The Underwriter
represents and warrants to the Company that it is registered as a broker-dealer
in all jurisdictions in which it is offering the Securities and that it will
comply with all applicable state or federal laws relating to the sale of the
Securities, including but not limited to, violations based on unauthorized
statements by the Underwriter or its representatives.
13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and the Underwriter and the undertakings set forth in
or made pursuant to this Agreement will remain in full force and effect until
three years from the date of this Agreement, regardless of any investigation
made by or on behalf of the Underwriter, 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. Any communications specifically required hereunder to be in writing,
if sent to the Underwriter, will be mailed, delivered or telecopied and
confirmed to it at FAS Wealth Management Services, Inc., 00000 Xxxx Xxxxxxxx
Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000, with a copy sent to Sonfield &
Sonfield, 000 Xxxxx Xxxx Xxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attention:
Xxxxxx X. Xxxxxxxx, Xx., Esq., or if sent to the Company, will be mailed,
delivered or telecopied and confirmed to it at 0000X Xxxxx Xxxxxx Xxxxxx, Xxxx
Xxxxx, Xxxxxxx 00000, with a copy sent to Xxxxx X. Xxxxxxxxx, Esq., Atlas,
Xxxxxxxx, Trop & Borkson, P.A., 000 Xxxx Xxx Xxxx Xxxx., Xxxxx 0000, Xx.
Xxxxxxxxxx, Xxxxxxx 00000. Notice shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication.
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15. PARTIES IN INTEREST. The Agreement herein set forth is made solely for the
benefit of the Underwriter, the Company, any person controlling the Company or
the Underwriter, 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, as
such purchaser, from the Underwriter of the Securities.
16. APPLICABLE LAW. This Agreement will be governed by, and construed in
accordance with, of the laws of the State of Florida applicable to agreements
made and to be entirely performed within Florida.
17. COUNTERPARTS. This Agreement may be executed in one or more counterparts
each of which shall be deemed to constitute an original and shall become
effective when one or more counterparts have been signed by each of the parties
hereto and delivered to the other parties (including by fax, followed by
original copies by overnight mail).
18. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in writing, signed by the
Underwriter and the Company.
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 Underwriter in accordance with its
terms.
Very truly yours,
PSI INDUSTRIES, INC.
By:
-----------------------------
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
FAS WEALTH MANAGEMENT SERVICES, INC.
By:
--------------------------------------
Xxxx X. Xxxxxxxxx, Chairman & CEO
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