INTERNATIONAL PLASTIC TECHNOLOGIES, INC.
1,250,000 SHARES OF COMMON STOCK
1,250,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
___________, 1998
To Underwriters listed on Schedule I attached hereto
c/o Network 1 Financial Securities, Inc.
The Galleria
Building 2/Penthouse
Red Bank, New Jersey 07701-1106
Gentlemen:
The undersigned, International Plastic Technologies, Inc., a Delaware
corporation, hereby confirms its agreement with Network 1 Financial Securities,
Inc., as the representative (the "Representative") of the several underwriters
identified in Schedule I hereto (together with the Representative, the
"Underwriters") as follows. All references to the "Company" shall include
International Plastic Technologies, Inc., and all of its wholly-owned
subsidiaries, to wit Electronic Hardware Corp., a New York corporation ("EHC"),
Compact Disc Packaging Corp., a Delaware corporation ("CDP"), and Duralogic
Technologies, Inc., a New York corporation ("DTI"), unless otherwise noted.
1. Introduction. The Company proposes to issue and sell to the Underwriters
an aggregate amount of 1,250,000 shares of common stock (the "Stock"), par value
$.001 per share (the "Common Stock"), and 1,250,000 Redeemable Common Stock
Purchase Warrants (the "Warrants," and together with the Stock, the
"Securities") of the Company. The Stock and the Warrants shall be separately
transferrable immediately upon issuance. Each Warrant is exercisable
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for a five-year period, commencing 12 months from the date the Securities and
Exchange Commission (the "Commission") declares the Registration Statement (as
defined herein) effective and entitles the holder thereof to purchase one share
of Common Stock at an exercise price equal to $5.00 per share (the "Warrant
Stock"), subject to adjustment in certain circumstances. As long as the
Registration Statement (as defined herein) is effective, the Warrants are
redeemable by the Company at any time commencing 12 months after the date of the
prospectus, at a price of $.10 per Warrant, upon
not less than 30 days prior written notice to the registered holders of the
Warrants, provided that the average closing bid quotations of the Common Stock
as reported on the Nasdaq SmallCap Market System ("SCM") or the Boston Stock
Exchange ("BSE"), if traded thereon, or if not traded thereon, the average
closing sale price if listed on a national or regional securities exchange
equals or exceeds 150% of the offering price per share of the Stock for any 20
trading days within a period of 30 consecutive trading days ending on the 15th
day prior to the day on which the Company gives notice of redemption. In
addition, solely for the purpose of covering over-allotments, the Company
proposes to grant to the Representative an option (the "Over-allotment Option")
to purchase from the Company, up to an additional 187,500 shares of Common Stock
(the "Additional Stock") and 187,500 Warrants (the "Additional Warrants," and
together with the Additional Stock, the "Additional Securities"). The Securities
and the Additional Securities are more fully described in the prospectus
referred to below.
2. Representations and Warranties.
(a) The Company represents and warrants to, and agrees with, the
Underwriters that:
(1) The Company has filed with the Commission a registration
statement, and may have filed one or more amendments thereto, on Form SB-2
(Registration File No. 333-48701), including in such registration statement
and each such amendment a related preliminary prospectus, for the
registration of the Securities, the Warrant Stock and the Additional
Securities, the Common Stock issuable upon the exercise of the Additional
Warrants (the "Additional Warrant Stock") the warrants referred to in
Section 5(a)(15) (the "Underwriter's Warrants"), the shares of Common Stock
issuable upon exercise of the Underwriter's Warrants (the "Underlying
Stock"),
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Warrants issuable upon the exercise of the Underwriter's Warrants (the
"Underlying Warrants," and together with the Underlying Stock, the
"Underlying Securities") and the Common Stock issuable upon the exercise of
the Underlying Warrants (the "Underlying Warrant Stock") under the
Securities Act of 1933, as amended (the "Act"). As used in this Agreement,
the term "Registration Statement" shall refer to such registration
statement, as amended, on file with the Commission at the time such
Registration Statement becomes effective under the Act (including the
prospectus, financial statements, exhibits, and all other documents filed
as a part thereof, provided, however, that such Registration Statement, at
the time it becomes effective, may omit such information as is permitted to
be omitted from such Registration Statement when it becomes effective under
the Act pursuant to Rule 430A of the General Rules and Regulations of the
Commission under the Act (the "Regulations"), which information (the "Rule
430A Information") shall be deemed to be included in such Registration
Statement when a final prospectus is filed with the Commission in
accordance with Rules 430A and 424(b)(1) or (4) of the Regulations); the
term "Preliminary Prospectus" shall refer to each prospectus included in
the Registration Statement, or any amendments thereto, before the
Registration Statement becomes effective under the Act, the form of
prospectus omitting Rule 430A Information included in the Registration
Statement when the Registration Statement becomes effective under the Act,
if applicable (the "Rule 430A Prospectus"), and any prospectus filed by the
Company with the Representative's consent pursuant to Rule 424(a) of the
Regulations; and the term "Prospectus" shall refer to the final prospectus
in the form first filed pursuant to Rule 424(b)(1) or (4) of the
Regulations or, if no such filing is required, the form of final prospectus
included in the Registration Statement.
(2) When the Registration Statement becomes effective under the Act,
and at all times subsequent thereto up to and including the Closing Date
(as defined in Section 3) and each Additional Closing Date (as defined in
Section 3), and during such longer period as the Prospectus may be required
to be delivered in connection
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with sales by the Underwriters or a dealer, and during such longer period
until any post-effective amendment thereto shall become effective under the
Act, the Registration Statement (and any post-effective amendment thereto)
and the Prospectus (as amended or as supplemented if the Company shall have
filed with the Commission any amendment or supplement to the Registration
Statement or the Prospectus), respectively, will contain all statements
which are required to be stated therein in accordance with the Act and the
Regulations, will comply with the Act and the Regulations, and will not
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 and no event will have occurred which
should have been set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not then been set forth
in such an amendment or supplement; if a Rule 430A Prospectus is included
in the Registration Statement at the time it becomes effective under the
Act, the Prospectus filed pursuant to Rules 430A and 424(b)(1) or (4) of
the Regulations will contain all Rule 430A Information and all statements
which are required to be stated therein in accordance with the Act or the
Regulations, will comply with the Act and the Regulations, and will not
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; and each Preliminary Prospectus, as of
the date filed with the Commission, contained all statements required to be
stated therein in accordance with the Act and the Regulations, complied
with the Act and the Regulations, and did not 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; except
that no representation or warranty is made in this Section 2(a)(2) with
respect to statements or omissions made in reliance upon, and in conformity
with information furnished to the Company as stated in Section 8(b) with
respect to any Underwriter by or on behalf of such Underwriter through the
Representative expressly for
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inclusion in the Registration Statement, any Preliminary Prospectus, or the
Prospectus, or any amendment or supplement thereto.
(3) Neither the Commission nor the "blue sky" or securities authority
of any jurisdiction has issued an order (a "Stop Order") suspending the
effectiveness of, or preventing or suspending the use of, the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, refusing to permit the effectiveness of the
Registration Statement, or suspending the registration or qualification of
the Securities, Warrant Stock, Additional Securities, Additional Warrant
Stock, Underwriter's Warrants, Underlying Securities, or the Underlying
Warrant Stock, nor has any of such authorities instituted or, to the best
of the Company's knowledge, threatened to institute any proceedings with
respect to a Stop Order.
(4) Any contract, agreement, instrument, lease, or license required to
be described in the Registration Statement or the Prospectus has been
properly described therein. Any contract, agreement, instrument, lease, or
license required to be filed as an exhibit to the Registration Statement
has been filed properly with the Commission as an exhibit to the
Registration Statement.
(5) The Company has no subsidiary or subsidiaries (as defined in the
Regulations) other than as disclosed in the Registration Statement. The
Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, with full power and
authority, and all necessary consents, authorizations, approvals, orders,
licenses, certificates, and permits of and from, and declarations and
filings with, all federal, state, local, and other governmental authorities
and all courts and other tribunals, to own, lease, license, and use its
properties and assets and to conduct its business in the manner described
in the Prospectus. The Company is duly qualified to do business as a
foreign corporation and is in good standing as such in every jurisdiction
in which its ownership, leasing, licensing, or use of property and assets
or the conduct of its business makes such qualification necessary, except
where the failure to be so qualified does not amount
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to a material liability or disability to the Company and its subsidiaries
taken as a whole.
(6) The Company has authorized capital stock as disclosed in the
Registration Statement, of which the Prospectus is a part. Except as
disclosed in the Prospectus, each outstanding share of Common Stock is
validly authorized and issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof, has not been issued
and is not owned or held in violation of any preemptive rights of
stockholders. There is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the issuance of,
any share of capital stock of the Company or any security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company, except as may be properly
described in the Prospectus. There is outstanding no security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company, except as may be properly
be described in the Prospectus. The certificates evidencing the Common
Stock are in proper form.
(7) The consolidated financial statements of the Company and EHC and
the financial statements of CDP included in the Registration Statement and
the Prospectus fairly present the financial position, the results of
operations, the cash flows, and the other information purported to be shown
therein at the respective dates and for the respective periods to which
they apply. Such financial statements have been prepared in accordance with
generally accepted accounting principles (except to the extent that certain
footnote disclosures regarding any stub period may have been omitted in
accordance with the applicable rules of the Commission under the Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
consistently applied throughout the periods involved, are correct and
complete in all material respects, and are in accordance with the books and
records of the Company and its combined subsidiaries. Xxxxxxx Xxxxx & Co.,
P.C., the certified public accountants whose reports on the audited
financial statements are filed with the
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Commission as a part of the Registration Statement, are, and during the
periods covered by their reports included in the Registration Statement and
the Prospectus were, independent certified public accountants to the
Company, EHC and CDP, respectively, within the meaning of the Act and the
Regulations. No other financial statements are required by Form SB-2 or
otherwise to be included in the Registration Statement or the Prospectus.
There has at no time been a material adverse change in the financial
condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company from the latest information
set forth in the Registration Statement or the Prospectus, except as may be
properly described in the Prospectus.
(8) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, or, to the best
knowledge of the Company, threatened or in prospect (or any basis therefor)
with respect to the Company or any of its operations, businesses,
properties, or assets, except as may be properly described in the
Prospectus or such as individually or in the aggregate do not now have, and
can not in the future reasonably be expected to have, a material adverse
effect upon the operations, business, properties, or assets of the Company
and its subsidiaries taken as a whole. The Company is not in violation of,
or in default with respect to, any law, rule, regulation, order, judgment,
or decree, except as may be properly described in the Prospectus or such as
in the aggregate do not now have, and can not in the future reasonably be
expected to have, a material adverse effect upon the operations, business,
properties, or assets of the Company and its subsidiaries taken as a whole;
nor is the Company required currently to take any action in order to avoid
any such violation or default.
(9) The Company has good title to all properties and assets which the
Prospectus indicates are owned by it, free and clear of all liens, security
interests, pledges, charges, encumbrances, and mortgages, except such as to
not materially and adversely affect the value of such property and do not
interfere with the use made or proposed to made of such property (or except
as may be properly described in the
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Prospectus). No real property leased, licensed, or used by the Company lies
in an area which is, or to the knowledge of the Company will be, subject to
zoning, use, or building code restrictions which would prohibit, and no
state of facts relating to the actions or inactions of another person or
entity or his or its ownership, leasing, licensing, or use of any real or
personal property exists or will exist which would prevent, the continued
effective leasing, licensing, or use of such real property in the business
of the Company as presently conducted or as the Prospectus indicates it
contemplates conducting, with such exceptions as are not material and do
not interfere with the use made or proposed to be made of such property and
buildings by the Company (or except as may be properly described in the
Prospectus).
(10) Neither the Company nor, to the knowledge of the Company, any
other party, is now, or is expected by the Company to be, in violation or
breach of, or in default with respect to, any material provision of any
contract, agreement, instrument, lease, license, arrangement, or
understanding which is material to the Company, and each such contract,
agreement, instrument, lease, license, arrangement, and understanding is in
full force and effect and is the legal, valid, and binding obligation of
the parties thereto and is enforceable as to them in accordance with its
terms, except as otherwise disclosed in the Prospectus. The Company enjoys
peaceful and undisturbed possession under all leases and licenses under
which it is operating. Except as described in the Prospectus, the Company
is not a party to, or bound by, any contract, agreement, instrument, lease,
license, arrangement, or understanding, or subject to any charter or other
restriction, which has had, or may in the future have, a material adverse
effect on the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of the Company and its
subsidiaries taken as a whole. The Company is not in violation or breach
of, or in default with respect to, any term of its certificate of
incorporation, as amended, (or other charter document) or By-Laws, as
amended.
(11) All United States and foreign patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
franchises, and other
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intangible properties and assets (all of the foregoing being herein called
"Intangibles") that the Company owns or has pending, or under which it is
licensed, are in good standing and uncontested, except as may be properly
described in the Prospectus. There is no right under any Intangible
necessary to the business of the Company as presently conducted or as the
Prospectus indicates it contemplates conducting, except as may be so
designated in the Prospectus. The Company to the best of its knowledge has
not received notice of (or knows of any basis for) a third party claim of
infringement with respect to asserted Intangibles of others, except as may
be properly described in the Prospectus. To the knowledge of the Company,
there is no material infringement by others of Intangibles of the Company.
To the knowledge of the Company, there is no Intangible of others which has
had, or may in the future have a material adverse effect on the financial
condition, results of operations, business, properties, assets, liabilities
or future prospects of the Company, except as may be properly described in
the Prospectus.
(12) Neither the Company nor, to the best of the Company's knowledge,
any director, officer, agent, employee, or other person associated with, or
acting on behalf of, the Company has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply in all respects with the Foreign
Corrupt Practices Act of 1977, as amended.
(13) The Company has all requisite power and authority to execute,
deliver, and perform this Agreement and the Underwriter's Warrants. All
necessary corporate proceedings of the Company have been duly taken to
authorize the execution, delivery, and performance by the Company of this
Agreement and the
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Underwriter's Warrants. This Agreement has been duly authorized, executed,
and delivered by the Company, is the legal, valid, and binding obligation
of the Company, and is enforceable as to the Company in accordance with its
terms. The Underwriter's Warrants have been duly authorized by the Company
and, when executed and delivered by the Company, will be legal, valid, and
binding obligations of the Company, each enforceable as to the Company in
accordance with its terms. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing with,
any federal, state, local, or other governmental authority or any court or
other tribunal is required by the Company for the execution, delivery, or
performance by the Company of this Agreement or the Underwriter's Warrants
(except filings under the Act which have been or will be made before the
Closing Date and filings and consents consisting only of filings and
consents under "blue sky" or securities laws which have been obtained at or
prior to the date of this Agreement). No consent of any party to any
contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Company is a party, or to which any of their
respective properties or assets are subject, is required for the execution,
delivery, or performance of this Agreement and the Underwriter's Warrants;
and the execution, delivery, and performance of this Agreement and the
Underwriter's Warrants will not violate, result in a breach of, conflict
with, result in the creation or imposition of any lien, charge, or
encumbrance upon any properties or assets of the Company pursuant to the
terms of, or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default under, any such
contract, agreement, instrument, lease, license, arrangement, or
understanding, or violate, result in a breach of, or conflict with any term
of the certificate of incorporation, as amended (or other charter document)
or By-Laws, as amended, of the Company, or violate, result in a breach of,
or conflict with any law, rule, regulation, order, judgment, or decree
binding on the Company or to which any of its respective operations,
businesses, properties, or assets are subject.
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(14) The Stock and Additional Stock are validly authorized and, when
issued and delivered in accordance with this Agreement, will be validly
issued, fully paid, and nonassessable, without any personal liability
attaching to the ownership thereof, and will not be issued in violation of
any preemptive or similar rights of stockholders, and the Underwriters will
receive good title to the Stock and Additional Stock free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts. The Common Stock, Stock and Additional Stock
conform to all statements relating thereto contained in the Registration
Statement or the Prospectus.
(15) The Warrant Stock and the Additional Warrant Stock are validly
authorized and have been duly and validly reserved for issuance and, when
issued and delivered upon exercise of the Warrants and Additional Warrants,
respectively, in accordance with the terms thereof, will be validly issued,
fully paid, and nonassessable, without any personal liability attaching to
the ownership thereof, and will not be issued in violation of any
preemptive rights of stockholders; and the holders of the Warrants and
Additional Warrants, as the case may be, will receive good title to the
Common Stock purchased by them upon the exercise of the Warrants and
Additional Warrants, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and voting
trusts. The Warrants, Additional Warrants, Warrant Stock and the Additional
Warrant Stock conform to all statements relating thereto contained in the
Registration Statement or the Prospectus.
(16) The Underlying Stock and the Underlying Warrant Stock are validly
authorized and have been duly and validly reserved for issuance and, when
issued and delivered upon exercise of the Underwriter's Warrants and
Underlying Warrants, as the case may be, in accordance with the respective
terms thereof, will be validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership thereof, and will
not be issued in violation of any preemptive rights of stockholders; and
the holders of the Underwriter's Warrants and the Underlying
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Warrants will receive good title to the securities purchased by them upon
the exercise of the such warrants, free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders' agreements, and
voting trusts. The Underwriter's Warrants, Underlying Stock, Underlying
Warrants and the Underlying Warrant Stock conform to all statements
relating thereto contained in the Registration Statement or the Prospectus.
(17) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as may
otherwise be properly described in the Prospectus, the Company has not (i)
issued any securities or incurred any liability or obligation, primary or
contingent, for borrowed money, (ii) entered into any transactions not in
the ordinary course of business, (iii) declared or paid any dividend on its
capital stock, or (iv) experienced any adverse changes or any development
which may materially adversely effect the condition (financial or
otherwise), net assets or stockholders' equity, results of operations,
business, key personnel, assets, or properties of the Company and its
subsidiaries taken as a whole.
(18) Neither the Company nor, to the best of the Company's knowledge,
any of its officers, directors, or affiliates (as defined in the
Regulations), has taken or will take, directly or indirectly, prior to the
termination of the offering contemplated by this Agreement, any action
designed to stabilize or manipulate the price of any security of the
Company, or which has caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or
resale of any of the Securities or the Additional Securities.
(19) The Company has obtained from each of its directors, officers and
principal stockholders a written agreement, in form and substance
satisfactory to counsel for the Underwriters, that, for a period of 24
months from the date on which the Registration Statement shall become
effective under the Act, he or she will not, without the Representative's
prior written consent, publicly offer, sell, contract to sell, grant any
option for the sale of, or otherwise dispose of, directly or indirectly,
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any shares of Common Stock or any security or other instrument which by its
terms is convertible into, or exercisable or exchangeable for, shares of
Common Stock or other securities of the Company, including, without
limitation, any shares of Common Stock issuable pursuant to the terms of
any employee stock options; provided, however, that such persons may offer,
sell, contract to sell, grant an option for the sale of, or otherwise
dispose of all or any part of his, her, or its shares of Common Stock or
other such security or instrument of the Company during such period only if
such transaction is private in nature and the transferee of such shares of
Common Stock or other securities or instruments agrees, prior to such
transaction, to be bound by all of the provisions of such agreement.
Further, if either of Messrs. Xxxxxx Xxxxxxxx, the Company's Chief
Executive Officer and President, Xxxxx X. Xxxxxx, the Chairman of the
Company's Board of Directors, and Xxxxx Xxxxxxx, the Company's Vice
President and Secretary, dies during such 24-month period, the estate of
the deceased may cause the Company to redeem 250,000 shares for an
aggregate of $500,000 and may sell the remaining shares pursuant to Rule
144 promulgated under the Act, provided that the estate does not sell more
than 25,000 shares within any three-month period.
(20) The Company is not, and does not intend to conduct its business
in a manner in which it would become, an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(21) Except for the securities that are being registered pursuant to
the Registration Statement, no person or entity has the right to require
registration of shares of Common Stock or other securities of the Company
because of the filing or effectiveness of the Registration Statement.
(22) Except as may be set forth in the Prospectus, the Company has not
incurred any liability for a fee, commission, or other compensation on
account of the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
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(23) Neither the Company, nor any of its affiliates, is presently
doing business with the government of Cuba or with any person or affiliate
located in Cuba. If, at any time after the date on which the Registration
Statement is declared effective under the Act or with the Florida
Department of Banking and Finance (the "Florida Department"), whichever is
later, and prior to the end of the period referred to in the first clause
of Section 2(a)(2), the Company commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba, the
Company will so inform the Florida Department within 90 days after such
commencement of business in Cuba, and, during the period referred to in
Section 2(a)(2), will inform the Florida Department within 90 days after
any change occurs with respect to previously reported information.
(24) To the knowledge of the Company, no officer, director, or
principal stockholder of the Company has any affiliation or association
with the National Association of Securities Dealers, Inc. (the "NASD") or
any member thereof.
(25) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state, local, and foreign income and franchise tax
returns and other reports required to be filed and has paid all taxes shown
as due thereon; and there is no tax deficiency which has been, or, to the
knowledge of the Company, might be, asserted against the Company.
(26) To the best knowledge of the Company, none of the activities or
businesses of the Company is in violation of, or will cause the Company 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 upon the condition (financial or otherwise),
business, property, prospective results of operations, or net worth of the
Company.
3. Purchase, Sale, and Delivery of the Securities and the Additional
Securities. On the basis of the representations, warranties, covenants, and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and
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sell to the Underwriters, and the Underwriters, severally and not jointly, agree
to purchase from the Company on a firm-commitment basis, the numbers of shares
of Stock and Warrants set forth opposite the respective names of the
Underwriters in Schedule I hereto.
The purchase price per share of the Stock to be paid by the Underwriters
shall be $4.05. The public offering price per share of the Stock shall be $4.50.
The purchase price per Warrant to be paid by the Underwriters shall be $.09. The
public offering price per Warrant shall be $.10.
Payment for the Securities by the Underwriters shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company at the offices of Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP, counsel to
the Underwriters, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such
other place as the Representative shall determine and advise the Company by at
least two full days' notice in writing, upon delivery of the Securities to the
Representative for the respective accounts of the Underwriters. Such delivery
and payment shall be made by 12:00 p.m., New York City local time, on the third
business day following the time of the public offering, as defined in Section
11(a) (unless such time and date is postponed in accordance with the provisions
of Section 9(c)), or at such other time as shall be agreed upon between the
Representative and the Company. The time and date of such delivery and payment
are hereinafter referred to as the "Closing Date."
Certificates for the Stock and Warrants shall be registered in such name or
names and in such authorized denominations as the Representative may request in
writing at least two full business days prior to the Closing Date. The Company
shall permit the Representative, or its designee, to examine and package such
certificates for delivery at least one full business day prior to the Closing
Date.
In addition, the Company hereby grants to the Representative the
Over-allotment Option to purchase all or a portion of the Additional Stock and
Additional Warrants as may be necessary to cover over-allotments, at the same
respective purchase price per share to be paid by the Underwriters to the
Company for the Additional Stock and Additional Warrants as provided for in this
Section 3. The Representative may elect to exercise the Over-allotment Option
for a disproportionate amount of Additional Stock and Additional Warrants. The
Over-allotment Option may be exercised only to cover over-allotments in the sale
of Stock and Warrants by the Underwriters. The Over-allotment Option may be
exercised by the Representative on the basis of the representations, warranties,
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covenants, and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, at any time and from time to time on or
before the forty-fifth (45th) day following the date on which the Registration
Statement becomes effective under the Act, by written notice by the
Representative to the Company. Such notice shall set forth the aggregate number
of Additional Stock and Additional Warrants as to which the Over-allotment
Option is being exercised (which shall be allocated as the Company and the
Representative deems appropriate) and the time and date, as determined by the
Representative, when such Additional Stock and Additional Warrants are to be
delivered (such time and date are hereinafter referred to as an "Additional
Closing Date"); provided, however, that no Additional Closing Date shall be
earlier than the Closing Date nor earlier than the second business day after the
date on which the notice of the exercise of the Over-allotment Option shall have
been given not later than the eighth business day after the date on which such
notice shall have been given.
In the event the Company declares or pays a dividend or a distribution on
the Common Stock, whether in the form of cash, shares of Common Stock, or other
consideration, prior to the Additional Closing Date, excluding any payments in
connection with the Company's Subchapter S corporation status pursuant to the
Internal Revenue Code of 1986, as amended, as set forth in the Prospectus, such
dividend or distribution shall also be paid on the Additional Stock on the later
of the Additional Closing Date and the date on which such dividend or
distribution is payable.
Payment for the shares of Additional Stock and Additional Warrants by the
Representative shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company at the offices of
Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP, counsel to the Underwriters, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as the
Representative shall determine and advise the Company by at least two full days'
notice in writing, upon delivery of the Additional Stock and Additional Warrants
to the Representative for the account of the Representative.
Certificates for the Additional Stock and Additional Warrants shall be
registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two full business days prior to
the Additional Closing Date with respect thereto. The
16
Company shall permit the Representative, or its designee, to examine and package
such certificates for delivery at least one full business day prior to the
Additional Closing Date with respect thereto.
4. Offering. The Underwriters are to make an initial public offering of the
Securities and Additional Securities, as the case may be, as soon, on or after
the date on which the Registration Statement becomes effective under the Act, as
the Representative deems it advisable so to do. The Stock and Warrants or
Additional Stock and Additional Warrants, as the case may be, are to be
initially offered to the public at the respective initial public offering prices
set forth in Section 3 (such respective prices being hereinafter referred to as
the "Public Offering Price"). After the initial public offering, the
Representative may from time to time increase or decrease the initial Public
Offering Price, in the Representative's sole discretion, by reason of changes in
general market conditions or otherwise.
5. Covenants.
(a) The Company covenants that it will:
(1) Use its best efforts to cause the Registration Statement to become
effective under the Act as promptly as possible and notify the
Representative immediately, and confirm such notice in writing, (i) when
the Registration Statement and any post-effective amendment thereto become
effective under the Act, (ii) of the receipt of any comments from the
Commission or the "blue sky" or securities authority of any jurisdiction
regarding the Registration Statement, any post-effective amendment thereto,
the Prospectus, or any amendment or supplement thereto, (iii) of the filing
with the Commission of any supplement to the Prospectus, and (iv) of the
receipt of any notification with respect to a Stop Order or the initiation
or threatening of any proceeding with respect to a Stop Order. The Company
will use its best efforts to prevent the issuance of any Stop Order and, if
any Stop Order is issued, to obtain the lifting thereof as promptly as
possible. If the Registration Statement has become or becomes effective
under the Act with a form of prospectus omitting Rule 430A Information, or
filing of the Prospectus with the Commission is otherwise required under
Rule 424(b), the Company will file with the Commission the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period
17
prescribed and will provide evidence satisfactory to the Representative of
such timely filing.
(2) During the time when a prospectus relating to the Securities,
Warrant Stock, Additional Securities and the Additional Warrant Stock is
required to be delivered hereunder or under the Act or the Regulations,
comply with all requirements imposed upon it by the Act, as now existing
and as hereafter amended, and by the Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of, or
dealings in, the Securities, Warrant Stock, Additional Securities and the
Additional Warrant Stock in accordance with the provisions hereof and the
Prospectus. If, at any time when a prospectus relating to the Securities,
Warrant Stock, Additional Securities or the Additional Warrant Stock is
required to be delivered hereunder or under the Act or the Regulations, any
event shall have occurred as a result of which, in the reasonable opinion
of counsel for the Company or counsel for the Underwriters, the
Registration Statement or the Prospectus as then amended or supplemented
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or if, in the reasonable opinion of
either of such counsel, it is necessary at any time to amend or supplement
the Registration Statement or the Prospectus to comply with the Act or the
Regulations, the Company will immediately notify the Representative and
promptly prepare and file with the Commission an appropriate amendment or
supplement (in form and substance satisfactory to the Representative) which
will correct such statement or omission or which will effect such
compliance and will use its best efforts to have any such amendment
declared effective under the Act as soon as possible.
(3) Deliver without charge to each of the Underwriters such number of
copies of each Preliminary Prospectus as the Underwriters may reasonably
request and, as soon as the Registration Statement, or any amendment
thereto, becomes effective under the Act or a supplement is filed with the
Commission, deliver without
18
charge to the Representative two signed copies of the Registration
Statement, including exhibits, or such amendment thereto, as the case may
be, and two copies of any supplement thereto, and deliver without charge to
each of the Underwriters such number of copies of the Prospectus, the
Registration Statement, and amendments and supplements thereto, if any,
without exhibits, as the Representative may request for the purposes
contemplated by the Act.
(4) Endeavor in good faith, in cooperation with the Representative, at
or prior to the time the Registration Statement becomes effective under the
Act, to qualify the Securities, Warrant Stock, Additional Securities and
Additional Warrant Stock for offering and sale under the "blue sky" or
securities laws of such jurisdictions as the Representative may designate;
provided, however, that no such qualification shall be required in any
jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction to which it is not then subject. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees in writing that such action is not at the
time necessary or advisable, file and make such statements or reports at
such times as are or may be required by the laws of such jurisdiction.
(5) Make generally available (within the meaning of Section 11(a) of
the Act and the Regulations) to its securityholders as soon as practicable,
but not later than 45 days after the end of the fiscal quarter in which the
first anniversary date of the Registration Statement occurs, an earnings
statement (which need not be certified by independent certified public
accountants unless required by the Act or the Regulations, but which shall
satisfy the provisions of Section 11(a) of the Act and the Regulations)
covering a period of at least 12 months beginning after the effective date
of the Registration Statement.
(6) For a period of 24 months after the date on which the Registration
Statement shall become effective under the Act, not, without the
Representative's prior written consent, offer, issue, sell, contract to
sell, grant any option for the sale
19
of, or otherwise dispose of, directly or indirectly, any shares of Common
Stock or other securities of the Company (or any security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, shares of Common Stock), except as provided in Section 3
or as described in the Prospectus and except for the issuance of (i)
300,000 shares of Common Stock which may be issued pursuant to the
Company's Stock Option and Grant Plan, as described in the Prospectus (the
"Plan"), including the shares of Common Stock issuable upon the exercise of
options granted thereunder, (ii) the Underlying Stock and (iii) the
Underlying Warrant Stock.
(7) For a period of five years after the effective date of the
Registration Statement, furnish to the Representative, without charge, the
following:
(i) as soon as practicable after they have been sent to
stockholders of the Company or filed with, or furnished to, the
Commission or the NASD, three copies of each annual and interim
financial, proxy statements and other reports or communications sent
by the Company to its stockholders or filed with, or furnished to, the
Commission or the NASD; and
(ii) as soon as practicable, two copies of every press release
and every material news item and article in respect of the Company or
its affairs which was released by the Company.
(iii) such additional documents and information with respect to
the Company and its affairs as the Representative may from time to
time reasonably request; provided, however, that such additional
documents and information shall be received by the Representative on a
confidential basis, unless otherwise disclosed to the public, and
shall not be used in violation of the Federal Securities laws and the
Regulations.
(8) Apply the net proceeds received by it from the offering
contemplated by this Agreement in a manner as close as practicable to that
set forth under the heading "Use of Proceeds" in the Prospectus.
20
(9) Furnish to the Representative as early as practicable prior to the
Closing Date and any Additional Closing Date, as the case may be, but no
less than two full business days prior thereto, a copy of the latest
available unaudited interim consolidated financial statements of the
Company which have been read by the Company's independent certified public
accountants, as stated in their letters to be furnished pursuant to
Sections 7(f) hereof.
(10) Comply with all filing and reporting requirements of the Exchange
Act, which may from time to time be applicable to the Company.
(11) Comply with all provisions of all undertakings contained in the
Registration Statement.
(12) Prior to the Closing Date or any Additional Closing Date, as the
case may be, issue no press release or other public communication,
financial in nature or otherwise, directly or indirectly, and hold no press
conference with respect to the Company, the financial condition, results of
operations, business, properties, assets, liabilities of any of them, or
this offering, without the Representative's prior written consent.
(13) If the principal stockholders, officers, or directors of the
Company are required by the "blue sky" or securities authority of any
jurisdiction selected by the Representative pursuant to Section 5(a)(4) to
escrow or agree to restrict the sale of any security of the Company owned
by them for the Company to qualify or register the Securities or the
Additional Securities for sale under the "blue sky" or securities laws of
any such jurisdiction, use its best power to cause each such person to
escrow or restrict the sale of such securities on the terms and conditions
and in the form specified by the securities administrator of such
jurisdiction.
(14) Use its best efforts to maintain the inclusion of the Securities
and the Additional Securities, if applicable, on the SCM and BSE, for at
least five years from the date of this Agreement.
(15) On the Closing Date, sell to the Representative, individually and
not as the representative of the Underwriters, for an aggregate purchase
price of $10.00,
21
the Underwriter's Warrants to purchase up to 125,000 shares of the Stock
and 125,000 Warrants, exclusive of the exercise of any portion of the
Over-allotment Option, which shall be substantially in the form set forth
as an exhibit to the Registration Statement. The Underwriter's Warrants
shall not be redeemable by the Company at any time or for any reason
without the prior, written consent of the Representative. Each
Underwriter's Warrant shall entitle the holder thereof to purchase one
share of Common Stock and one Warrant of the Company at a price equal to
125% of the initial public offering price of the Securities sold in the
offering, respectively, for a four-year period, commencing one year after
the Commission declares the Registration Statement effective. The
Underwriter's Warrants may not be sold, transferred, assigned, pledged or
hypothecated by any person for a period of one year, commencing the date
the Commission declares the Registration Statement effective, except that
it may be transferred, in whole or in part, to one or more officers and
partners of the Representative or Underwriters, as the case may be or by
operation of law; provided, however, that the foregoing restriction shall
lapse in respect to shares of Common Stock and other securities issuable
upon exercise of the Underlying Warrants as the Warrants are called for
redemption. Thereafter, the Underwriter's Warrants will be transferrable
provided such transfer is in accordance with the Act.
(16) For five (5) years following the Effective Date, should the
Company merge, reorganize or take any other action which would terminate
the Underwriter's Warrants, the Company shall make provision, satisfactory
to the Representative or its designees, for either the exercise or
continuation of the Underwriter's Warrants. Furthermore, the Company may
not under any circumstances call for the redemption of the Underwriter's
Warrants. The Underwriter's Warrants will contain certain anti-dilution
provisions in the event the Company (a) subdivides or combines the
outstanding shares of Common Stock, (b) issues or sells any shares of
Common Stock or options or warrants to purchase Common Stock or securities
convertible into Common Stock for consideration less than the prevailing
market price of a share
22
of Common Stock or (c) engages in a merger or combination which results in
a reclassification or change of the outstanding Common Stock. In the event
of a merger or acquisition of the Company which involves the issuance of
shares of Common Stock, any change in the exercise price of the
Underwriter's Warrants shall be adjusted based upon the difference between
the exercise price of the Underwriter's Warrants and fair market value of
the Common Stock issued in connection with such merger or acquisition (if
lower than the market price of the Common Stock) and the total number of
outstanding shares of Common Stock. The Company shall set aside and at all
times have available a sufficient number of Shares of Common Stock to be
issued upon exercise of the Underwriter's Warrants.
(17) During the four-year period commencing one year from the
effective date of the Registration Statement, the Company will agree to use
its best efforts to register the (i) Underwriter's Warrants, (ii)
Underlying Stock, (iii) Underlying Warrants and (iv) Underlying Warrant
Stock upon written request of the holders of at least a majority of the
Underlying Stock, no more than once at the Company's own expense, on a
registration statement on Forms XX-0, X-0 or S-3 or other appropriate form,
or offering statement, pursuant to the Act, or file an amendment to the
Registration Statement. These best efforts shall include the preparation
and filing of one demand registration statement with respect to the
securities issuable upon the exercise of the Underwriter's Warrants during
such four-year period and maintaining the effectiveness thereof, for nine
months or until the sale of such securities in the open market, at the
Company's sole expense (other than underwriter or selling broker costs),
including blue sky fees and expenses.
(18) During the period commencing the second year and concluding at
the end of the seventh year after the effective date of the Registration
Statement, notify all holders of the Underwriter's Warrants and securities
issuable thereunder of the Company's intention to do another offering of
the Company's securities (whether by the Company or by any security holder
of the Company) and, if requested by such holders, include any
Underwriter's Warrants, Underlying Stock, Underlying
23
Warrants and Underlying Warrant Stock, regardless of whether some of such
holders have availed themselves of any of the demand registration right
described above, in such offering at the Company's sole cost and expense,
and maintain the effectiveness thereof for at least 12 months ("Piggyback
Registration Rights"). The Piggyback Registration Rights are not applicable
to a Registration Statement filed by the Company with the Commission on
Forms X-0, X-0 or any other inappropriate form. The objection of a
subsequent underwriter to the exercise of any Piggyback Registration Rights
and inclusion of such securities, to the extent deemed necessary by such
underwriter, shall be without penalty or prejudice to any of the Piggyback
Registration Rights of the holders of the unregistered Underwriter's
Warrants and securities issuable thereunder. Notwithstanding the foregoing,
to the extent a subsequent underwriter agrees to register a portion of the
Underwriter's Warrants and securities issuable thereunder, such inclusion
shall be on a pro-rata basis to the holders thereof without penalty or
prejudice to the holders of the unregistered securities. However, in such
event, the Company will, within six months of the completion of such
subsequent underwriting, file, at its sole expense, a registration
statement to such register such excluded securities.
(19) Until expiration of the Underwriter's Warrants, keep reserved
sufficient shares of Common Stock for issuance upon exercise of the
Underwriter's Warrants and Underlying Warrants.
(20) Deliver to the Representative, without charge, no later than six
months after the last Additional Closing Date or the expiration of the
period during which the Representative may exercise the Over-allotment
Option, five (5) sets of bound volumes of the complete Registration
Statement and all related materials to the individuals designated by the
Representative or counsel to the Underwriters.
(21) For a period of three years after the effective date of the
Registration Statement, provide, at its sole expense, to the Representative
copies of the Company's daily transfer sheets. The Company shall cause its
depository (at the Company's
24
expense) to fax a "special security position report" to the Underwriter on
a weekly basis.
(22) Maintain key-person life insurance, payable to the Company on the
life of Xx. Xxxxxx Xxxxxxxx, the Company's Chief Executive Officer and
President, in the amount of $200,000 and use its best efforts to increase
such amount by an additional $300,000 for the period of time equal to the
longer of (i) three years from the date on which the Registration Statement
becomes effective under the Act and (ii) the terms of the employment
agreement between the Company and Xx. Xxxxxxxx.
(23) Use its best efforts, for a period of three years following the
date on which the Registration Statement becomes effective under the Act,
to cause a designee of the Representative to be elected to the Company's
Board of Directors, in the Representative's reasonable judgment, or to be
appointed as an advisor to such Board of Directors (the "Designee"). The
Designee shall attend the meetings of the Board, receive all notices and
other correspondence and communications sent by the Company to members of
the Board of Directors and receive compensation equal to entitlement of
other non-officer Directors. In addition, the Designee shall be entitled to
receive reimbursement for all costs incurred in attending such meetings,
including, but not limited to, food, lodging and transportation. The
Company further agrees that, during said three-year period, it shall
schedule no less than four formal and "in person" meetings of its Board of
Directors in each such year at which meetings the Designee shall be
permitted to attend as set forth herein; said 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 Designee. Further, in the
event the Representative shall not have selected the Designee during such
three-year period, the Company and its principal stockholders shall give
notice to the Representative with respect to any proposed acquisition,
merger, reorganization or other similar transaction.
(24) Indemnify, to the extent permitted by applicable law, and hold
the Representative and the Designee harmless against any and all claims,
actions, damages, costs, expenses and judgments arising solely out of the
attendance and
25
participation of the Designee at any such meeting described in Section
5(a)(23) above. In the event the Company maintains a liability insurance
policy affording coverage of its officers and directors, it agrees, if
possible, to include the Designee as an insured party under such policy.
(25) Until the expiration of three years from the date on which the
Registration Statement becomes effective under the Act, not effect a change
in the independent certified public accountants for the Company unless the
Company has received the prior written consent of the Representative.
(26) For a period of three years from date on which the Registration
Statement becomes effective under the Act, the Company, at its expense,
shall cause its regularly engaged independent certified public accountants
to review (but not audit) the Company's financial statements for each of
the first three fiscal quarters prior to the announcement of quarterly
financial information, the filing of the Company's Quarterly Report on Form
10-QSB, and the mailing of quarterly financial information to stockholders.
(27) Have outstanding, on the Closing Date, 3,195,000 shares of Common
Stock on a fully diluted basis, excluding the Additional Stock, Additional
Warrant Stock, Warrant Stock, Underlying Stock and Underlying Warrant
Stock. The Company will supply the Underwriter with a list of all current
stockholders of the Company and all persons who possess securities
exercisable or exchangeable for, or convertible into, capital stock.
(28) Have in effect on the Closing Date the Plan, which will provide
for the issuance of shares of Common Stock and options to purchase Common
Stock (which in either case shall not be more than an aggregate of 300,000
shares of Common Stock). The Company shall not grant, for a period of three
years following the date on which the Registration Statement becomes
effective under the Act, any options having an exercise price less than the
fair market value of the Common Stock on such date, except that the Company
shall be permitted to grant non-qualified options; provided, however, that
the exercise price of such non-qualified options
26
shall be no less than 85% of the fair market value of the Company's Common
Stock on the date of grant.
(29) Cooperate, in addition to the demand and Piggyback Registration
Rights, with the then holders of the Underwriter's Warrants and securities
issuable thereunder, in the preparation and execution of any registration
statement, in addition to the registration statements and offering
statements referred to above, required in order to sell or transfer the
aforesaid securities and supply all information required to be included in
such registration statement, but the expenses of such additional
registration statement or offering statement will be pro-rated between the
Company and the holders of the registered securities according to the
aggregate sales price of the securities being registered.
(30) For a period of 24 months following the effective date, not
effect any offerings of securities pursuant to Regulation S (or any
successor statute) under the Act, without the Representative's consent,
which consent shall not be unreasonably withheld.
(31) For a period of 24 months following the effective date, not file
a Registration Statement on Form S-8 registering securities other than
securities issued to (i) employees of the Company and its subsidiaries and
(ii) 25,000 shares of Common Stock to be issued to Xx. Xxx-Xxx Xxxx under
the Plan in annual increments of 5,000 shares, commencing the date the
Commission declares the Registration Statement effective.
(32) The Company, its subsidiaries and its principal stockholders will
grant to the Representative a right of first refusal for a period of three
years from the effective date for any public or private offering of
securities to raise capital and sale of securities to be made by the
Company, its principal stockholders or any of its present or future
subsidiaries.
(33) At or prior to the Closing Date, the Company shall enter into an
agreement retaining the Representative as management and financial
consultants to the Company for a 24-month period, commencing as of the
Closing Date at a fee equal to $5,000 per month, or an aggregate of
$120,000. The entire fee of $120,000 shall be paid in its entirety on the
Closing Date.
27
(34) Subject to the rules and regulations of the NASD, the Company
will pay the Representative a commission equal to five percent (5%) for all
Warrants exercised more than 12 months after the effective date. The
Representative may allow a portion of this commission to members in good
standing with the NASD. Any costs incurred by the Company in connection
with the solicitation of the exercise price of such Warrants shall be borne
by the Company. The Company agrees not to solicit warrant exercises through
any broker dealer other than the Representative.
6. Payment of Expenses. The Company hereby agrees to pay all expenses
(other than fees of counsel for the Underwriters, except as provided in Section
6(c)) in connection with the following:
(a) the preparation, printing, filing, distribution, and mailing of
the Registration Statement and the Prospectus and the printing, filing,
distribution, and mailing of this Agreement, and other underwriting and
related agreements and related documents, including the cost of all copies
thereof and of the Preliminary Prospectus and of the Prospectus and any
amendments or supplements thereto supplied to the Underwriters in
quantities as hereinabove stated;
(b) the issuance, sale, transfer, and delivery (as applicable) of the
Securities and the Additional Securities, including any transfer or other
taxes payable thereon;
(c) the qualification of the Securities, Warrant Stock, Additional
Securities and Additional Warrant Stock under state or foreign "blue sky"
or securities laws, including the costs of printing and mailing the
preliminary and final "Blue Sky Survey" and the fees for the Underwriters'
counsel in the amount of $35,000 and the disbursements in connection
therewith (not including fees of special counsel if required to be incurred
in a merit review state which may require local counsel);
(d) the filing fees payable to the Commission, the NASD, and the
jurisdictions in which such qualification is sought;
(e) any fees relating to the listing of the Common Stock and Warrants
on SCM or BSE, as the case may be;
28
(f) the cost of printing certificates representing the Securities,
Warrant Stock, Additional Securities and Additional Warrant Stock.
(g) the fees of the transfer agent and warrant agent for the Common
Stock and Warrants, respectively;
(h) the cost of publication of "tombstone" advertisements with respect
to the offering;
(i) a non-accountable expense allowance to the Representative equal to
three percent of the gross proceeds of the Securities and, to the extent
Additional Securities are sold, on the gross proceeds of the sale of the
Additional Securities (less amounts, if any, previously paid to the
Representative in respect of such non-accountable expense allowance) to the
Representative on the Closing Date or Additional Closing Date, as the case
may be.
7. Conditions of Underwriter's Obligations. The obligations of the
Underwriters to purchase and pay for the Securities and the Additional
Securities, as provided herein, shall be subject, in their reasonable
discretion, to the continuing accuracy of the representations and warranties of
the Company contained herein in all material respects and in each certificate
and document contemplated under this Agreement to be delivered to the
Representative, as of the date hereof and as of the Closing Date (or any
Additional Closing Date, as the case may be), to the performance by the Company
of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective under the
Act no later than 6:00 p.m., New York City time, on the date of this
Agreement or such later date and time as shall be consented to in writing
by the Representative; on or prior to the Closing Date, or any Additional
Closing Date, as the case may be, no Stop Order shall have been issued and
no proceeding shall have been initiated or threatened with respect to a
Stop Order; and any request by the Commission for additional information
shall have been complied with by the Company to the reasonable satisfaction
of counsel for the Underwriters. 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 Regulations.
29
(b) At the Closing Date and any Additional Closing Date, as the case
may be, the Representative shall have received the favorable opinion of
Xxxxxxx Xxxxxxxxxx & Xxxxxx, LLP, counsel for the Company, having offices
at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, dated the date of
delivery, addressed to the Underwriters, and in form and scope reasonably
satisfactory to counsel for the Underwriters, with reproduced copies or
signed counterparts thereof for each of the Underwriters, to the effect
that, as of such Closing Date or Additional Closing Date, as the case may
be:
(1) the Company is a corporation duly incorporated, validly
existing, and in good standing under the laws of the jurisdiction of
its incorporation, with full power and authority, and, to the best of
such counsel's knowledge, all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from,
and declarations and filings with, all federal, state, local, and
other governmental authorities and all courts and other tribunals, to
own, lease, license, and use its properties and assets and to conduct
its business in the manner described in the Prospectus. To the best of
such Counsel's knowledge, the Company is duly qualified to do business
as a foreign corporation and is in good standing in the jurisdictions
in which its ownership and leasing of any properties or the
characteristics of its operations require such qualification;
(2) EHC is a corporation duly incorporated, validly existing, and
in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority, and, to the best of such
counsel's knowledge, all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from,
and declarations and filings with, all federal, state, local, and
other governmental authorities and all courts and other tribunals, to
own, lease, license, and use its properties and assets and to conduct
its business in the manner described in the Prospectus. To the best of
such Counsel's knowledge, the Company is duly qualified to do business
as a foreign corporation and is in good standing in the jurisdictions
in which its ownership and leasing of any properties or the
characteristics of its operations require such qualification;
30
(3) CDP is a corporation duly incorporated, validly existing, and
in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority, and, to the best of such
counsel's knowledge, all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from,
and declarations and filings with, all federal, state, local, and
other governmental authorities and all courts and other tribunals, to
own, lease, license, and use its properties and assets and to conduct
its business in the manner described in the Prospectus. To the best of
such Counsel's knowledge, the Company is duly qualified to do business
as a foreign corporation and is in good standing in the jurisdictions
in which its ownership and leasing of any properties or the
characteristics of its operations require such qualification;
(4) DTI is a corporation duly incorporated, validly existing, and
in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority, and, to the best of such
counsel's knowledge, all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from,
and declarations and filings with, all federal, state, local, and
other governmental authorities and all courts and other tribunals, to
own, lease, license, and use its properties and assets and to conduct
its business in the manner described in the Prospectus. To the best of
such Counsel's knowledge, the Company is duly qualified to do business
as a foreign corporation and is in good standing in the jurisdictions
in which its ownership and leasing of any properties or the
characteristics of its operations require such qualification;
(5) the authorized capital stock of the Company is as reflected
in the Registration Statement, of which the Prospectus is a part.
Except as disclosed in the Prospectus, each outstanding share of
Common Stock is validly authorized and issued, fully paid, and
nonassessable, without any personal liability attaching to the
ownership thereof, has not been issued and is not owned or held in
violation of any statutory preemptive rights of stockholders. To the
knowledge of such counsel, there is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant,
31
or other right calling for the issuance of, any share of capital stock
of the Company or any security or other instrument which by its terms
is convertible into, or exercisable or exchangeable for, capital stock
of the Company, except as may be properly described in the Prospectus.
To the knowledge of such counsel, there is outstanding no security or
other instrument which by its terms is convertible into, or
exercisable or exchangeable for, capital stock of the Company, except
as may be described in the Prospectus. The certificates evidencing the
Common Stock are in proper form;
(6) to the knowledge of such counsel, there is no litigation,
arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending or in prospect with respect to the
Company and its subsidiaries or its operations, business, properties,
or assets, except as may be properly described in the Prospectus or
such as individually or in the aggregate do not now have, and can not
reasonably be expected in the future to have, a material adverse
effect upon the operations, business, properties, or assets of the
Company and its subsidiaries.
(7) such counsel has not been advised by the Company that the
Company is now, or is expected to be in violation or breach of, or in
default with respect to, any material provision of any contract,
agreement, instrument, lease, license, arrangement, or understanding
which is material to the Company, except as set forth in Exhibit E,
and, to the knowledge of such counsel, each such contract, agreement,
instrument, lease, license, arrangement, or understanding is in full
force and effect and is the valid, legal, and binding obligation of
the parties thereto and is enforceable in accordance with its terms;
(8) to the knowledge of such counsel, the Company is not in
violation or breach of, or in default with respect to, any term of its
certificate of incorporation (or other charter document) or By-Laws,
as those documents have been amended or restated;
(9) the Company has all requisite power and authority to execute,
deliver, and perform this Agreement and the Underwriter's Warrants.
All necessary
32
corporate proceedings of the Company have been taken to authorize the
execution, delivery, and performance by the Company of this Agreement
and the Underwriter's Warrants. This Agreement has been duly
authorized, executed, and delivered by the Company, is the legal,
valid, and binding obligation of the Company, and is enforceable as to
the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency and other laws affecting the enforceability of
creditors' rights generally.
(10) the Underwriter's Warrants have been duly authorized by the
Company and, when executed and delivered by the Company, will be
legal, valid, and binding obligations of the Company, each enforceable
as to the Company in accordance with its terms. To the knowledge of
such counsel, no consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or
other tribunal is required by the Company for the execution, delivery,
or performance by the Company of this Agreement or the Underwriter's
Warrants (except filings under the Act which have been made or will be
made before the Closing Date or Additional Closing Date, as the case
may be, and filings and consents consisting only of filings and
consents under "blue sky" or securities laws). No consent of any party
to any material contract or agreement filed as an exhibit to the
Registration Statement or incorporated by reference therein or which,
to the best knowledge of such counsel based solely on the
representations of the Company, is required to be filed as exhibit to
the Registration Statement, is required for the execu tion, delivery,
or performance of this Agreement and the Underwriter's Warrants; and
the execution, delivery, and performance of this Agreement and the
Underwriter's Warrants will not violate, result in a breach of,
conflict with, result in the creation or imposition of any lien,
charge, or encumbrance upon any properties or assets of the Company
pursuant to the terms of, or (with or without the giving of notice or
the passage of time or both) entitle any party to terminate or call a
default under, any such contract, agreement or instrument, violate or
result in a breach of, or conflict
33
with any term of the certificate of incorporation (or other charter
document) or ByLaws of the Company.
(11) each share of Stock to be delivered on the Closing Date is
validly authorized and, when issued and delivered in accordance with
the terms hereof, will be validly issued, fully paid, and
nonassessable, without any personal liability attaching to the
ownership thereof, and is not issued in violation of any statutory
preemptive rights of stockholders, and assuming the Underwriters are
"bona fide" purchasers under the Uniform Commercial Code as in effect
in the State of New York, the Underwriters will receive good title to
the shares of Stock purchased by them, from the Company, free and
clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts. The
Additional Stock is validly authorized and when issued and delivered
in accordance with the terms hereof, will be fully paid and
nonassessable, without any personal liability attaching to the
ownership thereof, and will not be issued in violation of any
preemptive rights of stockholders, and upon delivery of the Additional
Stock in accordance with the terms of the Over-allotment Option,
assuming the Underwriters are "bona fide" purchasers under the Uniform
Commercial Code as in effect in the state of New York, the
Underwriters will receive good title to the shares of Additional Stock
purchased by them, from the Company, free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholder's
agreements and voting trusts. The Common Stock, the Stock, and the
Additional Stock conform in all material respects to all statements
relating thereto contained in the Registration Statement or the
Prospectus;
(12) the Warrant Stock is validly authorized and has been duly
and validly reserved for issuance pursuant to the terms of the
Warrants. The Warrants have been duly and validly authorized, executed
and delivered. The Warrant Stock, when issued and delivered in
accordance with the Warrants will be validly issued, fully paid, and
nonassessable, without any personal liability attaching to the
ownership thereof, and will not have been issued in violation of any
statutory preemptive rights of
34
stockholders. The holders of the Warrants, assuming the Underwriters
are "bona fide" purchasers under the Uniform Commercial Code as in
effect in the State of New York, will receive good title to the
Warrant Stock upon exercise of the Warrants, free and clear of all
liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts. The Warrants and the
Warrant Stock conform in all material respects to all statements
relating thereto contained in the Registration Statement or the
Prospectus;
(13) the Underlying Stock and Underlying Warrant Stock are
validly authorized and has been duly and validly reserved for issuance
pursuant to the terms of the Underwriter's Warrants and Underlying
Warrants, respectively. The Underlying Warrants have been duly and
validly authorized, executed and delivered. The Underlying Stock and
Underlying Warrant Stock, when issued and delivered in accordance with
the Underwriter's Warrants and Underlying Warrants, respectively will
be validly issued, fully paid, and nonassessable, without any personal
liability attaching to the ownership thereof, and will not have been
issued in violation of any statutory preemptive rights of
stockholders. The Representative, and any other holders of the
Underwriter's Warrants, assuming the Underwriters are "bona fide"
purchasers under the Uniform Commercial Code as in effect in the State
of New York, will receive good title to the Underlying Stock and
Underlying Warrants upon exercise of the Underwriter's Warrants and to
the Underlying Warrant Stock upon exercise of the Underlying Warrants,
free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts. The
Underwriter's Warrants, Underlying Stock, Underlying Warrants and
Underlying Warrant Stock conform in all material respects to all
statements relating thereto contained in the Registration Statement or
the Prospectus;
(14) to the knowledge of such counsel, each contract, agreement,
instrument, lease, or license required to be described in the
Registration Statement or the Prospectus has been properly described
therein, and each contract, agreement, instrument, lease, or license
required to be filed as an exhibit to the Registration
35
Statement has been filed with the Commission as an exhibit to the
Registration Statement;
(15) insofar as statements in the Prospectus purport to summarize
the status of litigation or the provisions of laws, rules,
regulations, orders, judgments, decrees, contracts, agreements,
instruments, leases, or licenses, such statements have been prepared
or reviewed by such counsel and accurately reflect the status of such
litigation and provisions purported to be summarized in all material
respects;
(16) the Company is not an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended and, if
the Company conducts its business as set forth in the Prospectus, will
not become an "investment company" and will not be required to be
registered under the Investment Company Act;
(17) to the knowledge of such counsel, no person or entity has
the right to require registration of shares of Common Stock or other
securities of the Company because of the filing or effectiveness of
the Registration Statement except as described in the Prospectus; and
(18) such counsel has been advised by the Commission that the
Registration Statement has become effective under the Act, the
Prospectus has been filed in accordance with Rule 424(b) of the
Regulations, including the applicable time periods set forth therein,
or such filing is not required. To the knowledge of such counsel, no
Stop Order has been issued and no proceeding for that purpose has been
instituted or threatened. On the basis of the participation of such
counsel in conferences at which the contents of the Registration
Statement and the Prospectus and related matters were discussed, but
without independent verification by such counsel of the accuracy,
completeness, or fairness of the statements contained in the
Registration Statement, the Prospectus, or any amendment or supplement
thereto, such counsel has no knowledge that (other than financial
statements and other financial data and schedules which are or should
be contained therein, as to which such counsel need express no
opinion): (A) the Registration Statement, any Rule
36
430A Prospectus, and the Prospectus, and any amendment or supplement
thereto, does not appear on its face to comply as to form in all
material respects with the requirements of the Act and the
Regulations; (B) any of the Registration Statement, any Rule 430A
Prospectus, or the Prospectus, or any amendment or supplement thereto,
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; or (C) since the effective date of
the Registration Statement, any event has occurred which should have
been set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been set forth in such an
amendment or supplement.
In rendering such opinion, counsel for the Company may rely (A) as to
matters involving the application of laws, solely on the federal laws of the
United States, the laws of the State of Delaware and the laws of the State of
New York, without giving effect to principles relating to conflicts of laws; (B)
as to matters of fact, to the extent such counsel deems proper, on originals or
copies, certified or otherwise identified to such counsel's satisfaction, of
such corporate records, agreements, documents and other instrument or comparable
documents of public officials; and (C) as to opinions expressed as being made
"to such counsel's knowledge," such counsel's examination is limited to (i) a
review of documents in such counsel's files as to which such counsel has
represented the Company, (ii) conversations with certain of the executive
officers of the Company, and (iii) reasonable inquiry by such counsel into
applicable laws. Such counsel has not made independent investigation as to the
accuracy or completeness of any representations, warranties, data or other
information, written or oral, made or furnished by the Company to such counsel
or to the Representative.
In such examination, counsel has assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to counsel as originals, the conformity to original documents of all
documents submitted to counsel as certified or photostatic copies and the
authenticity of the originals of such latter documents.
(c) On or prior to the Closing Date and any Additional Closing Date, as the
case may be, the Representative shall have been furnished with such information,
documents, certificates,
37
and opinions as it may reasonably require and specifically request for the
purpose of enabling it to review the matters referred to in Section 7(b), and in
order to evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties, covenants, agreements, or conditions herein
contained in all material respects, or as the Representative may reasonably
request.
(d) At the Closing Date or any Additional Closing Date, as the case may be,
(i) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be stated
therein in accordance with the Act and the Regulations, and 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, (ii) there shall have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus, no
material adverse change, or any development involving a prospective material
adverse change, in the business, properties, or condition (financial or
otherwise), results of operations, capital stock, long-term or short-term debt,
or general affairs of the Company and its subsidiaries taken as a whole from
that set forth in the Registration Statement and the Prospectus, except changes
which the Registration Statement and Prospectus indicate might occur after the
date on which the Registration Statement becomes effective under the Act, and
the Company shall not have incurred any material liabilities or entered into any
agreements not in the ordinary course of business other than as referred to in
the Registration Statement and Prospectus, (iii) except as set forth in the
Prospectus, no litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation shall be pending or threatened with
respect to the Company or any of its respective operations, businesses,
properties, or assets which would be required to be set forth in the
Registration Statement, wherein an unfavorable decision, ruling, or finding
would materially adversely affect the business, property, condition (financial
or otherwise), results of operations, or general affairs, of the Company and its
subsidiaries taken as a whole and (iv) the Securities shall have been approved
for listing on the SCM and BSE.
(e) At the Closing Date and any Additional Closing Date, as the case may
be, the Representative shall have received a certificate of the chief executive
officer, the chief financial
38
officer, and the chief accounting officer of the Company, dated the Closing Date
or such Additional Closing Date, as the case may be, to the effect that among
other things (i) the conditions set forth in Sections 7(a) and 7(d) have been
satisfied, (ii) as of the date of this Agreement and as of the Closing Date or
such Additional Closing Date, as the case may be, the representations and
warranties of the Company contained herein were and are accurate and correct in
all materials respects, and (iii) as of the Closing Date or such Additional
Closing Date, as the case may be, the obligations to be performed by the Company
hereunder on or prior thereto have been fully performed.
(f) At the time this Agreement is executed and at the Closing Date and any
Additional Closing Date, as the case may be, the Representative shall have
received a letter, addressed to the Underwriters, and in form and substance
satisfactory to the Representative, with reproduced copies or signed
counterparts thereof for each of the Underwriters, from the independent
certified public accountants for the Company, dated the date of delivery:
(1) confirming that they are, and during the period covered by their
report(s) included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within
the meaning of the Act and the published Regulations and stating that the
answer to Item 13 of the Registration Statement is correct insofar as it
relates to them;
(2) stating that, in their opinion, the consolidated financial
statements and schedules of the Company included in the Registration
Statement examined by them comply in form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations;
(3) stating that, on the basis of procedures (but not an examination
made in accordance with generally accepted auditing standards) consisting
of a reading of the latest available unaudited consolidated interim
financial statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of the
latest available minutes of the stockholders and Board of Directors of the
Company and committees of such Board of Directors, inquiries to certain
officers and other employees of the Company responsible for financial and
accounting matters, and other specified procedures and inquiries,
39
nothing has come to their attention that caused them to believe that: (A)
the unaudited consolidated financial statements and schedules of the
Company included in the Registration Statement and Prospectus do not comply
in form in all material respects with the applicable accounting
requirements of the Act, the Exchange Act and the Regulations, or are not
fairly presented in conformity with generally accepted accounting
principles (except to the extent that certain footnote disclosures
regarding any stub period may have been omitted in accordance with the
applicable rules of the Commission under the Exchange Act) applied on a
basis consistent with that of the audited financial statements appearing
therein; (B) there was any change in the capital stock or long-term debt of
the Company or any decrease in the net current assets or stockholders'
equity of the Company as of the date of the latest available consolidated
monthly financial statements of the Company or as of a specified date not
more than five business days prior to the date of such letter, each as
compared with the amounts shown in the most recent balance sheet included
in the Registration Statement and Prospectus, other than as properly
described in the Registration Statement and Prospectus or any change or
decrease (which shall be set forth therein) which the Representative in its
sole discretion shall accept, or (C) there was any decrease in consolidated
net sales, net earnings, or net earnings per share of Common Stock of the
Company, during the period from the date of such balance sheet to the date
of the latest available consolidated monthly financial statements of the
Company or to a specified date not more than five business days prior to
the date of such letter, each as compared with the corresponding period in
the preceding fiscal year, other than as properly described in the
Registration Statement and Prospectus or any decrease (which shall be set
forth therein) which the Representative in its sole discretion shall
accept; and
(4) stating that they have compared specific numerical data and
financial information pertaining to the Company set forth in the
Registration Statement, which have been specified by the Representative
prior to the date of this Agreement, to the extent that such data and
information may be derived from the general accounting
40
records of the Company, and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries, and other appropriate
procedures (which procedures do not constitute an examination in accordance
with generally accepted auditing standards) set forth in the letter, and
found them to be in agreement.
(g) All proceedings taken in connection with the issuance, sale, transfer,
and delivery of the Securities and the Additional Securities shall be
satisfactory in form and substance to the Representative and to counsel for the
Underwriters, and the Representative shall have received from such counsel for
the Underwriters a favorable opinion, dated as of the Closing Date and the
Additional Closing Date, as the case may be, with respect to such of the matters
set forth under Section 7(b), and with respect to such other related matters, as
the Representative may reasonably request.
(h) The NASD, upon review of the terms of the initial public offering of
the Securities and the Additional Securities, shall not have objected to the
Underwriters' participation in such offering.
(i) Prior to or on the Closing Date, the Company shall have entered into
the Underwriter's Warrants with the Representative.
Any certificate or other document signed by any officer of the Company and
delivered to the Representative or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company hereunder to the
Underwriters as to the statements made therein. If any condition to the
Underwriters' obligations hereunder to be fulfilled prior to or at the Closing
Date or any Additional Closing Date, as the case may be, is not so fulfilled,
the Representative may, on behalf of the Underwriters, may terminate this
Agreement or, if the Representative so elects, in writing waive any such
conditions which have not been fulfilled or extends the time for their
fulfillment.
8. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Underwriter, its officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act
41
or Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage, and expense whatsoever (which shall include, for all purposes of
this Section 8, but not be limited to, reasonable attorneys' fees and any and
all reasonable expenses incurred in investigating, preparing, or defending
against any litigation, commenced or threatened, or any claims and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, any Rule 430A Prospectus, or the
Prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto or (B) any application or other document or communication
(for purposes of this Section 8, collectively referred to as an "application")
executed by, or on behalf of, the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Securities or the Additional Securities under the "blue sky" or
securities laws thereof or filed with the Commission or any securities exchange;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon, and in conformity
with, written information furnished to the Company as stated in Section 8(b)
with respect to any Underwriter by, or on behalf of, such Underwriter through
the Representative expressly for inclusion in the Registration Statement, any
Preliminary Prospectus, any Rule 430A Prospectus, or the Prospectus, or any
amendment or supplement thereto, or in any application as the case may be, or
(ii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Agreement. The foregoing agreement to indemnify shall
be in addition to any liability the Company may otherwise have, including
liabilities arising under this Agreement.
If any action is brought against an Underwriter or any of its officers,
directors, partners, employees, agents, or counsel, or any controlling persons
of an Underwriter (an "indemnified party") in respect of which indemnity may be
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the institution
of such action (but the failure so to notify shall not relieve the Company from
any liability it may have other than pursuant to this Section 8(a)) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably
42
satisfactory to such indemnified party or parties) and payment of expenses. Such
indemnified party or parties 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 indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action or the Company shall not have promptly employed
counsel reasonably satisfactory to such indemnified party or parties to have
charge of the defense of such action or such indemnified party or parties shall
have reasonably concluded that there may be one or more legal defenses available
to it or them or to other indemnified parties which are different from or
additional to those available to the Company, in any of which events such fees
and expenses shall be borne by the Company, and the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties. The Company shall not, without the prior written consent of each
indemnified party that is not released as described in this sentence, settle or
compromise any action, or permit a default or consent to the entry of judgment
or otherwise seek to terminate any pending or threatened action, in respect of
which indemnity may be sought hereunder (whether or not any indemnified party is
a party thereto), unless such settlement, compromise, consent, or termination
includes an unconditional release of each indemnified party from all liability
in respect of such action. The Company agrees promptly to notify the
Representative and Underwriters of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of the Securities or the Additional Securities, the
Registration Statement, any Preliminary Prospectus, any Rule 430A Prospectus, or
the Prospectus, or any amendment or supplement thereto, or any application.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who shall
have signed the Registration Statement on their own behalf or pursuant to a
power of attorney, 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
Underwriters in Section 8(a), but only with respect to statements or omissions,
if any, made in the Registration Statement, any Preliminary Prospectus, any Rule
430A Prospectus, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or on
43
any application in reliance upon, and in conformity with, written information
furnished to the Company as stated in this Section 8(b) with respect to the
Representative expressly for inclusion in the Registration Statement, any
Preliminary Prospectus, any Rule 430A Prospectus, or the Prospectus, or any
amendment or supplement thereto, or on any application, as the case may be;
provided, however, that the obligation of the Representative to provide
indemnity under the provisions of this Section 8(b) shall be limited to the
amount which represents the product of the number of shares of Securities and
Additional Securities underwritten by the Representative and the initial public
offering price per share of such as set forth on the cover page of the
Prospectus. For all purposes of this Agreement, the amounts of the selling
concession and reallowance set forth in the Prospectus constitute the only
information furnished in writing by or on behalf of the Representative expressly
for inclusion in the Registration Statement, any Preliminary Prospectus, any
Rule 430A Prospectus, or the Prospectus (as from time to time amended or
supplemented), or any amendment or supplement thereto, or in any application, as
the case may be. If any action shall be brought against the Company or any other
person so indemnified based on the Registration Statement, any Preliminary
Prospectus, any Rule 430A Prospectus, or the Prospectus, or any amendment or
supplement thereto, or on any application, and in respect of which indemnity may
be sought against the Representative pursuant to this Section 8(b), the
Representative shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 8(a) or 8(b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case or (ii) any indemnified or indemnifying party seeks
contribution under the Act, the Exchange Act, or otherwise, then the Company
(including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed the Registration
Statement, and any controlling person of the Company) as one entity and the
Underwriters, in the aggregate (including for this purpose any contribution by
or on behalf of an indemnified party), as a second entity, shall contribute to
the losses, liabilities, claims, damages, and
44
expenses whatsoever to which any of them may be subject in such proportions as
are appropriate to reflect the relative benefits received by the Company and the
Underwriters in the aggregate; provided, however, that if applicable law does
not permit such allocation, then other relevant equitable considerations such as
the relative fault of the Company and the Underwriters in the aggregate in
connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses shall also be considered. The relative benefits received
by the Company and the Underwriters in the aggregate shall be deemed to be in
the same proportion as (i) the total proceeds from the offering of the
Securities (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and (ii) the total proceeds of the offering of
the Additional Securities (net of underwriting discounts and commissions but
before deducting expenses). The relative fault, in the case of an untrue
statement, alleged untrue statement, omission, or alleged omission, shall be
determined by, among other things, whether such statement, alleged statement,
omission, or alleged omission relates to information supplied by the Company or
by the Underwriters, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement, alleged
statement, omission, or alleged omission. The Company and the Underwriters agree
that it would be unjust and inequitable if the respective obligations of the
Company and the Underwriters for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Underwriters and the other indemnified parties were
treated as one entity for such purpose) or by any other method of allocation
that does not reflect the equitable considerations referred to in this Section
8(c). In no case shall any Underwriter be responsible for a portion of the
contribution obligation imposed on all Underwriters in excess of its pro rata
share based on the number of shares underwritten by it as compared to the number
of shares underwritten by all Underwriters who do not default in their
obligations under this Section 8(c). 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. For purposes of this Section 8(c), each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, partner, employee, agent,
and counsel of an Underwriter shall have the same rights to contribution as such
Underwriter and each
45
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, each officer of the Company who shall
have signed the Registration Statement, and each director of the Company shall
have the same rights to contribution as the Company, subject in each case to the
provisions of this Section 8(c). Anything in this Section 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 8(c) is intended to supersede any right to contribution under the Act,
the Exchange Act, or otherwise.
(d) Notwithstanding the foregoing, in no event shall the indemnification
agreement contained in this Section 8 inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) on account of any
losses, claims, damages, liabilities or actions arising from the sale of the
Securities upon the initial public offering to any person by such Underwriter if
such losses, claims, damages, liabilities or actions arise out of, or are based
upon, a statement or omission or alleged omission in a preliminary prospectus
and if, in respect to such statement, omission or alleged omission, the
Prospectus differs in a material respect from such preliminary prospectus and a
copy of the Prospectus has not been sent or given to such person at or prior to
the confirmation of such sale to such person, provided, however, that (i)
sufficient quantities of such Prospectus have been delivered to the Underwriters
to deliver to investors having had received a preliminary prospectus and (ii)
the Company has advised in writing the Underwriters (A) that such Prospectus
materially differs from such preliminary prospectus and (B) to deliver the
Prospectus to such investors.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Securities or Additional Securities hereunder, and if the
number of Securities or Additional Securities to which the defaults of all
Underwriters in the aggregate relate does not exceed 10% of the number of
Securities or Additional Securities, as the case may be, which all Underwriters
have agreed to purchase hereunder, then such Securities or Additional Securities
to which such defaults relate shall be purchased by the non-defaulting
Underwriters in proportion to their respective commitments hereunder.
46
(b) If such defaults exceed in the aggregate 10% of the number Securities
or Additional Securities, as the case may be, which all Underwriters have agreed
to purchase hereunder, the Representative may, in the Representative's
discretion, arrange for itself or for another party or parties to purchase such
Securities or Additional Securities, as the case may be, to which such default
relates on the terms contained herein. If the Representative does not arrange
for the purchase of such Securities or Additional Securities within five
business days after the occurrence of defaults relating to in excess of 10% of
the Securities or the Additional Securities, as the case may be, then the
Company shall be entitled to a further period of four business days within which
to procure another party or parties reasonably satisfactory to the
Representative to purchase such Securities or Additional Securities, as the case
may be, on such terms. If the Representative or the Company with respect to the
Securities or Additional Securities, as the case may be, does not arrange for
the purchase of the Securities or Additional Securities to which such defaults
relate as provided in this Section 9(b), this Agreement may be terminated by the
Representative or Company with respect to the Securities or Additional
Securities, in each case without liability on the part of the Company (except
that the provisions of Sections 5(a)(1), 6, 8, 10, and 13 shall survive such
termination) or the several Underwriters, but nothing in this Agreement shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for any damages occasioned by its default
hereunder.
(c) If the Securities or Additional Securities to which such defaults
relate are to be purchased by the non-defaulting Underwriters, or are to be
purchased by another party or parties as aforesaid, the Representative or the
Company with respect to the Securities or Additional Securities shall have the
right to postpone the Closing Date or the Additional Closing Date, as the case
may be, for a reasonable period but in any event not more than ten business days
in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements with respect to the Securities or the Additional Securities, and
the Company agrees to prepare and file promptly any amendment or supplement to
the Registration Statement or the Prospectus which in the opinion of counsel for
the Underwriters may thereby be made necessary. The term "Underwriter" as used
in this Agreement shall include any party substituted under this Section 9 as if
such party had originally been a party
47
to this Agreement and had been allocated the number of Securities and Additional
Securities actually purchased by it as a result of its original commitment to
purchase Securities and Additional Securities and its purchase of Securities or
Additional Securities pursuant to this Section 9.
10. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriters and
the Company, including the indemnity and contribution agreements contained in
Section 8, shall remain operative and in full force and effect regardless of any
investigation made by, or on behalf of, any Underwriter or any indemnified
person, or by, or on behalf of, the Company or any person or entity which is
entitled to be indemnified under Section 8(b), and shall survive termination of
this Agreement or the delivery of the Securities and the Additional Securities
to the several Underwriters. In addition, the provisions of Sections 5(a)(1), 6,
8, 10, 11, and 13 shall survive termination of this Agreement, whether such
termination occurs before or after the Closing Date or any Additional Closing
Date.
11. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 9:30 a.m., New York City local
time, on the first full business day following the day on which the Registration
Statement becomes effective under the Act. The Representative or the Company may
prevent this Agreement from becoming effective without liability of any party to
any other party, except as noted below in this Section 11, by giving the notice
indicated in Section 11(d) before the time this Agreement becomes effective
under the Act.
(b) If the relative purchase price of the Stock and the Warrants as
provided for in Section 3 has been changed and has not been determined prior to
4:30 p.m., New York City local time, on the third full business day after the
date the Registration Statement becomes effective under the Act, this Agreement
may be terminated at any time thereafter either by the Representative or by the
Company by giving notice to the other unless before such termination the
relative purchase price for the Stock and Warrants has been so determined. If
the relative purchase price of the Stock and Warrants has not been so determined
prior to 4:30 p.m., New York City local time, on the tenth full
48
business day after the date the Registration Statement becomes effective under
the Act, this Agreement shall automatically terminate forthwith.
(c) In addition to the right to terminate this Agreement pursuant to
Sections 7 and 9 hereof, the Representative shall have the right to terminate
this Agreement at any time prior to the Closing Date by giving notice to the
Company, and, if exercised, the Over-allotment Option, at any time prior to any
Additional Closing Date, by giving notice to the Company, (i) if any domestic or
international event, act, or occurrence has materially disrupted, or, in the
Representative's opinion, will in the immediate future materially disrupt, the
securities markets; or (ii) if there shall have been a general suspension of, or
a general limitation on prices for, trading in securities on the New York Stock
Exchange, Boston Stock Exchange or the American Stock Exchange or in the
over-the-counter market; or (iii) if there shall have been any new outbreak or
increase in the level of major hostilities or other national or international
calamity; or (iv) if a banking moratorium has been declared by a state or
federal authority; or (v) if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or (vi) if there shall have
been a material interruption in the mail service or other means of communication
within the United States; or (vii) if the Company shall have sustained a
material or substantial loss by fire, flood, accident, hurricane, earthquake,
theft, sabotage, or other calamity or malicious act, whether or not such loss
shall have been insured, or from any labor dispute or court or government
action, order, or decree, which will, in the Representative's opinion, make it
inadvisable to proceed with the offering, sale, or delivery of the or the
Additional Securities, as the case may be; or (viii) if any two of Xxxxx X.
Xxxxxx, Xxxxxx Xxxxxxxx and Xxxxx Xxxxxxx are rendered disabled or die or
otherwise become unable to function in their respective official capacities at
the Company; or (ix) if any material governmental restrictions shall have been
imposed on trading in securities in general, which restrictions are not in
effect on the date hereof; or (x) if there shall be passed by the Congress of
the United States or by any state legislature any act or measure, or adopted by
any governmental body or authoritative accounting institute or board, or any
governmental executive any orders, rules, or regulations, which the
Representative believes likely to have a material adverse effect on the
business, financial condition, or financial statements of the Company or the
market for the Stock and Warrants; or (xi) if there shall have a material
adverse change in the market for the Securities or securities in general or in
political, financial, or
49
economic conditions as in the Representative's judgment makes it inadvisable to
proceed with the offering, sale, and delivery of the Securities or the
Additional Securities, as the case may be, on the terms contemplated by the
Prospectus.
(d) If the Representative elects to prevent this Agreement from becoming
effective, as provided in this Section 11, or to terminate this Agreement, the
Representative shall notify the Company promptly by telephone, telex, or
telegram, confirmed by letter. If, as so provided, the Company elects to prevent
this Agreement from becoming effective or to terminate this Agreement, the
Company shall notify the Representative promptly by telephone, telex, or
telegram, confirmed by letter.
(e) Anything in this Agreement to the contrary notwithstanding other than
Section 11(f), if this Agreement shall not become effective by reason of an
election by the Representative pursuant to this Section 11, the sole liability
of the Company to the Underwriters, in addition to the obligations the Company
assumed pursuant to Section 6, will be to reimburse the Underwriters for
accountable out-of-pocket expenses only as shall have been incurred by them in
connection with this Agreement or the proposed offer, sale, and delivery of the
Securities and the Additional Securities, and, upon demand, the Company agrees
to pay promptly the full amount thereof to the Representative for the respective
accounts of the Underwriters. If this Agreement shall not be carried out within
the time specified herein for any reason other than the failure on the part of
the Company to perform any covenant or agreement or satisfy any condition of
this Agreement by it to be performed or satisfied, the Company shall have no
liability to the Underwriters other than for obligations assumed by the Company
pursuant to Section 6.
(f) Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 5(a)(1), 6, 8, 10, and 13 shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
12. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
by letter, to:
50
Network 1 Financial Securities, Inc.
The Galleria
Building 2/Penthouse
0 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to: Xxxxx Xxxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or if sent to the Company shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to the Company:
International Plastic Technologies, Inc.
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx Xxxxxxxxxx & Xxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx Xxxxxxx, Esq.
Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
51
All notices hereunder shall be effective upon receipt by the party to which it
is addressed.
13. Parties. The Representative represents that it is authorized to act on
behalf of the several Underwriters named in Schedule I hereto, and the Company
shall be entitled to act and rely on any request, notice, consent, waiver, or
agreement purportedly given on behalf of the Underwriters when the same shall
have been given by the Representative on such behalf. This Agreement shall inure
solely to the benefit of, and shall be binding upon, the Underwriters and the
Company, and the persons and entities referred to in Section 8 who are entitled
to indemnification or contribution, and their respective successors, legal
representatives, and assigns (which shall not include any buyer, as such, of the
Securities or the Additional Securities), and no other person shall have, or be
construed to have, any legal or equitable right, remedy, or claim under, in
respect of, or by virtue of this Agreement or any provision herein contained.
Notwithstanding anything contained in this Agreement to the contrary, all of the
obligations of the Underwriters hereunder are several and not joint.
14. Severability. Should any provision or portion of any provision of this
Agreement be invalidated for any reason, the validity of the remaining
provisions or of the other portion of the provision in question shall not be
affected thereby. This Agreement supersedes any prior letter, agreement or
understanding concerning the subject matter hereof.
15. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
16. Counterparts. The Agreement may be executed in any number of
counterparts and each of such counterpart shall for all purposes be deemed to be
an original, and such counterparts shall together constitute but one and the
same instrument.
17. Construction. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS. TIME
IS OF THE ESSENCE IN THIS AGREEMENT.
18. Consent to Jurisdiction. The Company irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out
of, or relating to, this Agreement, any document or
52
instrument delivered pursuant to, in connection with, or simultaneously with
this Agreement, or a breach of this Agreement or any such document or
instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint, or other process and agrees that service
thereof may be made in accordance with Section 12. Within 30 days after such
service, or such other time as may be mutually agreed upon in writing by the
attorneys for the parties to such action or proceeding, the Company shall appear
or answer such summons, complaint, or other process. Should the Company fail to
appear or answer within such 30-day period or such extended period, as the case
may be, the Company shall be deemed in default and judgment may be entered
against the Company for the amount as demanded in any summons, complaint, or
other process so served.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
53
If the foregoing correctly sets forth the understanding between the
Representative 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,
INTERNATIONAL PLASTIC
TECHNOLOGIES, INC.
By:
----------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
Accepted as of the date first above
written in New York, New York
NETWORK 1 FINANCIAL SECURITIES, INC.*
By:
---------------------------------
Name: Xxxxxxx X. Xxxx, Xx.
Title: President
* On behalf of itself and the other several
Underwriters named in Schedule I hereto.
54
SCHEDULE I
Underwriter Stock Purchased Warrants Purchased
Network 1 Financial Securities, Inc.
--------- ---------
Total: 1,250,000 1,250,000
========= =========
55
