AZUREL LTD.
1,000,000 Shares of Common Stock
and
1,000,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
__________, 1997
Network 1 Financial Securities, Inc.
One Financial Galleria
0 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxxxx 00000
Gentlemen:
Azurel Ltd., a Delaware corporation (the "Company"), hereby confirms
its agreement with Network 1 Financial Securities, Inc. (the "Underwriter") as
set forth below.
The Company proposes to issue and sell to the Underwriter an aggregate
of (i) 1,000,000 shares (the "Firm Shares") of the Company's common stock, par
value $.001 per share (the "Common Stock"), and (ii) 1,000,000 redeemable
warrants to purchase Common Stock (the "Firm Warrants"). The Company also
proposes to grant to the Underwriter an option to purchase (i) an additional
150,000 shares of Common Stock and (ii) an additional 150,000 redeemable
warrants to purchase Common Stock, as provided in section 2(c) of this agreement
(the "Agreement"). Any and all shares of Common Stock to be purchased pursuant
to such option are referred to herein as the "Option Shares," and the Firm
Shares and any Option Shares are collectively referred to herein as the
"Shares." Any and all redeemable warrants to purchase Common Stock to be
purchased pursuant to such option are referred to herein as the "Option
Warrants," and the Firm Warrants and any Option Warrants are collectively
referred to herein as the "Warrants." Any shares of Common Stock issuable upon
the exercise of any Warrants are referred to herein as "Warrant Shares." The
Firm Shares and the Firm Warrants are collectively referred to herein as the
"Firm Securities;" the Option Shares and the Option Warrants are collectively
referred to herein as the "Option Securities;" and
the Firm Securities, the Option Securities and the Warrant Shares are
collectively referred to herein as the "Securities."
Pursuant to an agreement to be entered into among the Company, the
Underwriters and North American Transfer Co. (the "Warrant Agreement"), each
Warrant will be exercisable during the period commencing on the first
anniversary of the effective date of the Registration Statement (as hereinafter
defined) (the "Effective Date") and expiring on the fifth anniversary thereof,
subject to redemption by the Company (as described below), at an initial
exercise price (subject to adjustment as set forth in the Warrant Agreement)
equal to $____ per share [120% of the Exercise Price]. The Warrants will be
redeemable at a price of $.10 per Warrant, commencing on the first anniversary
of the Effective Date and prior to their expiration, upon not less than 30 days
prior written notice to the holders of the Warrants, provided the average
closing bid quotations of Common Stock as reported on the Nasdaq Stock Market if
traded thereon, or if not traded thereon, the average closing sale price if
listed on a national or regional securities exchange (or other reporting system
that provides last sales prices), shall have been at least 150% of the then
current Warrant exercise price (initially $____ per share, subject to
adjustment), for 20 trading days during the 30 trading day period ending 15 days
prior to the date on which the Company gives notice of redemption, subject to
the right of the holder to exercise such Warrants prior to redemption.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) A registration statement on Form SB-2 (File No.
333-15127), with respect to the Securities and the Underwriter's Warrant
Securities (as hereinafter defined), including a prospectus subject to
completion, has been filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act "), and one or more amendments to that registration statement may have been
so filed. Copies of such registration statement and of each amendment heretofore
filed by the Company with the Commission have been delivered to the Underwriter.
After the execution of this Agreement, the Company will file with the Commission
either (i) if the registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in that registration statement (or, if an amendment
thereto shall have been filed, in such amendment), with such changes or
insertions as are required by Rule 430A under the Act or permitted by Rule
424(b) under the Act and as have been provided to and approved by the
Underwriter prior to the execution of this Agreement, or (ii) if that
registration statement, as it may have been amended, has not been declared by
the Commission to be effective under the Act, an amendment to that registration
statement, including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Underwriter prior to the execution of this
Agreement. The Company also may file a related registration statement with the
Commission pursuant to Rule 462(b) under the Act for purposes of registering
certain additional Securities, which registration statement shall become
effective upon filing with the Commission (the "Rule 462(b) Registration
Statement). As used in this Agreement, the term "Registration Statement" means
that registration statement, as amended at the time it was or is declared
effective, and any amendment
- 2 -
thereto that was or is thereafter declared effective, including all
financial schedules and exhibits thereto and any information omitted
therefrom pursuant to Rule 430A under the Act and included in the Prospectus
(as hereinafter defined), together with any Rule 462(b) Registration Statement;
the term "Preliminary Prospectus" means each prospectus subject to completion
filed with that registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration Statement
at the time it was or is declared effective); and the term "Prospectus" means
the prospectus first filed with the Commission pursuant to Rule 424(b) under the
Act or, if no prospectus is so filed pursuant to Rule 424(b), the prospectus
included in the Registration Statement. The Company has caused to be delivered
to the Underwriter copies of each Preliminary Prospectus and has consented to
the use of those copies for the purposes permitted by the Act. If the Company
has elected to rely on Rule 462(b) and the Rule 462(b) Registration Statement
has not been declared effective, then (i) the Company has filed a Rule 462(b)
Registration Statement in compliance with and that is effective upon filing
pursuant to Rule 462(b) and has received confirmation of its receipt and (ii)
the Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under the Act or
the Commission has received payment of such filing fee.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When each Preliminary
Prospectus and each amendment and each supplement thereto was filed with the
Commission it (i) contained all statements required to be stated therein, in
accordance with, and complied with the requirements of, the Act and the rules
and regulations of the Commission thereunder and (ii) did not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. When the Registration Statement was or is
declared effective, it (i) contained or will contain all statements required to
be stated therein in accordance with, and complied or will comply with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus and each amendment or
supplement thereto is filed with the Commission pursuant to Rule 424(b) (or, if
the Prospectus or such amendment or supplement is not required so to be filed,
when the Registration Statement containing such Prospectus or amendment or
supplement thereto was or is declared effective) and on the Firm Closing Date
and any Option Closing Date (as each such term is hereinafter defined), the
Prospectus, as amended or supplemented at any such time, (i) contained or will
contain all statements required to be stated therein in accordance with, and
complied or will comply with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (b) do not apply to statements or omissions made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by the Underwriter specifically for use
therein.
- 3 -
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state of
Delaware and is duly qualified or authorized to transact business as a foreign
corporation and is in good standing in each jurisdiction where the ownership or
leasing of its property or the conduct of its business requires such
qualification or authorization.
(d) The Company has full corporate power and authority, and
all necessary material authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory authorities, to own or lease
its property and conduct its business as now being conducted and as proposed to
be conducted as described in the Registration Statement and the Prospectus (and,
if the Prospectus is not in existence, the most recent Preliminary Prospectus).
(e) Except for the subsidiaries listed in Exhibit 21.1 to the
Registration Statement (the "Subsidiaries"), the Company does not own, directly
or indirectly, an interest in any corporation, partnership, limited liability
company, joint venture, trust or other business entity. Each Subsidiary is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction where the ownership or leasing of its property or the conduct of
its business requires such qualification or licensing. Each Subsidiary has full
corporate power and authority, and all necessary material authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory authorities, to own or lease its properties and conduct
its business as now being conducted and as proposed to be conducted as described
in the Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus)
(f) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All of the issued shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. There are no
outstanding options, warrants or other rights granted by the Company to purchase
shares of its Common Stock or other securities, other than as described in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The Shares and the Warrant Shares have been duly
authorized, and the Warrant Shares have been duly reserved for issuance, by all
necessary corporate action on the part of the Company and, when the Shares are
issued and delivered to and paid for by the Underwriter pursuant to this
Agreement and the Warrant Shares are issued and delivered to and paid for by the
holders of Warrants upon exercise of the Warrants in accordance with the terms
thereof, the Shares and the Warrant Shares will be validly issued, fully paid,
nonassessable and free of preemptive rights and will conform to the description
thereof in the Prospectus (and, if the Prospectus is not in existence, the most
recent Preliminary Prospectus). No holder of outstanding securities of the
Company is entitled as such to any preemptive or other right to subscribe for
any of the Securities, and no person is entitled to have securities registered
by the Company under the Registration Statement or otherwise under the Act other
than as described in the Prospectus (and, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
- 4 -
(g) The capital stock of the Company conforms to the
description thereof contained in the Prospectus (and, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
(h) All issuances of securities of the Company have been
effected pursuant to an exemption from the registration requirements of the Act.
Except as previously disclosed in writing to the Underwriter, no compensation
was paid to or on behalf of any member of the National Association of Securities
Dealers, Inc. ("NASD"), or any affiliate or employee thereof, in connection with
any such issuance.
(i) The consolidated financial statements of the Company
included in the Registration Statement and the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) fairly
present the financial position of the Company and its subsidiaries as of the
dates indicated and the results of operations of the Company and its
subsidiaries for the periods specified. Such consolidated financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, except to the extent that certain footnote disclosures
regarding unaudited interim periods may have been omitted in accordance with the
applicable rules of the Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"). The consolidated financial data set forth under the
caption "Summary Financial Information" in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) fairly
present, on the basis stated in the Prospectus (or such Preliminary Prospectus),
the information included therein.
(j) Xxxxxxx Xxxxx & Co., P.C., who have audited certain
financial statements of the Company and delivered their report with respect to
the consolidated financial statements included in the Registration Statement and
the Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), are independent public accountants with respect to the
Company as required by the Act and the applicable rules and regulations
thereunder.
(k) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (and, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), (i) except as
otherwise contemplated therein, there has been no material adverse change in the
business, operations, condition (financial or otherwise), earnings or prospects
of the Company and the Subsidiaries, whether or not arising in the ordinary
course of business, (ii) except as otherwise stated therein, there have been no
transactions entered into by the Company or the Subsidiaries and no commitments
made by the Company or the Subsidiaries that, individually or in the aggregate,
are material with respect to the Company and the Subsidiaries, (iii) there has
not been any change in the capital stock or indebtedness of the Company and the
Subsidiaries, and (iv) there has been no dividend or distribution of any kind
declared, paid or made by the Company in respect of any class of its capital
stock.
(l) The Company has full corporate power and authority
to enter into and perform its obligations under this Agreement, the Warrant
Agreement and the Underwriter's Warrant
- 5 -
Agreement (as hereinafter defined). The execution and delivery of this
Agreement and the Underwriter's Warrant Agreement have been duly authorized by
all necessary corporate action on the part of the Company and this Agreement,
the Warrant Agreement and the Underwriter's Warrant Agreement have each been
duly executed and delivered by the Company and each is a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and other similar
laws affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law), and except as rights to indemnity and contribution under this Agreement
may be limited by applicable law. The issuance, offering and sale by the Company
to the Underwriter of the Securities pursuant to this Agreement or the
Underwriter's Securities pursuant to the Underwriter's Warrant Agreement, the
compliance by the Company with the provisions of this Agreement, the Warrant
Agreement and the Underwriter's Warrant Agreement, and the consummation of the
other transactions contemplated by this Agreement, the Warrant Agreement and the
Underwriter's Warrant Agreement do not (i) require the consent, approval,
authorization, registration or qualification of or with any court or
governmental or regulatory authority, except such as have been obtained or may
be required under state securities or blue sky laws and, if the registration
statement filed with respect to the Securities (as amended) is not effective
under the Act as of the time of execution hereof, such as may be required (and
shall be obtained as provided in this Agreement) under the Act, or (ii) conflict
with or result in a breach or violation of, or constitute a default under, any
material contract, indenture, mortgage, deed of trust, loan agreement, note,
lease or other material agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of its
property is bound or subject, or the certificate of incorporation or by-laws of
the Company or any Subsidiary, or any statute or any rule, regulation, judgment,
decree or order of any court or other governmental or regulatory authority or
any arbitrator applicable to the Company or any Subsidiary.
(m) No legal or governmental proceedings are pending to which
the Company or any Subsidiary is a party or to which the property of the Company
or any Subsidiary is subject, and no such proceedings have been threatened
against the Company or any Subsidiary or with respect to any of its property,
except such as are described in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). No contract or other
document is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that is
not described therein (and, if the Prospectus is not in existence, in the most
recent Preliminary Prospectus) or filed as required.
(n) Neither the Company nor any Subsidiary is in (i) violation
of its certificate of incorporation or by-laws, (ii) violation in any material
respect of any law, statute, regulation, ordinance, rule, order, judgment or
decree of any court or any governmental or regulatory authority applicable to
it, or (iii) default in any material respect in the performance or observance of
any obligation, agreement, covenant or condition contained in any material
contract, indenture, mortgage, deed of trust, loan agreement, note, lease or
other material agreement or instrument to
- 6 -
which it is a party or by which it or any of its property may be bound or
subject, and no event has occurred which with notice or lapse of time or both
would constitute such a default.
(o) The Company and the Subsidiaries currently own or possess
adequate rights to use all intellectual property, including all trademarks,
service marks, trade names, copyrights, inventions, know-how, trade secrets,
proprietary technologies, processes and substances, or applications or licenses
therefor, that are described in the Prospectus (and if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and any other rights or
interests in items of intellectual property as are necessary for the conduct of
the business now conducted or proposed to be conducted by them as described in
the Prospectus (or, such Preliminary Prospectus), and, except as disclosed in
the Prospectus (and such Preliminary Prospectus), the Company is not aware of
the granting of any patent rights to, or the filing of applications therefor by,
others, nor is the Company aware of, nor has the Company received notice of,
infringement of or conflict with asserted rights of others with respect to any
of the foregoing. All such intellectual property rights and interests are (i)
valid and enforceable and (ii) to the best knowledge of the Company, not being
infringed by any third parties.
(p) The Company and each Subsidiary possesses adequate
licenses, orders, authorizations, approvals, certificates or permits issued by
the appropriate federal, state or foreign regulatory agencies or bodies
necessary to conduct its business as described in the Registration Statement and
the Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), and, except as disclosed in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
are no pending or, to the best knowledge of the Company, threatened, proceedings
relating to the revocation or modification of any such license, order,
authorization, approval, certificate or permit.
(q) The Company and each Subsidiary has good and marketable
title to all of the properties and assets reflected in the Company's
consolidated financial statements or as described in the Registration Statement
and the Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind, except those reflected in such consolidated financial
statements or as described in the Registration Statement and the Prospectus (and
such Preliminary Prospectus). Except as disclosed in the Prospectus, the Company
and each Subsidiary occupies its leased properties under valid and enforceable
leases conforming to the description thereof set forth in the Registration
Statement and the Prospectus (and such Preliminary Prospectus).
(r) The Company is not and does not intend to conduct its
business in a manner in which it would be an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940 (the "Investment Company
Act").
(s) Except as listed on Schedule 1 hereto, the Company has
obtained and delivered to the Underwriter the agreements (the "Lock-up
Agreements") with the officers, directors and other security holders owning or
having rights to acquire shares of Common Stock or preferred
- 7 -
stock to the effect that, among other things, each such person (i) will not,
commencing on the Effective Date and continuing for the period thereafter set
forth opposite their names on Schedule 1, directly or indirectly, sell, offer or
contract to sell or grant any option to purchase, transfer, assign or pledge, or
otherwise encumber, or dispose of any shares of Common Stock or preferred stock
or any securities convertible into or exercisable for Common Stock or preferred
stock now or hereafter owned by such person without the prior written consent of
the Underwriter, and (ii) will comply with any additional restriction or
condition on the disposition of such Common Stock or preferred stock which may
be required to qualify the offering of the Securities in any state in accordance
with the blue sky or securities laws of such state.
(t) No labor dispute with the employees of the Company or any
Subsidiary exists, is threatened or, to the best of the Company's knowledge, is
imminent that could result in a material adverse change in the condition
(financial or otherwise), business, prospects, net worth or results of
operations of the Company and the Subsidiaries, except as described in or
contemplated by the Prospectus (and, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(u) The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any Subsidiary has been refused any insurance
coverage sought or applied for; and neither the Company nor any Subsidiary has
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition (financial or
otherwise), business, prospects, net worth or results of operations of the
Company and the Subsidiaries, except as described in or contemplated by the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(v) The Underwriter's Warrants (as hereinafter defined) will
conform to the description thereof in the Registration Statement and in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and, when sold to and paid for by the Underwriter in
accordance with the Underwriter's Warrant Agreement, will have been duly
authorized and validly issued and will constitute valid and binding obligations
of the Company entitled to the benefits of the Underwriter's Warrant Agreement.
The shares of Common Stock issuable upon exercise of the Underwriter's Warrants
and the Warrants issuable upon exercise thereof (the "Underwriter's Warrant
Shares") have been duly authorized and reserved for issuance upon exercise of
the Underwriter's Warrants and the Warrants issuable upon exercise thereof by
all necessary corporate action on the part of the Company and, when issued and
delivered and paid for upon such exercise in accordance with the terms of the
Underwriter's Warrant Agreement, the Underwriter's Warrants, and the Warrants
issuable upon exercise thereof, respectively, will be validly issued, fully
paid, nonassessable and free of preemptive rights and will conform to the
description thereof in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
- 8 -
(w) No person has acted as a finder in connection with, or is
entitled to any commission, fee or other compensation or payment for services as
a finder for or for originating, or introducing the parties to, the transactions
contemplated herein and the Company will indemnify the Underwriter with respect
to any claim for finder's fees in connection herewith. Except as set forth in
the Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company has no
management or financial consulting agreement with anyone. No promoter, officer,
director or stockholder of the Company is, directly or indirectly, affiliated or
associated with an NASD member and no securities of the Company have been
acquired by an NASD member, except as previously disclosed in writing to the
Underwriter.
(x) The Company and each Subsidiary has filed all federal,
state, local and foreign tax returns which are required to be filed through the
date hereof, or has received extensions thereof, and has paid all taxes shown on
such returns and all assessments received by it to the extent that the same are
material and have become due.
(y) Neither the Company nor 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. No transaction has occurred between or
among the Company and any of its officers or directors or any affiliates of any
such officer or director, that is required to be described in and is not
described in the Registration Statement and the Prospectus.
(z) Neither the Company nor any of its officers, directors or
affiliates (as defined in the Regulations), has taken or will take, directly or
indirectly, prior to the completion of the Offering, 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
Option Securities.
2. Purchase, Sale and Delivery of the Securities and the Warrant
Securities.
(a) On the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, the Firm
Shares at a purchase price of $_____ per share and the Firm Warrants at a
purchase price of $_____ per warrant.
(b) Certificates in definitive form for the Firm Securities
that the Underwriter has agreed to purchase hereunder, and in such denomination
or denominations and registered in such
- 9 -
name or names as the Underwriter requests upon notice to the Company at
least 48 hours prior to the Firm Closing Date, shall be delivered by or on
behalf of the Company to the Underwriter, against payment by or on behalf of the
Underwriter of the purchase prices therefor by certified or official bank check
or checks drawn upon or by a New York Clearing House bank and payable in
next-day funds to the order of the Company. Such delivery of and payment for the
Firm Securities shall be made at the offices of Counsel for the Underwriter, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 9:30 A.M., New York time on ___________,
1997, or at such other place, time or date as the Underwriter and the Company
may agree upon, such time and date of delivery against payment being herein
referred to as the "Firm Closing Date. The Company will make such certificates
for the Firm Securities available for checking and packaging by the Underwriter,
at such offices as may be designated by the Underwriter, at least 24 hours prior
to the Firm Closing Date.
(c) For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Securities as contemplated
by the Prospectus, the Company hereby grants to the Underwriter an option to
purchase any or all of the Option Securities, exercisable by the Underwriter on
behalf of and for the account of the Underwriter. The purchase price to be paid
for any of the Option Securities shall be the same price per share or warrant as
the price per share or warrant for the Firm Securities set forth above in
paragraph (a) of this section 2. The option granted hereby may be exercised as
to all or any part of the Option Securities from time to time within 45 calendar
days after the Firm Closing Date. The Underwriter shall not be under any
obligation to purchase any of the Option Securities prior to the exercise of
such option. The Underwriter may from time to time exercise the option granted
hereby by giving notice in writing or by telephone (confirmed in writing) to the
Company setting forth the aggregate number of Option Securities as to which the
Underwriter is then exercising the option and the date and time for delivery of
and payment for such Option Securities. Any such date of delivery shall be
determined by the Underwriter but shall not be earlier than two business days or
later than three business days after such exercise of the option and, in any
event, shall not be earlier than the Firm Closing Date. The time and date set
forth in such notice, or such other time on such other date as the Underwriter
and the Company may agree upon, is herein called the "Option Closing Date" with
respect to such Option Securities. Upon exercise of the option as provided
herein, the Company shall become obligated to sell to the Underwriter, and,
subject to the terms and conditions herein set forth, the Underwriter shall
become obligated to purchase from the Company, the Option Securities as to which
the Underwriter is then exercising its option If the option is exercised as to
all or any portion of the Option Securities, certificates in definitive form for
such Option Securities, and payment therefor, shall be delivered on the related
Option Closing Date in the manner, and upon the terms and conditions, set forth
in paragraph (b) of this section 2, except that reference therein to the Firm
Securities and the Firm Closing Date shall be deemed, for purposes of this
paragraph (c), to refer to such Option Securities and Option Closing Date,
respectively.
(d) On the Firm Closing Date, the Company will further issue
and sell to the Underwriter or, at the direction of the Underwriter, to bona
fide officers of the Underwriter, for an aggregate purchase price of $10,
warrants to purchase Common Stock and redeemable warrants to purchase Common
Stock (the "Underwriter's Warrants") entitling the holders thereof to purchase
an
- 10 -
aggregate of 100,000 shares of Common Stock and 100,000 redeemable warrants to
purchase Common Stock for a period of four years,
such period to commence on the first anniversary of the Effective Date. The
Underwriter's Warrants shall be exercisable at a price equal to 150% of the
initial public offering price of the Common Stock and Warrants, respectively,
and shall contain terms and provisions more fully described herein below and as
set forth more particularly in the warrant agreement relating to the
Underwriter's Warrants to be executed by the Company on the Effective Date (the
"Underwriter's Warrant Agreement"), including, but not limited to, (i) customary
anti-dilution provisions in the event of stock dividends, split mergers, sales
of all or substantially all of the Company's assets, sales of stock below then
prevailing market or exercise prices and other events, and (ii) prohibitions of
mergers, consolidations or other reorganizations of or by the Company or the
taking by the Company of other action during the five-year period following the
Effective Date unless adequate provision is made to preserve, in substance, the
rights and powers incidental to the Underwriter's Warrants. As provided in the
Underwriter's Warrant Agreement, the Underwriter may designate that the
Underwriter's Warrants be issued in varying amounts directly to bona fide
officers of the Underwriter. As further provided, no sale, transfer, assignment,
pledge or hypothecation of the Underwriter's Warrants shall be made for a period
of 12 months from the Effective Date, except (i) by operation of law or
reorganization of the Company, or (ii) to the Underwriter and bona fide
partners, officers of the Underwriter and selling group members. The shares of
Common Stock issuable upon exercise of the Underwriter's Warrants and the
Warrants issuable upon exercise thereof are referred to herein as the
"Underwriter's Warrant Shares"; and the Underwriter's Warrants, the Warrants
issuable upon exercise thereof, and the Underwriter's Warrant Shares are
collectively referred to herein as the "Underwriter's Securities."
3. Offering by the Underwriter. The Underwriter proposes to
offer the Firm Securities for sale to the public upon the terms set forth in the
Prospectus.
4. Covenants of the Company. The Company covenants and agrees
with the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, to become effective as promptly as possible. If required, the Company
will file the Prospectus and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act. During any time when a prospectus relating to the Securities is
required to be delivered under the Act, the Company (i) will comply with all
requirements imposed upon it by the Act and the rules and regulations of the
Commission thereunder to the extent necessary to permit the continuance of sales
of or dealings in the Securities in accordance with the provisions hereof and of
the Prospectus, as then amended or supplemented, and (ii) will not file with the
Commission any prospectus or amendment referred to in the first sentence of
section (a) (i) hereof, any amendment or supplement to such prospectus or any
amendment to the Registration Statement as to which the Underwriter shall not
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Underwriter
shall not have given its consent. The Company will prepare and file
with the Commission, in accordance with the rules and regulations
- 11 -
of the Commission, promptly upon request by the Underwriter or counsel to the
Underwriter, any amendments to the Registration Statement or amendments or
supplements to the Prospectus that may be necessary or advisable in connection
with the distribution of the Securities by the Underwriter, and will use its
best efforts to cause any such amendment to the Registration Statement to be
declared effective by the Commission as promptly as possible. The Company will
advise the Underwriter, promptly after receiving notice thereof, of the time
when the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto has
been filed and will provide evidence satisfactory to the Underwriter of each
such filing or effectiveness.
(b) The Company will advise the Underwriter, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, (ii) the
suspension of the qualification of any Securities for offering or sale in any
jurisdiction, (iii) the institution, threat or contemplation of any proceeding
for any such purpose or (iv) any request made by the Commission for amending the
Registration Statement, for amending or supplementing the Prospectus or for
additional information. The Company will use its best efforts to prevent the
issuance of any such stop order and, if any such stop order is issued, to obtain
the withdrawal thereof as promptly as possible.
(c) The Company will, in cooperation with counsel to the
Underwriter, arrange for the qualification of the Securities for offering and
sale under the blue sky or securities laws of such jurisdictions as the
Underwriter may designate and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Securities.
(d) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any other
reason it is necessary at any time to amend or supplement the Prospectus to
comply with the Act or the rules or regulations of the Commission thereunder,
the Company will promptly notify the Underwriter thereof and, subject to section
4(a) hereof, will prepare and file with the Commission, at the Company's
expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission or effects
such compliance.
(e) So long as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement to become effective in compliance with the Act and without any lapse
of time between the effectiveness of any such post-effective amendments and
cause a copy of each Prospectus, as then amended, to be delivered to each holder
of record of a Warrant and to furnish to the Underwriter and any dealer as many
copies of each such Prospectus as the Underwriter or dealer may reasonably
request. The Company
- 12 -
shall not call for redemption of the Warrants unless a registration
statement covering the securities underlying the Warrants has been declared
effective by the Commission and remains current at least until the date
fixed for redemption. In addition, for so long as any Warrant is outstanding,
the Company will promptly notify the Underwriter of any material change in the
business, financial condition or prospects of the Company. So long as any of the
Warrants remain outstanding, the Company will timely deliver and supply to its
Warrant Agent sufficient copies of the Company's current Prospectus, as will
enable such Warrant agent to deliver a copy of such Prospectus to any Warrant or
other holder where such Prospectus delivery is by law required to be made.
(f) The Company will, without charge, provide to the
Underwriter and to counsel for the Underwriter (i) as many signed copies of the
registration statement originally filed with respect to the Securities and each
amendment thereto (in each case including exhibits thereto) as the Underwriter
may reasonably request, (ii) as many conformed copies of such registration
statement and each amendment thereto (in each case without exhibits thereto) as
the Underwriter may reasonably request and (iii) so long as a prospectus
relating to the Securities is required to be delivered under the Act, as many
copies of each Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto as the Underwriter may reasonably request.
(g) The Company, as soon as practicable, will make generally
available to its security holders and to the Underwriter an earnings statement
of the Company that satisfies the provisions of section 11 (a) of the Act and
Rule 158 thereunder.
(h) The Company will reserve and keep available for issuance
that maximum number of authorized but unissued shares of Common Stock which are
issuable upon exercise of the Warrants and the Underwriter's Warrants (including
the underlying securities) outstanding from time to time.
(i) The Company will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Prospectus. The
Company will timely file, and will provide or cause to be provided to the
Underwriter and counsel to the Underwriter a copy of the report on Form SR
required to be filed by the Company pursuant to Rule 463 under the Act.
(j) The Company will not, without the prior written consent of
the Underwriter, directly or indirectly offer, agree to sell, sell, grant any
option to purchase or otherwise dispose (or announce any offer, agreement to
sell, sales grant of any option to purchase or other disposition) of any shares
of Common Stock, preferred stock or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock or preferred stock for a
period of 24 months after the Effective Date, except (i) the Shares and Warrants
issued pursuant to this Agreement, (ii) the Warrant Shares issuable upon
exercise of the Warrants, (iii) the Warrants, (iv) the Underwriter's Warrant
Shares and Warrants issuable upon the exercise of the Underwriter's Warrants,
and (v) shares of Common Stock issuable upon the exercise of options granted and
to be granted under the Company's Stock Option Plan as in effect as of the
date hereof. The Company also will not for a period of 36 months following the
Effective Date, without the prior written consent of the
- 13 -
Underwriter, (i) issue or sell any of its securities pursuant to Regulation S
promulgated under the Act or (ii) file a registration on Form S-8 for the sale
of securities by a person other than an employee of the Company or a Subsidiary.
(k) Prior to the Closing Date or the Option Closing Date (if
any), the Company will not, directly or indirectly, without prior written
consent of the Underwriter, issue any press release or other public announcement
or hold any press conference with respect to the Company or its activities with
respect to the Offering (other than trade releases issued in the ordinary course
of the Company's business consistent with past practices with respect to the
Company's operations).
(l) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A under the Act, then immediately following the execution of this
Agreement, the Company will prepare, and file or transmit for filing with the
Commission in accordance with Rule 430A and Rule 424(b) under the Act, copies of
the Prospectus including the information omitted in reliance on Rule 430A, or,
if required by such Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted.
(m) The Company will cause the Securities to be included in
The Nasdaq Small Cap Market and the Boston Stock Exchange on the Effective Date
and to maintain such listings thereafter. The Company will file with The Nasdaq
SmallCap Market and the Boston Stock Exchange all documents and notices that are
required by companies with securities that are traded on The Nasdaq SmallCap
Market and the Boston Stock Exchange.
(n) During the period of five years from the Firm Closing
Date, the Company will, as promptly as possible, not to exceed 135 days, after
each annual fiscal period render and distribute reports to its stockholders
which will include audited statements of its operations and changes of financial
position during such period and its audited balance sheet as of the end of such
period, as to which statements the Company's independent certified public
accountants shall have rendered an opinion.
(o) During a period of three years commencing with the Firm
Closing Date, the Company will furnish to the Underwriter, at the Company's
expense, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(p) The Company has appointed North American Transfer Co. as
transfer agent for the Common Stock and warrant agent for the Warrants, subject
to the Closing. The Company will not change or terminate such appointment for a
period of three years from the Firm Closing Date without first obtaining the
written consent of the Underwriter. For a period of three years after the
Effective Date, the Company shall cause the transfer agent and warrant agent to
deliver promptly to the Underwriter a duplicate copy of the daily transfer
sheets relating to trading of the Securities.
- 14 -
The Company shall also provide to the Underwriter, promptly upon their
request, up to four times in any calendar year, copies of DTC or equivalent
transfer sheets.
(q) During the period of 180 days after the date of this
Agreement, the Company will not at any time, directly or indirectly, take any
action designed to or that will constitute, or that might reasonably be expected
to cause or result in, the stabilization of the price of the Common Stock or the
Warrants to facilitate the sale or resale of any of the Securities.
(r) The Company will not take any action to facilitate the
sale of any shares of Common Stock pursuant to Rule 144 under the Act if any
such sale would violate any of the terms of the Lock-up Agreements.
(s) Prior to the 120th day after the Firm Closing Date, the
Company will provide the Underwriter and its designees with three bound volumes
of the transaction documents relating to the Registration Statement and the
closing(s) hereunder, in form and substance reasonably satisfactory to the
Underwriter.
(t) The Company shall consult with the Underwriter prior to
the distribution to third parties of any financial information news releases or
other publicity regarding the Company, its business, or any terms of this
offering and the Underwriter will consult with the Company prior to the issuance
of any research report or recommendation concerning the Company's securities.
Copies of all documents that the Company or its public relations firm intend to
distribute will be provided to the Underwriter for review prior to such
distribution.
(u) The Company and the Underwriter will advise each other
immediately in writing as to any investigation, proceeding, order, event or
other circumstance, or any threat thereof, by or relating to the Commission or
any other governmental authority, that could impair or prevent this Offering.
Except as required by law or as otherwise mutually agreed in writing, neither
the Company nor the Underwriter will acquiesce in such circumstances and each
will actively defend any proceedings or orders in that connection.
(v) The Company will, for a period of no less than three years
commencing immediately after the Effective Date, engage a designee by the
Underwriter as advisor (the "Advisor") to the Company's Board of Directors, who
shall attend meetings of the Board, receive all notices and other correspondence
and communications sent by the Company to its Board of Directors and receive
compensation equal to that of other non officer directors; provided, that in
lieu of the Underwriter's right to designate an Advisor, the Underwriter shall
have the right during such three-year period, in its sole discretion, to
designate one person for election as a director of the Company and the Company
will utilize its best efforts to obtain the election of such person who shall be
entitled to receive the same compensation, expense reimbursements and other
benefits as set forth above. In addition, such Advisor 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,
during said three-year period, shall schedule no less than four formal meetings
(at least
- 15 -
one of which shall be "in person" and the others may be held telephonically) of
its Board of Directors in each such year at which meetings such Advisor shall
be permitted to attend (in person, for each meeting held "in person") 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 Advisor. The Company and its principal stockholders shall, during such
three year period, give the Underwriter timely prior written notice of any
proposed acquisitions, mergers, reorganizations or other similar transactions.
The Company shall indemnify and hold the Underwriter and such Advisor or
director harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of such Advisor or director at any such meeting described herein, and, if the
Company maintains a liability insurance policy affording coverage for the acts
of its officers and directors, it shall, if possible, include such Advisor or
director as an insured under such policy.
(w) The Company shall first submit to the Underwriter
certificates representing the Securities for approval prior to printing, and
shall, as promptly as possible, after filing the Registration Statement with the
Commission, obtain CUSIP numbers for the Securities.
(x) The Company shall engage the Underwriter's counsel to
provide the Underwriter, at the closing of any sale of Securities hereunder and
quarterly thereafter, with an opinion, setting forth those states in which the
Common Stock and Warrants may be traded in non-issuer transactions under the
blue sky or securities laws of the 50 states. The Company shall pay such counsel
a one-time fee of $12,500 for such opinions at the closing of the sale of the
Firm Securities.
(y) The Company will prepare and file a registration statement
with the Commission pursuant to section 12 of the 1934 Act, and will use its
best efforts to have such registration statement declared effective by the
Commission on an accelerated basis on the day after the Effective Date. For this
purpose the Company shall prepare and file with the Commission a General Form of
Registration of Securities (Form 8-A or Form 10).
(z) For so long as the Securities are registered under the
1934 Act, the Company will hold an annual meeting of stockholders for the
election of directors within 180 days after the end of each of the Company's
fiscal years and within 135 days after the end of each of the Company's fiscal
years will provide the Company's stockholders with the audited consolidated
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such consolidated financial statements shall be those
required by Rule 14a-3 under the 1934 Act and shall be included in an annual
report pursuant to the requirements of such Rule.
(aa) Prior to the Effective Date, the Company shall obtain
key-man life insurance in the minimum amount of [$1,000,000] on Xxxxxx Xxxxxx on
such terms and conditions as are reasonably satisfactory to the Underwriter,
assuming such coverage is available on commercially reasonable terms.
- 16 -
(bb) The Company shall retain the Underwriter as a financial
advisor at an annual fee of $24,000 for a 24-month period commencing on the
Closing Date. The entire fee of $48,000 shall be payable on the Closing Date.
(cc) The Company will engage a financial public relations firm
reasonably satisfactory to the Underwriter on or before the Firm Closing Date,
and continuously engage such firm, or a substitute firm reasonably acceptable to
the Underwriter, for a period of twelve (12) months following the Firm Closing
Date.
(dd) The Company will take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions or other
equivalent manual and to maintain its listing therein for a period of five (5)
years from the Effective Date.
(ee) On or prior to the Effective Date, the Company will give
written instructions to the transfer agent for the Common Stock directing said
transfer agent to place stop-order restrictions against, and appropriate legends
advising of the Lock-up Agreements on, the certificates representing the
securities of the Company owned by the persons who have entered into the Lock-up
Agreements.
5. Expenses
(a) The Company shall pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to section 10 hereof, including all costs and expenses incident to (i)
the preparation, printing and filing or other production of documents with
respect to the transactions, including any costs of printing the registration
statement originally filed with respect to the Securities and any amendment
thereto, any Preliminary Prospectus and the Prospectus and any amendment or
supplement thereto, this Agreement, the selected dealer agreement and the other
agreements and documents governing the underwriting arrangements and any blue
sky memoranda, (ii) all reasonable and necessary arrangements relating to the
delivery to the Underwriter of copies of the foregoing documents, (iii) the fees
and disbursements of the counsel, the accountants and any other experts or
advisors retained by the Company, (iv) the preparation, issuance and delivery to
the Underwriter of any certificates evidencing the Securities, including
transfer agent's, warrant agent's and registrar's fees or any transfer or other
taxes payable thereon, (v) the qualification of the Securities under state blue
sky or securities laws, including filing fees and fees and disbursements of
counsel for the Underwriter relating thereto (such counsel fees not to exceed
$35,000, of which $10,000 shall be due and payable upon the commencement of blue
sky filing, together with the related filing fees) and any fees and
disbursements of local counsel, if any, retained for such purpose, (vi) the
filing fees of the Commission and the NASD relating to the Securities, (vii) the
inclusion of the Securities on The Nasdaq SmallCap Market, the Boston Stock
Exchange and in the Standard and Poor's Corporation Descriptions Manual, (viii)
any "road shows" or other meetings with prospective investors in the Securities,
including transportation, accommodation, meal, conference room, audio-visual
presentation and similar expenses of the
- 17 -
Underwriter or its representatives or designees (other than as shall have been
specifically approved by the Underwriter to be paid for by the Underwriter)
and (ix) the placing of "tombstone advertisements" in The Wall Street Journal
and the Investment Dealers Digest and the manufacture of prospectus memorabilia.
In addition to the foregoing, the Company shall reimburse the Underwriter for
its expenses on the basis of a non-accountable expense allowance in the amount
of 3.00% of the gross offering proceeds to be received by the Company, $______
of which has been paid by the Company to the Underwriter. The Underwriter
hereby acknowledges receipt of such $______, which shall be credited against
the non-accountable expense allowance to be paid by the Company. The unpaid
portion of the expense allowance, based on the gross proceeds from the sale of
the Firm Securities, shall be deducted from the funds to be paid by the
Underwriter in payment for the Firm Securities, pursuant to section 2 of this
Agreement, on the Firm Closing Date. To the extent any Option Securities are
sold, any remaining non-accountable expense allowance based on the gross
proceeds from the sale of the Option Securities shall be deducted from the
funds to be paid by the Underwriter in payment for the Option Securities,
pursuant to section 2 of this Agreement, on the Option Closing Date. The
Company warrants, represents and agrees that all such payments and
reimbursements will be promptly and fully made.
(b) Notwithstanding any other provision of this Agreement, if
the offering of the Securities contemplated hereby is terminated for any reason,
the Company agrees that, in addition to the Company paying its own expenses as
described in subparagraph (a) above, (i) the Company shall reimburse the
Underwriter only for its actual accountable out-of-pocket expenses (in addition
to blue sky legal fees and expenses referred to in subparagraph (a) above), and
(ii) the Underwriter shall be entitled to retain the non-accountable expense
allowance paid by the Company pursuant to subparagraph (a) above; provided,
however, that the amount retained pursuant to this clause (ii) shall not exceed
the Underwriter's expenses on an accountable basis to the date of such
cancellation and that all unaccounted for amounts shall be refunded to the
Company. Such expenses shall include, but are not to be limited to, fees for the
services and time of counsel for the Underwriter to the extent not covered by
clause (i) above, plus any additional expenses and fees, including, but not
limited to, travel expenses, postage expenses, duplication expenses,
long-distance telephone expenses, and other expenses incurred by the Underwriter
in connection with the proposed offering.
6. Warrant Solicitation Fee. The Company agrees to pay the Underwriter
a fee of five percent (5%) of the aggregate exercise price of the Warrants if
(i) the market price of the Common stock is greater than the exercise price of
the Warrants on the date of exercise; (ii) the exercise of the Warrants is
solicited by a member of the NASD; (iii) the Warrants are not held in a
discretionary account; (iv) the disclosure of compensation arrangements is made
both at the time of this offering and at the time of the exercise of the
Warrant; and (v) the solicitation of the Warrant exercise is not in violation of
Rule 10b-6 under the 1934 Act. The Company agrees not to solicit the exercise of
any Warrant other than through the Underwriter and will not authorize any other
dealer to engage in such solicitation without the prior written consent of the
Underwriter which will not be unreasonably withheld. The Warrant solicitation
fee will not be paid in a non solicited transaction. Any request for exercise
will be presumed to be unsolicited unless the customer states in writing that
the transaction was solicited and designates in writing the broker/dealer to
receive compensation for the
- 18 -
exercise. No Warrant solicitation by the Underwriter will occur for a period of
12 months after the Effective Date.
7. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Firm Shares shall be subject, in the
Underwriter's sole discretion, to the accuracy of the representations and
warranties of the Company contained herein as of the date hereof and as of the
Firm Closing Date as if made on and as of the Firm Closing Date, to the accuracy
of the statements of the Company's officers made pursuant to the provisions
hereof, to the performance by the Company of its covenants and agreements
hereunder and to the following additional conditions:
(a) If the registration statement, as heretofore amended, has
not been declared effective as of the time of execution hereof, the registration
statement, as heretofore amended or as amended by an amendment thereto to be
filed prior to the Firm Closing Date, shall have been declared effective not
later than 11 A.M., New York time, on the date on which the amendment to such
registration statement containing information regarding the initial public
offering price of the Securities has been filed with the Commission, or such
later time and date as shall have been consented to by the Underwriter; if
required, the Prospectus and any amendment or supplement thereto shall have been
filed with the Commission in the manner and within the time period required by
Rule 424(b) under the Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of the
Company or the Underwriter, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Underwriter shall have received an opinion, dated the
Firm Closing Date, of Xxxxxxx, Savage, Kaplowitz, Xxxxxxxxxx & Xxxxxx LLP,
counsel to the Company, to the effect that:
(1) the Company and each Subsidiary has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the state of its incorporation and is duly qualified to
transact business as a foreign corporation and is in good standing under the
laws of each other jurisdiction in which its ownership or leasing of any
properties or the conduct of its business requires such qualification, except
where the failure to so qualify would not have a materially adverse effect upon
the Company;
(2) the Company and each Subsidiary has full
corporate power and authority to own or lease its property and conduct its
business as now being conducted and as proposed to be conducted, as described
in the Registration Statement and the Prospectus, and the Company has full
corporate power and authority to enter into this Agreement, the Warrant
Agreement and the Underwriter's Warrant Agreement and to carry out all the
terms and provisions hereof and thereof to be carried out by it;
- 19 -
(3) to the knowledge of such counsel, there are
no outstanding options, warrants or other rights granted by the Company to
purchase shares of its Common Stock, preferred stock or other securities other
than as described in the Prospectus; the Shares have been duly authorized and
the Warrant Shares and the Underwriter's Warrant Shares have been duly
reserved for issuance by all necessary corporate action on the part of the
Company and, the Shares when issued and delivered to and paid for by the
Underwriter pursuant to this Agreement, the Warrant Shares when issued upon
payment of the exercise price specified in the Warrants, Underwriter's Warrants
when issued and delivered and paid for in accordance with this Agreement and
the Underwriter's Warrant Agreement by the Underwriter and the Warrant Shares
when issued upon payment of the exercise price specified in the Underwriter's
Warrants, will be validly issued, fully paid, nonassessable and free of
preemptive rights and will conform to the description thereof in the Prospectus;
to the knowledge of such counsel, no holder of outstanding securities of the
Company is entitled as such to any preemptive or other right to subscribe for
any of the Shares, the Warrant Shares, or the Underwriter's Warrant Shares;
and to the knowledge of such counsel, no person is entitled to have securities
registered by the Company under the Registration Statement or otherwise under
the Act other than as described in the Prospectus;
(4) the Shares have been approved for inclusion
in The Nasdaq SmallCap Market and the Boston Stock Exchange;
(5) the execution and delivery of this
Agreement, the Warrant Agreement, the Underwriter's Warrant Agreement and the
Financial Advisory and Investment Banking Agreement have been duly authorized
by all necessary corporate action on the part of the Company and this Agreement,
the Warrant Agreement, the Underwriter's Warrant Agreement and the Financial
Advisory and Investment Banking Agreement have been duly executed and delivered
by the Company, and each is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other similar laws affecting creditors'
rights generally and to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) and except as
rights to indemnity and contribution under this Agreement, the Warrant
Agreement and the Underwriter's Warrant Agreement may be limited by applicable
law;
(6) the Underwriter's Warrants conform to the
description thereof in the Registration Statement and in the Prospectus and are
duly authorized and upon payment of the purchase price therefore specified in
Section 2(d) of this Agreement are validly issued and constitute valid and
binding obligations of the Company entitled to the benefits of the Underwriter's
Warrant Agreement;
(7) the statements set forth in the Prospectus
under the caption "Description of Securities" in the Prospectus, insofar as
those statements purport to summarize the terms of the capital stock and
warrants of the Company, provide a fair summary of such terms; the statements
in the Prospectus, insofar as those statements constitute matters of law or
legal
- 20 -
conclusions, or summaries of the contracts, agreement instruments, leases
or licenses referred to therein, constitute a fair summary of those matters,
legal conclusions, contracts, agreement instruments, leases or licenses and
include all material terms thereof, as applicable;
(8) none of (A) the execution and delivery of
this Agreement, the Warrant Agreement and the Underwriter's Warrant Agreement,
(B) the issuance, offering and sale by the Company to the Underwriter of the
Securities pursuant to this Agreement and the Underwriter's Warrant Securities
pursuant to the Underwriter's Warrant Agreement, nor (C) the compliance by the
Company with the other provisions of this Agreement, the Warrant Agreement and
the Underwriter's Warrant Agreement and the consummation of the transactions
contemplated hereby and thereby, (1) requires the consent, approval,
authorization, registration or qualification of or with any court or
governmental authority known to us, except such as have been obtained and such
as may be required under state blue sky or securities laws, or (2) conflicts
with or results in a breach or violation of, or constitutes a default under,
any material contract, indenture, mortgage, deed of trust, loan agreement,
note, lease or other material agreement or instrument known to us to which the
Company is a party or by which the Company or any of its property is bound or
subject, or the certificate of incorporation or by-laws of the Company, or any
material statute or any judgment, decree, order, rule or regulation of any
court or other governmental or regulatory authority known to us applicable to
the Company;
(9) to the knowledge of such counsel, (A) no
legal or governmental proceedings are pending to which the Company or a
Subsidiary is a party or to which the property of the Company or a Subsidiary
is subject and (B) no contract or other document is required to be described
in the Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement that is not described therein or filed as
required;
(10) the Company and each of the Subsidiaries
possesses adequate licenses, orders, authorizations, approvals, certificates or
permits issued by the appropriate federal or state regulatory agencies or
bodies necessary to conduct its business as described in the Registration
Statement and the Prospectus, and, to the knowledge of such counsel, there are
no pending or threatened proceedings relating to the revocation or modification
of any such license, order, authorization, approval, certificate or permit,
except as disclosed in the Registration Statement and the Prospectus;
(11) neither the Company nor the Subsidiary is
in violation or breach of, or in default with respect to, any term of its
certificate of incorporation or by-laws, and to the knowledge of such counsel,
neither the Company nor any Subsidiary is in (i) violation in any material
respect of any law, statute, regulation, ordinance, rule, order, judgment or
decree of any court or any governmental or regulatory authority applicable to
it, or (ii) default in any material respect in the performance or observance
of any obligation, agreement, covenant or condition contained in any material
contract, indenture, mortgage, deed of trust, loan agreement, note, lease or
other material agreement or instrument to which it is a party or by which it or
any of its property
- 21 -
may be bound or subject, and no event has occurred which with notice, lapse of
time or both would constitute such a default.
(12) the Registration Statement is effective
under the Act; any required filing of the Prospectus pursuant to Rule 424(b)
has been made in the manner and within the time period required by Rule 424(b);
and no stop order suspending the effectiveness of the Registration Statement or
any amendment thereto has been issued, and no proceedings for that purpose have
been instituted or threatened or, to the best knowledge of such counsel, are
contemplated by the Commission;
(13) the registration statement originally filed
with respect to the Securities and each amendment thereto and the Prospectus
(in each case, other than the financial statements and schedules and other
financial and statistical information contained therein, as to which such
counsel need express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the rules and regulations of
the Commission thereunder; and
(14) the Company is not an "investment company"
as defined in Section 3(a) of the Investment Company Act and, if the Company
conducts its business as set forth in the Prospectus, it will not become an
"investment company" and will not be required to register under the Investment
Company Act.
Counsel also shall state in its opinion that it has participated in the
preparation of the Registration Statement and the Prospectus and that nothing
has come to its attention that has caused them to believe that the Registration
Statement, at the time it became effective (including the information deemed to
be a part of the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b), if applicable), contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus, as of its
date or as of the Firm Closing Date, contained an untrue statement of material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials, copies of which certificates will
be provided to the Underwriter, and, as to matters of the laws of certain
jurisdictions, on the opinions of other counsel to the Company, which opinions
shall also be delivered to the Underwriter, in form and substance acceptable to
the Underwriter, if such other counsel expressly authorize such reliance and
counsel to the Company expressly states in their opinion that such counsel's and
the Underwriter's reliance upon such opinion is justified.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
- 22 -
(c) The Underwriter shall have received from Xxxxxxx,
Radin & Company, P.C. a letter dated the Firm Closing Date and dated each
Option Closing Date (as defined below), if applicable, in form and substance
satisfactory to the Underwriter, to the effect that (i) they are independent
public accountants with respect to the Company within the meaning of the Act
and the applicable rules and regulations thereunder; (ii) in their opinion,
the consolidated financial statements audited by them and included in the
Registration Statement and the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations thereunder; (iii) based upon procedures
set forth in detail in such letter, nothing has come to their attention which
causes them to believe that (A) the unaudited financial statements as of
September 30,1996 included in the Registration Statement was not determined on
a basis substantially consistent with that used in determining the corresponding
amounts in the audited financial statements as of December 31, 1995 included in
the Registration Statement or (B) at a specified date not more than five days
prior to the date of this Agreement, there has been any change in the capital
stock of the Company, any increase in the long-term debt or decrease in net
sales of the Company and its Subsidiaries, as compared with the amounts
shown in the September 30,1996 balance sheet included in the Registration
Statement or as of the date of the most recent financial statements made
available by the Company there has been any change in the capital stock of the
Company, any increase in the long-term debt or any decrease in net sales,
working capital or net assets of the Company and its Subsidiaries as compared
with the amounts shown in the September 30, 1996 balance sheet included in the
Registration Statement or, during the period from September 30, 1996 through
date of the most recent financial statement made available by the Company and
its Subsidiaries, there were any decreases, as compared with the corresponding
period in the preceding year, in revenues, or any increase in net loss of the
Company, except in all instances for changes, increases or decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur;
and (iv) in addition to the audit referred to in their opinion and the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information (including the summary of
consolidated financial information and secured financial information) which are
included in the Registration Statement and Prospectus and which are specified by
the Underwriter, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and other
records of the Company identified in such letter. References to the Registration
Statement and the Prospectus in this paragraph (c) with respect to the letter
referred to above shall include any amendment or supplement thereto at the date
of such letter.
(d) The representations and warranties of the Company
contained in this Agreement shall be true and correct as if made on and as of
the Firm Closing Date; the Registration Statement shall not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein necessary to make the statements therein not misleading, and the
Prospectus, as amended or supplemented as of the Firm Closing Date, shall not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
- 23 -
and the Company shall have performed all covenants and agreements and
satisfied all conditions on its part to be performed or satisfied at or prior
to the Firm Closing Date.
(e) No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been issued, and no
proceedings for that purpose shall have been instituted or threatened or
contemplated by the Commission.
(f) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there shall not have
been any material adverse change, or any development involving a prospective
material adverse change, in the business, operations, condition (financial or
otherwise), earnings or prospects of the Company and the Subsidiaries, except in
each case as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto).
(g) The Underwriter shall have received a certificate, dated
the Firm Closing Date, of the Chief Executive Officer and the Secretary of the
Company to the effect set forth in subparagraphs (d) through (f) above.
(h) The Common Stock and Warrants shall be qualified in such
jurisdictions as the Underwriter may reasonably request pursuant to section
4(c), and each such qualification shall be in effect and not subject to any stop
order or other proceeding on the Firm Closing Date.
(i) The Company shall have executed and delivered to the
Underwriter the Underwriter's Warrant Agreement and a certificate or
certificates evidencing the Underwriter's Warrants, in each case in a form
acceptable to the Underwriter.
(j) The Underwriter shall have received Lock-up Agreements
executed by the persons listed on Schedule 1 annexed hereto.
(j) On or before the Firm Closing Date, the Underwriter and
counsel for the Underwriter shall have received such further certificates,
documents, letters or other information as they may have reasonably requested
from the Company.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriter and counsel
for the Underwriter. The Company shall furnish to the Underwriter such conformed
copies of such opinions, certificates, letters and documents in such quantities
as the Underwriter and counsel for the Underwriter shall reasonably request.
The obligation of the Underwriter to purchase and pay for any Option
Securities shall be subject, in its discretion, to each of the foregoing
conditions to purchase the Firm Securities, except that all references to the
Firm Securities and the Firm Closing Date shall be deemed to refer to such
Option Securities and the related Option Closing Date, respectively.
- 24 -
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of section 15 of the Act or section 20 of the 1934 Act against any
losses, claims, damages, amounts paid in settlement or liabilities, joint or
several, to which the Underwriter or such controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof arise out of or are based upon:
(i) any untrue statement or alleged untrue
statement of any material fact contained in (A) the Registration Statement or
any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or (B) any application or other document, or
any amendment or supplement thereto, executed by 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 under the Blue Sky or
securities laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"), or
(2) the omission or alleged omission to state
in such Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse, as incurred,
the Underwriter and such controlling person for any legal or other expenses
reasonably incurred by the Underwriter or such controlling person in connection
with investigating, defending against or appearing as a third-party witness in
connection with any loss, claim, damage, liability, action, investigation,
litigation or proceeding; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement or any amendment thereto, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto, or any Application in reliance upon
and in conformity with written information furnished to the Company by the
Underwriter specifically for use therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have. The Company
will not, without the prior written consent of the Underwriter, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not the Underwriter or any person who controls the
Underwriter within the meaning of section 15 of the Act or section 20 of the
1934 Act is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of the
Underwriter and each such controlling person from all liability arising out of
such claim, action, suit or proceeding.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of section 15 of the Act or section 20 of the Exchange Act against, any losses,
claims, damages or liabilities to which the Company or any such director,
officer
- 25 -
or controlling person may become subject under the Act or otherwise, but
only insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application, or
(ii) the omission or the alleged omission to state therein a material fact
required to be stated in the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application, or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by the Underwriter specifically for use therein; and, subject to the
limitation set forth immediately preceding this clause, will reimburse, as
incurred, any legal or other expenses reasonably incurred by the Company or any
such director, officer or controlling person in collection with investigating or
defending any such loss, claim, damage, liability or any action in respect
thereof. This indemnity agreement will be in addition to any liability which the
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this section 8, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this section 8. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this section 8 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence or (ii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the indemnifying party.
- 26 -
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this section 8 is unavailable or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Securities or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof). The relative benefits received by the Company on the one hand and the
Underwriter on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriter. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriter, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and the other equitable considerations appropriate in the
circumstances. The Company and the Underwriter agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d). Notwithstanding any other provision of this paragraph (d), the
Underwriter shall not be obligated to make contributions hereunder that in the
aggregate exceed the total public offering price of the Securities purchased by
the Underwriter under this Agreement, less the aggregate amount of any damages
that the Underwriter has otherwise been required to pay in respect of the same
or any substantially similar claim, and no person guilty of 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 paragraph (d), each person, if any, who
controls an Underwriter within the meaning of section 15 of the Act or section
20 of the 1934 Act shall have the same rights to contribution as the
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of section 15 of the Act or section 20 of the 1934
Act, shall have the same rights to contribution as the Company.
9. Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, any of
its officers or directors and the Underwriter set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by
or on behalf of the Company, any of its officers or directors, the
Underwriter or any controlling person referred to in section 8 hereof and
(ii) delivery of and payment for the Securities. The respective agreements,
- 27 -
covenants, indemnities and other statements set forth in sections 5
and 8 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
10. Termination.
(a) This Agreement may be terminated with respect to the Firm
Securities or any Option Securities in the sole discretion of the Underwriter by
notice to the Company given prior to the Firm Closing Date or the related Option
Closing Date, respectively, in the event that the Company shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied under Section 7 hereunder at or prior
thereto or if at or prior to the Firm Closing Date or such Option Closing Date,
respectively.
(1) the Company sustains a loss by reason of
explosion, fire, flood, accident or other calamity, which, in the opinion of the
Underwriter, substantially affects the value of the properties of the Company
or which materially interferes with the operation of the business of the
Company regardless of whether such loss shall have been insured; there shall
have been any material adverse change, or any development involving a
prospective material adverse change (including, without limitation, a change in
management or control of the Company), in the business, operations, condition
(financial or otherwise), earnings or prospects of the Company, except in each
case as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto);
(2) any action, suit or proceeding shall be
threatened, instituted or pending, at law or in equity, against the Company, by
any person or by any federal, state, foreign or other governmental or
regulatory commission, board or agency wherein any unfavorable result or
decision could materially adversely affect the business, operations, condition
(financial or otherwise), earnings or prospects of the Company;
(3) trading in the Common Stock or Warrants
shall have been suspended by the Commission or the NASD, or trading in
securities generally on the New York Stock Exchange shall have been suspended
or minimum or maximum prices shall have been established on either such
exchange or quotation system;
(4) a banking moratorium shall have been
declared by New York or United States authorities;
(5) there shall have been (A) an outbreak of
hostilities between the United States and any foreign power (or, in the case of
any ongoing hostilities, a material escalation thereof), (B) an outbreak of any
other insurrection or armed conflict involving the United States or (C) any
other calamity or crisis or material change in financial, political or
economic conditions, having an effect on the financial markets that, in any case
referred to in this clause (5), in the sole judgment of the Underwriter makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities as contemplated by the Registration Statement;
- 28 -
(6) termination of this Agreement pursuant to
this section 10 shall be without liability of any party to any other party,
except as provided in section 5(b) and section 8 hereof.
11. Information Supplied by the Underwriter. The statements set forth
in the penultimate paragraph on page 3, in the third and eleventh paragraphs
under the heading "Underwriting" in any Preliminary Prospectus or the Prospectus
(to the extent such statements relate to the Underwriter) constitute the only
information furnished by the Underwriter to the Company for the purposes of
sections 1 (b) and 8(b) hereof. The Underwriter confirm that such statements (to
such extent) are correct.
12. Notices. All notice hereunder to or upon either party hereto shall
be deemed to have been duly given for all purposes if in writing and (i)
delivered in person or by messenger or an overnight courier service against
receipt, or (ii) send by certified or registered mail, postage paid, return
receipt requested, or (iii) sent by telegram, facsimile, telex or similar means,
provided that a written copy thereof is sent on the same day by postage paid
first-class mail, to such party at the following address:
To the Company at: Azurel Ltd.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx
Fax: (000) 000-0000
To the Underwriter at: Network 1 Financial Securities, Inc.
One Financial Galleria
0 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxxxx 00000
Attn: Corporate Finance Department
Fax: (000) 000-0000
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving of any such notice shall be, in the case of clause (i), the
date of the receipt; in the case of clause (ii), five business days after such
notice or demand is sent; and, in the case of clause (iii), the business day
next following the date such notice is sent.
13. Amendment. Except as otherwise provided herein, no amendment
of this Agreement shall be valid or effective, unless in writing and signed by
or on behalf of the parties hereto.
14. Waiver. No course of dealing or omission or delay on the part of
either party hereto in asserting or exercising any right hereunder shall
constitute or operate as a waiver of any such right. No waiver of any provision
hereof shall be effective, unless in writing and signed by or on
- 29 -
behalf of the party to be charged therewith. No waiver shall be deemed a
continuing waiver or waiver in respect of any other or subsequent breach or
default, unless expressly so stated in writing.
15. Applicable Law. This agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of New York
without regard to principles of choice of law or conflict of laws.
16. Jurisdiction. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the Supreme Court of the
State of New York and the United States District Court for the Southern District
of New York in connection with any suit, action or other proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby, waives
any objection to venue in the County of New York, State of New York, or such
District and agrees that service of any summons, complaint, notice or other
process relating to such suit, action or other proceeding may be effected in the
manner provided by clause (ii) of Section 12.
17. Remedies. In the event of any actual or prospective breach or
default by either party hereto, the other party shall be entitled to equitable
relief, including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive, and
nothing herein shall be deemed to prohibit or limit either party from pursuing
any other remedy or relief available at law or in equity for such actual or
prospective breach or default, including the recovery of damages.
18. Attorneys' Fees. The prevailing party in any suit, action or
other proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, shall be entitled to recover its costs and
reasonable attorneys' fees.
19. Severability. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
20. Counterparts. This agreement may be executed in counterparts,
each of which shall be deemed an original and which together shall constitute
one and the same agreement.
21. Successors. This agreement shall inure to the benefit of and be
binding upon the Underwriter, the Company and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provisions herein contained,
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company contained in
section 8 of this Agreement shall also be for the
- 30 -
benefit of any person or persons who control any Underwriter within the meaning
of section 15 of the Act or section 20 of the Exchange Act and (ii) the
indemnities of the Underwriter contained in section 8 of this Agreement shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement and any person or persons
who control the Company within the meaning of section 15 of the Act or section
20 of the Exchange Act. No purchaser of Securities from the Underwriter shall
be deemed a successor because of such purchase.
22. Titles and Captions. The titles and captions of the articles
and sections of this Agreement are for convenience of reference only and do not
in any way define or interpret the intent of the parties or modify or otherwise
affect any of the provisions hereof.
23. Grammatical Conventions. Whenever the context so requires, each
pronoun or verb used herein shall be construed in the singular or the plural
sense and each capitalized term defined herein and each pronoun used herein
shall be construed in the masculine, feminine or neuter sense.
24. References. The terms "herein," "hereto," "hereof,"
"hereby," and "hereafter," and other terms of similar import, refer to this
Agreement as a whole, and not to any Article, Section or other part hereof.
25. Entire Agreement. This Agreement embodies the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any prior agreement, commitment or arrangement relating thereto.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company and the
Underwriter.
Very truly yours,
AZUREL LTD.
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
The foregoing agreement is hereby confirmed and accepted as of the date first
above written.
- 31 -
NETWORK 1 FINANCIAL SECURITIES, INC.
By:
Name:
Title:
- 32 -
