EXHIBIT 1.1
UNDERWRITING AGREEMENT
September , 1997
Nichols, Safina, Xxxxxx & Co., Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxx Xxxxx & Co., L.L.C.
0000 Xxxxx Xxxx
Xxxxx, XX 00000
Dear Sirs:
Galveston's Steakhouse Corp., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you, 1,000,000 shares of the common stock, $.01 par value (the "Common
Stock") of the Company (the "Firm Shares"). In addition, solely for the purpose
of covering over-allotments, (i) the Company proposes to issue and sell to you
150,000 shares of Common Stock (the "Additional Shares"). The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares". The Shares are more fully described in the Registration
Statement and Prospectus referred to below.
The Company confirms as follows its agreement with you:
1. REGISTRATION STATEMENT AND PROSPECTUS: The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission"), in
accordance with the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder (the "Rules and
Regulations", and together with said Act, the "Act"), a registration statement
on Form SB-2 (File No. ) and may have filed one or more amendments thereto,
including in such registration statement and in certain amendments thereto a
related preliminary prospectus for the registration under the Act of the Shares.
In addition, subject to the provisions of Section 4(e) hereof, the Company has
filed or will promptly file a further amendment to such registration statement
prior to the effectiveness of such registration statement, unless an amendment
is not required pursuant to Rule 430A of the Rules and Regulations. As used in
this Agreement, the term "Registration Statement" means such registration
statement, including the prospectus, financial statements and schedules thereto,
exhibits and other documents filed as part thereof, as amended when, and in the
form in which, it is declared effective by the Commission, and, in the event any
post-effective amendment thereto is filed thereafter and on or before the
Closing Date (as hereinafter defined), shall also mean (from and after the date
such post-effective amendment is effective under the Act) such registration
statement as so amended, provided that such Registration Statement, at the time
it becomes effective, may omit such information as is permitted to be omitted
from the Registration Statement when it becomes effective pursuant to Rule 430A
of the Rules and Regulations, which
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information ("Rule 430 Information") shall be deemed to be included in such
Registration Statement when a final prospectus is filed with the Commission in
accordance with Rules 430A and 424(b)(1) or (4) of the Rules and Regulations;
the term "Preliminary Prospectus" means each prospectus included in the
Registration Statement, or any amendments thereto, before it becomes effective
under the Act, the form of prospectus omitting Rule 430A Information included in
the Registration Statement when it becomes effective, if applicable (the "Rule
430A Prospectus"), and any prospectus filed by the Company with your consent
pursuant to Rule 424(a) of the Regulations; the term "Prospectus" means the
final prospectus included as part of the Registration Statement, except that (i)
if any prospectus (including any preliminary prospectus) which differs from such
prospectus included in the Registration Statement is provided to you for use in
connection with the offering of the Shares (whether or not such differing
prospectus is required to be filed by the Company pursuant to Rule 424(b) under
the Act), the term "Prospectus" as used herein shall mean such differing
prospectus from and after the date on which it shall have been first used, and
(ii) in the event any supplement to or amendment of such prospectus is made
after the date on which the Registration Statement is declared effective and on
or prior to the Closing Date, the term "Prospectus" shall also mean (with
respect to any supplement, from and after the date such supplement is first used
or, with respect to any amendment, the date such amendment is effective under
the Act) such prospectus as so supplemented or amended; and the term "Effective
Date" means (i) if the Company and you have determined not to proceed pursuant
to Rule 430A under the Act, the date on which the Registration Statement becomes
effective, or (ii) if the Company and you have determined to proceed pursuant to
Rule 430A under the Act, the date of this Agreement.
2. AGREEMENTS TO SELL AND PURCHASE: Subject to the terms and conditions
herein set forth, the Company agrees to sell to you and each of you agree,
severally and not jointly, to purchase from the Company, at a purchase price of
$7.425 per Firm Share (net of underwriting discounts and commissions) or, as
applicable, solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares, Additional Shares, the
number of Shares (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying the aggregate number of Firm Shares or Additional
Shares to be sold by a fraction, the numerator of which is the aggregate
number of Firm Shares or Additional Shares to be purchased by each of
you as set forth opposite your respective names in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares or Additional
Shares to be purchased hereunder.
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Additional Shares may be purchased at any time and from time to time on
or before the thirtieth business day following the date of this Agreement
upon written notice from you to the Company specifying the number of Additional
Shares to be purchased. You agree that, if any Additional Shares are to be
purchased, they will be purchased first from Messrs. Xxx and Xxx as Additional
Selling Stockholder Shares prior to the purchase from the Company of any
Additional Company Shares.
You will offer the Shares for sale at the initial public offering price
set forth on the cover of the Prospectus. After the initial public offering, you
may from time to time increase or decrease the public offering price, in your
sole discretion, by reason of changes in general market conditions or otherwise.
3. DELIVERY AND PAYMENT: Delivery of and payment for the Firm Shares
shall be made at the offices of Nichols, Safina, Xxxxxx & Co., Inc. ("NSL") at
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or such other place as shall be
mutually agreed upon) at such time and date, not later than the third full
business day following the Effective Date (unless the time of effectiveness is
after 4:00 P.M. New York time, in which case the date of closing shall be no
later than four business days following the Effective Date), as you shall
designate by at least forty-eight hours prior notice to the Company (the
"Closing Date").
Delivery of and payment for Additional Shares shall be made at said
offices of NSL, or at such other place, and at such time(s) and date(s) (each an
"Optional Closing Date") as may be agreed upon in writing by you and the
Company; provided, however, that in no event may an Optional Closing Date be (i)
earlier than the Closing Date or (ii) later than three business days after the
date on which the related notice to purchase Additional Shares is given.
The Closing Date and the time and place of delivery of and payment
for the Shares may be varied by agreement between you and the Company. The
Optional Closing Date and the time and place of delivery of and payment for the
Additional Shares may be varied by agreement between you and the Company.
Delivery of certificates for the Shares (in definitive form, registered in such
names and in such denominations as you shall request at least two business days
prior to the Closing Date by written notice to the Company) shall be made to you
against payment of the purchase price therefor by certified or official bank
check or checks payable in New York Clearing House funds to the order of the
Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at the offices of NSL at least 24 hours prior to the
Closing Date and each Optional Closing Date, as the case may be.
On the Closing Date, at the time of the delivery and payment for the
Firm Shares, (i) the Company shall pay to you as a non-accountable expense
allowance a sum equal to three percent (3%) of the gross proceeds of the sale of
the Firm Shares purchased by you hereunder less the $20,000 heretofore paid to
you in respect thereof, by certified or official bank check or checks payable
in New York Clearing House funds payable to
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the order of, and in accordance with instructions from, you and (ii) the Company
shall issue, sell and deliver to you, for an aggregate purchase price of $10, a
warrant to purchase up to an aggregate of 100,000 Shares (the "Underwriters'
Warrant") in substantially in the form filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the
Underwriters' Warrant are hereinafter referred to collectively as the
"Underwriters' Warrant Shares". The Underwriters' Warrant will be exercisable at
an initial exercise price equal to 120% of the initial public offering sale
price Share at any time and from time to time, in whole or in part, during a
four-year period commencing one year following the Effective Date. The Company
has granted you certain registration rights with respect to the Underwriters'
Warrant and the securities issuable upon exercise thereof, as set forth in said
Underwriters' Warrant.
On each Additional Closing Date, at the time of the delivery and
payment for the Additional Shares, the Company shall pay to you as a
non-accountable expense allowance, a sum equal to three percent (3%) of the
gross proceeds of the sale of the Additional Shares purchased by you hereunder
(or an aggregate of $33,750 in the event that all Additional Shares are
purchased by you) on such date by certified or official bank check or checks
payable in New York Clearing House funds payable to the order of, and in
accordance with instructions from, you.
4. COVENANTS AND AGREEMENTS OF THE COMPANY: (A) The Company covenants
and agrees with you as follows:
(a) The Company will notify you promptly by telephone and (if requested by you)
will confirm such advice in writing, (1) when the Registration Statement
has become effective and when any post-effective amendment thereto becomes
effective, (2) if Rule 430A under the Act is used, or the Prospectus is
otherwise required to be filed with the Commission pursuant to Rule 424(b)
under the Act, when the Prospectus is filed with the Commission pursuant to
Rule 424(b) under the Act, (3) of any request by the Commission for
amendments or supplements to the Registration Statement or the Prospectus
or for additional information, (4) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement,
preventing or suspending the use of the Preliminary Prospectus, the
Prospectus, the Registration Statement or any amendment or supplement
thereto, or refusing to permit the effectiveness of the Registration
Statement ("Stop Order"), or the initiation of any proceedings for any of
those purposes, (5) of the happening of any event during the period
mentioned in paragraph (f) below which in the reasonable judgment of the
Company makes any statement made in the Registration Statement or the
Prospectus untrue or which requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading, and (6) of the receipt of any comments from the
Commission or the Blue Sky or securities authorities of any jurisdiction
regarding the Registration Statement, any post-effective amendment thereto,
the Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto. The Company will use its best efforts to prevent the issuance of
any Stop Order by the Commission or any notification from the Blue Sky or
securities authorities of any jurisdiction suspending the qualification or
registration of the Shares for sale in such jurisdictions, and if at any
time the Commission shall
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issue any Stop Order, or if the Blue Sky or securities authorities of any
jurisdiction shall issue notification suspending the qualification or
registration of the Shares, the Company will make every reasonable effort
to obtain the withdrawal of such Stop Order or notification at the earliest
possible moment. The Company will promptly advise you of its receipt of any
notification with respect to the suspension of the qualification or
registration of the Shares for offer or sale in any jurisdiction or the
initiation or threatening of any action or proceeding for such purpose.
(b) Prior to any public offering of the Shares by you, the Company will
cooperate with you and your counsel (or, at your discretion, our counsel)
in registering or qualifying the Shares for offer or sale under the Blue
Sky or securities laws, rules or regulations of such jurisdictions as you
may reasonably request; provided that in no event shall the Company be
obligated to register or qualify to do business as a foreign corporation in
any jurisdiction where it is not now so registered or qualified or to take
any action which would subject it to general service of process, or to
taxation as a foreign corporation doing business, in any jurisdiction where
it is not now so subject. The Company will pay all fees and expenses
relating to the registration or qualification of the Shares under such Blue
Sky or securities laws of such jurisdictions as you may designate
(including the legal fees, expenses and disbursements of counsel to you,
or, in your discretion, counsel to the Company, for the registration or
qualifi cation of the Shares in such jurisdictions as you shall determine).
After registration, qualification or exemption of the Shares for offer and
sale in such jurisdictions, and for as long as any offering pursuant to
this Agreement continues, the Company, at your reasonable request, will
file and make such statements or reports, and pay the fees applicable
thereto, at such times as are or may be required by the laws, rules or
regulations of such jurisdictions in order to maintain and continue in full
force and effect the registration, qualification or exemption for offer or
sale of the Shares in such jurisdictions. After the termination of the
offering contemplated hereby, and as long as any of the Shares are
outstanding, the Company will file and make, and pay all fees applicable
thereto, such statements and reports and renewals of registration as are or
may be required by the laws, rules or regulations of such jurisdictions to
maintain and continue in full force and effect the registration,
qualification or exemption for secondary market transactions in the Shares,
in the various jurisdictions in which the Shares were originally
registered, qualified or exempted for offer or sale.
(c) The Company will furnish to you, without charge, four manually-signed
copies, and such reasonable number of conformed copies, of the Registration
Statement as originally filed on Form SB-2 and of any amendments (including
post-effective amendments thereto), including financial statements and
schedules, if any, and all consents, certificates and exhibits (including
those incorporated therein by reference to the extent not previously
furnished to you), heretofore or hereafter made, signed by or on behalf of
its officers whose signatures are required thereon and a majority of its
board of directors.
(d) The Company will use its best efforts to cause the Registration Statement
to become effective under the Act. Upon such effectiveness, if the Company
and you have determined not to proceed pursuant to Rule 430A under the Act,
the Company will timely file a Prospectus
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pursuant to, and in conformity with, Rule 424(b), if required, and if the
Company and you have determined to proceed pursuant to Rule 430A under the
Act, the Company will timely file a Prospectus pursuant to, and in
conformity with, Rules 424(b) and 430A under the Act.
(e) The Company will give you and your counsel advance notice of its intention
to file any amendment to the Registration Statement or any amendment or
supplement to the Prospectus, whether before or after the effective date of
the Registration Statement, and will not file any such amendment or
supplement unless the Company shall have first delivered copies of such
amendment or supplement to you and your counsel and you and your counsel
shall have given your consent to the filing of such amendment or
supplement. Any such amendment or supple ment shall comply with the Act.
(f) From and after the Effective Date, the Company will deliver to you, without
charge, as many copies of the Prospectus or any amendment or supplement
thereto as you may reasonably request. The Company consents to the use of
the Prospectus or any amendment or supplement thereto by you and by all
dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for such period of time thereafter as
the Prospectus is required by law to be delivered in connection therewith.
If during such period of time any event shall occur which in the judgment
of you or your counsel should be set forth in the Prospectus in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or if it is necessary to supplement or amend the
Pro spectus to comply with law, the Company will forthwith prepare and duly
file with the Commission an appropriate supplement or amendment thereto,
and will deliver to each of you, without charge, such number of copies
thereof as you may reasonably request.
(g) The Company will promptly pay all expenses in connection with (1) the
preparation, printing, filing, distribution and mailing (including, without
limitation, express delivery service) of the Registration Statement, each
preliminary prospectus, the Prospectus, and the preliminary and final forms
of Blue Sky memoranda (if any); (2) the issuance and delivery of the
Shares; (3) the fees and expenses of legal counsel and independent
accountants for the Company relating to, among other things, opinions of
counsel, audits, review of unaudited financial statements and cold comfort
review; (4) the fees and expenses of a registrar or transfer agent for the
Common Stock; (5) the printing, filing, distribution and mailing
(including, without limitation, express delivery service) of this
Agreement, the Agreement Among Underwriters, if any, and the Selected
Dealers Agreement; (6) furnishing such copies of the Registration
Statement, the Prospectus and any preliminary prospectus, and all
amendments and supplements thereto, as may be requested for use in
connection with the offering and sale of the Shares by you or by dealers to
whom Shares may be sold; (7) any fees and communication expenses with
respect to filings required to be made by you with the National Association
of Securities Dealers Regulatory, Inc. (the "NASDR"); and (8) the quotation
of the Shares on NASDR's Automated Quotation System ("NASDAQ").
(h) On the Closing Date, the Company shall sell to you the Underwriters'
Warrant to purchase 100,000 Shares for an aggregate purchase price of $10.
The Underwriters' Warrant shall be
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divided between you and your designees in such manner as you shall jointly
direct by written instruction to the Company at least two business days
prior to the Closing Date.
(i) If this Agreement shall be terminated pursuant to any of the provisions
hereof (otherwise than by notice given by you pursuant to Section 8 hereof)
or if for any reason the Company shall be unable to perform its obligations
hereunder, the Company will reimburse you for all of your out-of-pocket
expenses (including the fees and expenses of your counsel) reasonably
incurred by you in connection herewith; provided, however, the Company
shall not be so obligated to reimburse you if this Agreement is terminated
by reason of a failure to satisfy the condition set forth in Section 7(k)
hereinbelow by reason of your unwillingness to modify the underwriting
arrangements pertaining to sale of the Shares and/or the participation by
you in the sale of the Shares, as may be requested by the NASDR.
(j) For a period of ninety (90) days after the commencement of the public
offering of the Shares by you, without your prior written consent, the
Company will not offer, issue, sell, contract to sell, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, any
securities of the Company, except as provided for and as contemplated by
this Agreement, as specifically disclosed in the Registration Statement
respecting certain post-offering issuances to Company employees, or for
stock options granted to employees pursuant to the Company's Omnibus Stock
Plan attached as an exhibit to the Registration Statement.
(k) On or prior to the Closing Date, the Company shall obtain from each of its
officers and directors, his or her enforceable written agreement, in form
and substance satisfactory to your counsel, that for a period of
twenty-four (24) months after the Effective Date (or any longer period
required by NASDAQ or any jurisdiction in which the offer and sale of the
Shares is to be registered or qualified), he or she will not offer for
sale, sell, contract to sell, assign, pledge, transfer, grant any option
for the sale of, or otherwise dispose of, directly or indirect ly, any
securities of the Company (including without limitation any shares of
Common Stock), owned by him or her as of the Closing Date, whether upon
exercise of warrants, stock options or otherwise, without Nichols, Safina,
Xxxxxx & Co., Inc.'s prior written consent (the "Lock- up Letter").
(l) The Company has reserved and shall continue to reserve and keep available
the maximum number of shares of its authorized but unissued Common Stock
and other securities for issuance upon exercise of the Underwriters'
Warrant.
(m) For a period of five years after the date of this Agreement, the Company
shall:
(1) retain Xxxxxx Xxxxxxxx LLP or another nationally recognized
firm of independent public accountants, as its auditors, and
at its own expense, shall cause such indepen dent certified
public accountants to review the Company's financial
statements for each of the first three fiscal quarters of each
fiscal year prior to the announcement of quarterly financial
information, the filing of the Company's Form 10-QSB quarterly
reports and the mailing of quarterly financial information to
its stockholders;
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(2) cause the Company's Board of Directors to meet not less
frequently than quarterly, upon proper notice, and cause an
agenda and minutes of the preceding meeting to be distributed
to directors prior to each such meeting;
(3) distribute to its security holders, within 120 days after the
end of each fiscal year, an annual report (containing
certified financial statements of the Company) prepared in
accordance with those required under Rule 14a-3(b) of
Regulation 14A promulgated by the Commission under the
Securities Exchange Act of 1934, as amended; and
(4) appoint a transfer agent for the Common Stock, in each case
acceptable to you.
(n) For a period of five years after the date of this Agreement, the
Company shall furnish you, free of charge, with the following:
(1) within 90 days after the end of each fiscal year, financial
statements for the Company certified by the independent
certified public accountants referred to in Section 4(m)(1)
above, including a balance sheet, statement of operations,
statement of stockholders' equity and statement of cash flows,
for the Company, with supporting schedules, prepared in
accordance with generally accepted accounting principles, as
at the end of such fiscal year and for the twelve months then
ended, accompanied by a copy of the certificate or report
thereon of such independent certified public accountants;
(2) (x) for so long as the Company is a reporting company under
any of Sections 12(b), 12(g) or 15(d) of the Securities
Exchange Act, as amended, and the rules and regulations of the
Commission promulgated thereunder (collectively, the "Exchange
Act"), promptly after filing with the Commission, copies of
all reports and proxy soliciting material which the Company is
required to file under the Exchange Act, or (y) at such times
as the Company is not a reporting company under the aforesaid
provisions of the Exchange Act, as soon as practicable after
the end of each of the first three fiscal quarters of each
fiscal year, financial statements of the Company, including a
balance sheet, statement of operations, statement of
stockholders' equity and statement of cash flows as at the end
of, or for each such fiscal quarter and the comparable period
of the preceding year, which statements need not be audited;
(3) as soon as practicable after they have first been distributed
to stockholders of the Company, copies of each annual and
interim financial or other report or communica tion sent by
the Company to its stockholders (except to the extent
duplicative of information furnished pursuant to any other
clause of this Section 4(n));
(4) as soon as practicable following release or other
dissemination, copies of every press release and every
material news item and article in respect of the Company or
its affairs released or otherwise disseminated by the Company;
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(5) promptly following receipt thereof, copies of the Company's
daily transfer sheets prepared by the Company's transfer agent
and a list of stockholders; and
(6) such additional documents and information with respect to the
Company and its affairs, if any, as you may from time to time
reasonably request.
(o) [Intentionally deleted].
(p) On or prior to the Effective Date, the Company will have accomplished the
quotation of the Shares on the NASDAQ SmallCap Market, subject only to
notice of issuance and the registra tion of such securities under the
Exchange Act. For a period of five years from the date of this Agreement,
the Company agrees, at its sole cost and expense, to take all necessary and
appropriate action such that its securities continue to be quoted on
NASDAQ, provided that the Company otherwise complies with the prevailing
requirements of NASDAQ.
(q) For a period of two years after the date of this Agreement, the Company
will not seek to amend its certificate of incorporation or file a
certificate of designation to authorize the issuance of any other class or
series of its capital stock, including, without limitation, any preferred
stock, without your prior written consent.
(r) The Company agrees, at its own cost and expense, to deliver to you and your
counsel, within a reasonable period after the Optional Closing Date, or the
expiration of the period in which you may exercise the over-allotment
option, five bound volumes containing copies of all documents and
correspondence filed with, or received from, the Commission, NASDAQ and the
NASDR relating to the offering of the Shares and the closing thereof,
including related matters.
(s) The Company will make generally available to its security holders and
deliver to you as soon as it is practicable to do so (but in no event later
than the 45th day after the end of the twelve- month period beginning at
end of the fiscal quarter of the Company during which the Registration
Statement becomes effective, or, if the Registration Statement becomes
effective during the Company's last fiscal quarter, the 90th day after the
end of such twelve-month period), an earnings statement of the Company
(which need not be audited) covering a period of at least twelve
consecutive months commencing after the effective date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the
Act.
(t) The Company will, promptly upon your request, prepare and file with the
Commission any amendments or supplements to the Registration Statement, any
Preliminary Prospectus or the Prospectus and take any other action, which
in the reasonable opinion of Law Offices of Xxxxx X. Xxxxxxx, counsel to
you, may be reasonably necessary or advisable in connection with the
distribution of the Shares, and will cause the same to become effective as
promptly as possible.
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(u) The Company will furnish to you as early as practicable prior to the
Closing Date and any Optional Closing Date, as the case may be, but no less
than two full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company which have been
reviewed by the Company's independent certified public accountants, as
stated in their letters to be furnished pursuant to Section 7(e) hereof.
(v) The Company will apply the net proceeds from the issuance and sale of the
Shares for the purposes and in the manner set forth under the caption "Use
of Proceeds" in the Prospectus, and will file on a timely basis such
reports with the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required pursuant to Rule
463 under the Act. The Company will operate its business in such a manner
and, pending application of the net proceeds of the offering for the
purposes and in the manner set forth under the caption "Use of Proceeds" in
the Prospectus, will invest such net proceeds in certain types of
securities so as not to become an "investment company" as such term is
defined under the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(w) The Company has filed a registration statement on Form 8-A covering the
Shares pursuant to Section 12(b) of the Exchange Act and will use its best
efforts to cause said registration statement to become effective on the
Effective Date. The Company will comply with all reg istration, filing and
reporting requirements of the Exchange Act, which may from time to time be
applicable to the Company. The Company shall comply with the provisions of
all under takings contained in the Registration Statement.
(x) Prior to the Closing Date or any Optional Closing Date, as the case may be,
the Company shall neither issue any press release or other communication,
directly or indirectly, nor hold any press conference with respect to the
offering of the Shares, the Company or its business, results of operations,
condition (financial or otherwise), property, assets, liabilities or
prospects of the Company, without your prior written consent.
(y) For a period of ninety (90) days after the date hereof, the Company will
not, directly or indirectly, take any action designed, or which will
constitute or which might reasonably be expected to cause or result in,
stabilization or manipulation of the market price of the Shares, or the
facilitation of the sale or resale of the Shares.
(aa) The Company maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset accountability; (iii) access to cash and cash equivalents
is per mitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for cash and cash
equivalents is compared with the existing cash and cash equivalents at
reasonable intervals and appropriate action is taken with respect to any
differences.
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(bb) There are no business relationships or related party transactions of the
nature described in Item 404 of Regulation S-B of the Rules and Regulations
involving the Company and any person referred to in Items 401 or 404,
except as required to be described in the Prospectus and as so described.
(cc) The Company will not grant any person or entity registration rights with
respect to any of its securities, except such rights as are subordinate to
the registration rights contained in the Underwriters' Warrant and are
exercisable no earlier than six months after the securities to be
registered upon exercise of such registration rights have been offered for
sale pursuant to an effective registration statement under the Act and
registered or qualified for sale under the Blue Sky or state securities
law, rules or regulations of the jurisdictions in which such securities are
to be offered for sale.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY: The Company
represents and warrants to you that:
(a) When the Registration Statement becomes effective, and at all times
subsequent thereto to and including the Closing Date and each Optional
Closing Date, and during such longer period as the Prospectus may be
required to be delivered in connection with sales by you or any dealer, and
during such longer period until any post-effective amendment thereto shall
become effective, the Registration Statement (and any post-effective
amendment thereto) and the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment or supplement to
the Registration Statement or the Prospectus) will contain all statements
which are required to be stated therein in accordance with the Act, will
comply with the Act, and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and no
event will have occurred which should have been set forth in an amendment
or supplement to the Registration Statement or the Prospectus which has not
then been set forth in such an amendment or supplement; if a Rule 430A
Prospectus is included in the Registration Statement at the time it becomes
effective, the Prospectus filed pursuant to Rules 430A and 424(b) (1) or
(4) will contain all Rule 430A Information and all
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statements which are required to be stated therein in accordance with the
Act, will comply with the Act, and will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and
each Preliminary Prospectus, as of the date filed with the Commission, did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; except that no representation or warranty is made in
this Section 5(A)(a) with respect to statements or omissions made in
reliance upon and in conformity with written information furnished to the
Company as stated in Section 6(b) with respect to you expressly for
inclusion in any Preliminary Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto.
(b) Neither the Commission nor the Blue Sky or securities authorities of any
jurisdiction has issued an order suspending the effectiveness of the
Registration Statement, preventing or suspending the use of any Preliminary
Prospectus, the Prospectus, the Registration Statement, or any amendment or
supplement thereto, refusing to permit the effectiveness of the
Registration Statement, or suspending the registration or qualification of
the Shares, nor has the Commission or any of such authorities instituted or
threatened to institute any proceedings with respect to such an order.
(c) The Company is a corporation duly incorporated and validly existing in good
standing under the laws of Delaware, its jurisdiction of incorporation. The
Company has full corporate power and authority and has obtained all
necessary consents, authorizations, approvals, orders, licenses,
certificates, declarations and permits of and from, and have made all
required filings with, all federal, state, local and other governmental
authorities and all courts and other tribunals, to own, lease, license and
use its properties and assets and to carry on its business in the manner
described in the Prospectus. All such consents, authorizations, approvals,
orders, licenses, certificates, declarations, permits and filings are in
full force and effect and the Company is in all material respects complying
therewith. The Company is duly registered or qualified to do business as a
foreign corporation and is in good standing in each other jurisdiction in
which their ownership, leasing, licensing, or use of property and assets or
the conduct of its business requires such registration or qualification.
(d) The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, $.01 par value, of which 500,000 shares are outstanding,
and 5,000,000 shares of Preferred Stock, $.001 par value, of which
1,000,000 shares of Series B Convertible Preferred Stock are outstanding.
The Company does not have any subsidiaries or own any capital stock or
equity interest in any other corporation, partnership, limited liability
company or other entity. Each outstanding share of Common Stock, are
validly authorized, validly issued, fully paid, and nonassessable without
any personal liability attaching to the ownership thereof, and has not been
issued and is not owned or held in violation of any preemptive rights of
stockholders. There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the issuance of, any
share of
12
capital stock of the Company or any security or other instrument which by
its terms is convertible into, exercisable for, or exchangeable for capital
stock of the Company, except as disclosed in the Prospectus. There is
outstanding no security or other instrument which by its terms is
convertible into or exchangeable for capital stock of the Company.
(e) The financial statements of the Company included in the Registration
Statement and the Prospectus fairly present the financial position, the
results of operations and the other information purported to be shown
therein at the respective dates and for the respective periods to which
they apply. Such financial statements have been prepared in accordance with
generally accepted accounting principles and are prepared in accordance
with the books and records of the Company. The accountants whose reports on
the audited financial statements are filed with the Commission as a part of
the Registration Statement are, and during the periods covered by their
report(s) included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within
the meaning of the Act. No other financial statements are required by Form
SB-2 or otherwise to be included in the Registration Statement or the
Prospectus. Except as disclosed in the Prospectus, there has at no time
been a material adverse change in the condition (financial or otherwise),
results of operations, business, property, assets, liabilities or prospects
of the Company from the latest information set forth in the Registration
Statement or the Prospectus.
(f) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or
in prospect (or any basis therefor known to the Company) with respect to or
affecting the Company, its operation, business, property or assets, except
as disclosed in the Prospectus or such as individually or in the aggregate
do not now have and are not expected to have a material adverse effect upon
the operations, businesses, property, assets, condition (financial or
otherwise) or prospects of the Company. The Company is not in violation of,
or in default with respect to, any law, rule, regulation, order, judgment,
or decree, except as disclosed in the Prospectus or such as individually or
in the aggregate do not now have and are not expected to have a material
adverse effect upon the operations, businesses, property, assets, condition
(financial or otherwise) or prospects of the Company; nor is the Company
required to take any action in order to avoid any such violation or
default.
(g) The Company has good and marketable title in fee simple absolute to all
real properties and good title to all other properties and assets which the
Prospectus indicates are owned by it, free and clear of all liens, security
interests, pledges, charges, mortgages and other encumbrances (except as
may be required to be and are disclosed in the Prospectus). The properties
held under lease by the Company are held by it under valid and enforceable
leases and the interests of the Company in such leases are free and clear
of all liens, encumbrances and defects, except as disclosed in the
Prospectus, and the Company is in full compliance with all material terms
and conditions thereunder and such leases are in full force and effect. No
real property owned, leased, licensed or used by the Company is situated in
an area which is, or to the knowledge of the Company, will be, subject to
zoning, use or building code
13
restrictions which would prohibit (and no state of facts relating to the
actions or inaction of another person or entity or his or its ownership,
leasing, licensing, or use of any real or personal property exists or will
exist which would prevent) the continued effective ownership, leasing,
licensing, or use of such real property in the business of the Company as
presently conducted or as the Prospectus indicates any of them contemplate
conducting, except as disclosed in the Prospectus).
(h) Neither the Company nor any other party is now or is expected by the
Company to be in violation or breach of, or in default with respect to
complying with, any material provision of any indenture, mortgage, deed of
trust, debenture, note or other evidence of indebtedness, contract,
agreement, instrument, lease or license, or arrangement or understanding
which is material to the Company, and each such indenture, mortgage, deed
of trust, debenture, note or other evidence of indebtedness, contract,
agreement, instrument, lease or license is in full force and is the legal,
valid and binding obligation of the Company, and to the knowledge of the
Company, of the other contracting party and is enforceable as to them in
accordance with its terms. The Company enjoys peaceful and undisturbed
possession under all leases and licenses under which they are operating.
The Company is not a party to or bound by any contract, agreement,
instrument, lease, license, arrangement or understanding, or subject to any
charter or other restriction, which has had or is expected in the future to
have a material adverse effect on the condition (financial or otherwise),
results of operations, businesses, property, assets or liabilities of the
Company. The Company is not in violation or breach of, or in default with
respect to, any term of its Certificate of Incorporation or By-laws, in
each case as amended to date.
(i) The Company does not own or have any licensed rights to, in or under any
patents, patent applications, trademarks, service marks, trademark or
service xxxx applications, trade names, service marks, copyrights,
technology, know-how or other intangible properties or assets (all of the
foregoing being herein called "Intangibles") that are material to the
business of the Company, except to the extent disclosed in the Prospectus.
There is no right under any Intan gibles of the Company necessary to the
business of the Company as presently conducted or as proposed to be
conducted as indicated in the Prospectus, except as may be disclosed in the
Prospectus. The Company has not received notice of infringement with
respect to asserted Intangibles of others, except as disclosed in the
Prospectus. To the knowledge of the Company, there is no infringement by
others of Intangibles of the Company. To the knowledge of the Company,
there is no Intangible of others which has had or may in the future have a
materially adverse effect on the condition (financial or otherwise),
results of operations, businesses, property, assets, liabilities or
prospects of the Company.
(j) Neither the Company, any director or officer of the Company, or to the best
knowledge of the Company, any agent, employee, or other person authorized
to act on behalf of the Company have, directly or indirectly: used any
corporate funds of the Company 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 of the Company;
14
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, as relates to the business of the Company or its predecessor in
interest; or made any bribe, rebate, payoff, influence payment, kickback,
or other unlawful payment in connection with the business of the Company or
its predecessor in interest.
(k) Any contract, agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has been properly
described therein. Any contract, agreement, instrument, lease or license
required to be filed as an exhibit to the Registration Statement has been
filed with the Commission as an exhibit to or has been incorporated as an
exhibit by reference into the Registration Statement.
(l) The Company has all requisite corporate power and authority to execute,
deliver and perform under the terms and conditions of this Agreement and
the Underwriters' Warrant. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery and
performance by the Company of this Agreement and the Underwriters' Warrant.
This Agreement has been duly authorized, executed and delivered by the
Company, is a legal, valid, and binding agreement of the Company, and is
enforceable as to the Company in accordance with its terms. The
Underwriters' Warrant has been duly authorized by the Company and, when
executed and delivered by the Company, assuming the due execution and
delivery thereof by the other parties thereto, will be a legal, valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms. No consent, authorization, approval, order,
license, certificate, declaration or permit of or from, or filing with, any
governmental or regulatory authority, agent, board or other body is
required for the issue and sale of the Shares by the Company and the
execution, delivery or performance by the Company of this Agreement or the
Underwriters' Warrant (except filings with and orders of the Commission
pursuant to the Act which have been or will be made or obtained prior to
the Closing Date, and such filings, consents or permits as are required
under Blue Sky or securities laws in connection with the transactions
contemplated by this Agreement). No consent of any party to any contract,
agreement, instrument, lease, license, arrangement or understanding to
which the Company is a party, or to which any of their properties or assets
are subject, is required for the execution, delivery or performance of this
Agreement or the Underwriters' Warrant; and the execution, delivery and
performance of this Agreement and the Underwriters' Warrant will not
violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract, agreement, instrument,
lease, license, arrangement or understanding, result in the creation or
imposition of, any lien, security interest, pledge, charge, or other
encumbrance upon any of the property or assets of the Company pursuant to
the terms of any indenture, mortgage, deed of trust, loan or credit
agreement, lease or other agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the property or
assets of the Company is subject or violate or result in a breach of any
term of the Certificate of Incorporation or By-laws of the Company, or
violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment or decree binding on the Company or to which its
operations, business, properties or assets are subject.
15
(m) The Shares are validly authorized, and when issued, paid for and delivered
in accordance with this Agreement, will be validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive rights of
stockholders. You will receive good title to the Shares and the
Underwriters' Warrant purchased by it, upon payment of the purchase price
therefor in accordance with the provisions of this Agreement, free and
clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements and voting trusts (collectively, "Encumbrances").
(n) The Underwriters' Warrant Shares are validly authorized and reserved for
issuance and, when issued, paid for and delivered upon exercise of the
Underwriters' Warrant, in accordance with the provisions of the
Underwriters' Warrant will be validly issued, fully paid and non-assessable
and will not be issued in violation of any preemptive rights of
stockholders; and the holders of the Underwriters' Warrant Shares will
receive good title to them, free and clear of all Encumbrances.
(o) The Shares and the Underwriters' Warrant conform to all statements relating
thereto contained in the Registration Statement and the Prospectus.
(p) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as otherwise may be
stated therein, (i) the Company has not entered into any transaction or
incurred any liability or obligation, contingent or otherwise, which is
material to the Company, except in the ordinary course of business, (ii)
there has not been any change in the outstanding capital stock of the
Company, or any issuance of options, warrants or rights to purchase the
capital stock of the Company, or any material increase in the long-term
debt of the Company, or any material adverse change in the business,
condition (financial or otherwise) or results of operations of the Company,
(iii) no loss or damage (whether or not insured) to the properties of the
Company has been sustained which is material to the Company, (iv) the
Company has not paid or declared any dividend or other distribution with
respect to its capital stock, and (v) there has not been any change,
contingent or otherwise, in the direct or indirect control of the Company
nor, to the best knowledge of the Company, do there exist any circumstances
which would likely result in such a change.
(q) Neither the Company nor any officers or directors of the Company or
Affiliates (as defined in Rule 405 of the Rules and Regulations), have
taken or will take, directly or indirectly, prior to the termination of the
offering contemplated by this Agreement, any action designed to stabilize
or manipulate the price of any security of the Company, or which has caused
or resulted in, or which might in the future reasonably be expected to
cause or result in, stabi lization or manipulation of the price of any
security of the Company, to facilitate the sale or resale of any of the
Shares.
(r) The Company has not incurred, directly or indirectly, any liability for a
fee, commission or other compensation on account of the employment of a
broker or finder in connection with
16
the offering of the Shares contemplated by this Agreement, except as
contemplated by this Agreement or as disclosed in the Registration
Statement.
(s) The Company is not, and does not intend to conduct its business in a manner
in which it would become, an "investment company" as defined in Section
3(a) of the Investment Company Act.
(t) The Company has obtained, or prior to the Closing Date will obtain a
Lock-up Letter, from each of its officers and directors who owns shares of
Common Stock.
(u) No person or entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the filing or
effectiveness of the Registration Statement.
(v) The Company has and will continue to (i) adequately insure its properties
against loss or damage by fire, (ii) maintain adequate insurance against
liability for negligence and (iii) maintain such other insurance as is
usually maintained by companies engaged in the same or similar businesses,
including without limitation, product liability insurance.
(w) The Company has filed all federal, state and local tax returns required to
be filed (or have obtained extensions therefor) and have paid all taxes
shown on such returns and all assessments received by it to the extent that
payment has become due. The Company has made adequate accruals for all
taxes which may be owed by it but has not been paid.
(y) Xxxxxx Xxxxxxxx LLP, who have certified certain financial statements of the
Company, are independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
17
6. INDEMNIFICATION AND CONTRIBUTION:
(a) The Company agrees to indemnify and hold harmless you, your
officers, directors, partners, employees, agents and counsel, and each person,
if any, who controls you within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (which shall include, for all purposes of this Section 6,
but not be limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation) as and when incurred arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained in (1) any Preliminary Prospectus, the
Rule 430A Prospectus, the Registration
18
Statement, or the Prospectus (as from time to time amended and supplemented), or
any amendment or supplement thereto, or (2) any application or other document or
communication (in this Section 6 collectively called an "application") executed
by or on behalf of the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify the
Shares under the Blue Sky or securities laws thereof (or the rules and
regulations promulgated thereunder) or filed with the Commission or any
securities exchange or automated quotation system; or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company as stated in Section 6(b) by you for inclusion in any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, of the
Prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or (ii) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement. The foregoing agreement to
indemnify shall be in addition to any liability the Company may otherwise have,
including liabilities arising under this Agreement.
If any action is brought against you or any of your officers,
directors, partners, employees, agents or counsel, or any of your controlling
persons (each, an "indemnified party") in respect of which indemnity may be
sought against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the institution
of such action (but the failure so to notify shall not relieve the Company from
any liability it may have pursuant to this Section 6(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(satisfactory to such indemnified party or parties) and payment of expenses.
Such indemnified party or parties shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such indemnified party or parties, unless the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly employed
counsel satisfactory to such indemnified party or parties to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available to
it or them or to other indemnified parties which are different from or
additional to those available to the Company, in any of which events such fees
and expenses shall be borne by the Company and the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties. Anything in this paragraph to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action effected
without its written consent. The Company agrees promptly to notify you of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of the Shares, any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto, or any application.
19
(b) You agree to indemnify and hold harmless the Company, each director
of the Company, each officer of the Company who shall have signed the
Registration Statement, and each other person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to you
in Section 6(a), but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Rule 430A Prospectus, the Registration
Statement, or the Prospectus (as from time to time amended and supplemented), or
any amendment or supplement thereto, or in any application, in reliance upon and
in conformity with written information furnished to the Company by you expressly
for inclusion in any Preliminary Prospectus, the Rule 430A Prospectus, the
Registration Statement, or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be. For all purposes of this
Agreement, the public offering price, the amounts of the selling concession and
reallowance set forth in the Prospectus and the information in the third
paragraph under "Underwriting" constitute the only information furnished in
writing by or on your behalf expressly for inclusion in any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement or the
Prospectus (as from time to time amended or supplemented), or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based
upon any Preliminary Prospectus, the Rule 430A Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or any
application, and in respect of which indemnity may be sought against you
pursuant to this Section 6(b), you shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of
Section 6(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 6(a) or
6(b) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly provides
for indemnification in
20
such case, or (ii) any indemnified or indemnifying party seeks contribution
under the Act, the Exchange Act, or otherwise, then the Company (including for
this purpose any contribution made by or on behalf of any director of the
Company, any officer of the Company who signed the Registration Statement, and
any controlling person of the Company), as one entity, and you, as a second
entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, so that you are
responsible for the proportion thereof equal to the percentage which the
aggregate underwriting discount set forth on the cover page of the Prospectus
represents of the initial public offering price of the Shares set forth on the
cover page of the Prospectus and the Company is responsible for the remaining
portion, in proportion to the net proceeds from the offering received by them;
provided, however, that if applicable law does not permit such allocation, then
other relevant equitable considerations such as the relative fault of the
Company, Xxx and Xxx and you in the aggregate in connection with the facts which
resulted in such losses, liabilities, claims, damages and expenses shall also be
considered. The relative fault, in the case of an untrue statement, alleged
untrue statement, omission, or alleged omission, shall be determined by, among
other things, whether such statement, alleged statement, omission, or alleged
omission relates to information supplied by the Company or you, and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement, alleged statement, omission or alleged omission. The
Company and you agree that it would be unjust and inequitable if the respective
obligations of the Company and you for contribution were determined by pro rata
or per capita allocation of the aggregate losses, liabilities, claims, damages
and expenses or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 6(d). No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 6(d), each person, if
any, who controls you within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company, shall have the same
rights to contribution as the Company, subject in each case to the provisions of
this Section 6(d). Anything in this Section 6(d) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 6(d) is intended to supersede any right to contribution under the Act,
the Exchange Act, or otherwise.
7. CONDITIONS OF YOUR OBLIGATIONS: Your obligations hereunder are
subject to the continuing accuracy of the representations and warranties of the
Company contained herein and in each certificate and document contemplated
under this Agreement to be delivered to you, as of the date hereof, as of the
Closing Date, and each Optional Closing Date, as the case may be, to the
performance by the Company of its obligations hereunder, and to the following
additional conditions:
(a) Notification that the Registration Statement has become effective shall be
received by you not later than 6:30 p.m., New York City time, on the date
of this Agreement or at such later date and time as shall be consented to
in writing by you. If the Company has elected to rely upon Rule 430A of the
Rules and Regulations, the price of the Shares and any price-related infor
mation previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the Rules and Regulations within the
prescribed time period, and prior to the Closing Date the Company shall
have provided evidence satisfactory to you of such timely filing, or a
post-ef fective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements
of Rule 430A of the Rules and Regulations.
21
(b) The Commission shall not have issued a Stop Order and no Blue Sky or
securities authority of any jurisdiction shall have issued an order
suspending the registration or qualification of the Shares, and no
proceedings for such purpose shall have been instituted or shall be
pending, or to the knowledge of the Company, be threatened or contemplated
by the Commission or the Blue Sky or securities authorities of any such
jurisdiction.
(c) You shall have received an opinion, dated the Closing Date and satisfactory
in form and substance to your counsel from Xxxxxx & Eilen, counsel to the
Company, to the effect that:
(1) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of Delaware, its
jurisdiction of incorporation, with full corporate power and
authority to own its property and conduct its business in the
manner described in the Prospectus. To the knowledge of such
counsel, the Company has obtained all necessary consents,
authorizations, approvals, orders, licenses, certificates,
declarations and permits of and from, and has made all
required filings with, all federal, state, local and other
governmental authorities and all courts and other tribunals,
to own, lease, license and use its properties and assets and
to carry on its business in the manner described in the
Prospectus. The Company is duly registered or qualified to do
business as a foreign corporation and is in good standing in
each other jurisdiction in which the ownership, leasing,
licensing, or use of its property and assets or the conduct of
its business require such registration or qualification.
(2) The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, $.01 par value, of which
500,000 shares are outstanding, and 5,000,000 shares of
Preferred Stock, $.001 par value ("Preferred Stock"), of which
1,000,000 shares of Series B Convertible Preferred Stock are
outstanding. Each outstanding share of Common Stock and
Preferred Stock is validly authorized, validly issued, fully
paid, and nonassessable, with no personal liability attaching
to the ownership thereof, has not been issued and is not owned
or held in violation of any preemptive right of stockholders.
There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the
issuance of, any share of capital stock of the Company or any
security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for capital stock of
the Company, except as disclosed in the Prospectus. There is
outstanding no security or other instrument which by its terms
is convertible into or exchangeable for capital stock of the
Company except for the outstanding shares of Preferred Stock.
22
(3) To the knowledge of such counsel, there is no litigation,
arbitration, claim, governmental or other proceeding (formal
or informal), or investigation pending or threatened, with
respect to the Company or any of its operations, business,
property or assets, except as disclosed in the Prospectus or
such as individually or in the aggregate do not now have and
are not expected to have a material adverse effect on the
operations, business, property, assets or condition (financial
or otherwise) of the Company. The Company is not in violation
of, or in default with respect to, any law, rule or
regulation, or to the knowledge of such counsel, after
reasonable investigation, any order, judgment or decree,
except as disclosed in the Prospectus or such as individually
or in the aggregate do not now have and are not expected to
have a material adverse effect on the operations, businesses,
property, assets or condition (financial or otherwise) of the
Company; nor is the Company required to take any action in
order to avoid any such violation or default.
(4) Except as disclosed in the Prospectus, the Company is not
now in violation or breach of, or in default with respect to
complying with, any material provision of any indenture,
mortgage, deed of trust, debenture, note or other evidence
of indebtedness, contract, agreement, instrument, lease or
license, or arrangement or understanding which is material
to the Company, and each such indenture, mortgage, deed of
trust, debenture, note or other evidence of indebtedness,
contract, agreement, instrument, lease or license is in full
and force and is the legal, valid and binding obligation of
the Company.
(5) The Company is not in violation or breach of, or in default
with respect to, any term of its Certificate of Incorporation
or By-laws, in each case as amended to date.
(6) The Company has all requisite corporate power and authority to
execute, deliver and perform this Agreement and the
Underwriters' Warrant. All necessary corporate proceedings of
the Company have been taken to authorize the execution,
delivery, and performance by the Company of this Agreement and
the Underwriters' Warrant. This Agreement and the
Underwriters' Warrant have been duly authorized, executed and
delivered by the Company, constitute legal, valid, and binding
agreements of the Company, and (subject to applicable
bankruptcy, insolvency, reorganization and other laws
affecting the enforceability of creditors' rights generally,
and the application of equitable principles affecting the
enforceability of remedies in the nature of specific
enforcement, and except as the enforceability of the
indemnification and contribution provisions of this Agreement
and the Underwriters' Warrant may be limited under applicable
securities laws) is enforceable as to the Company in
accordance with its terms. The Underwriters' Warrant has been
duly authorized by the Company and, when executed, issued and
delivered by the Company and paid for by you in accor dance
with the provisions of this Agreement, will be a legal, valid
and binding obligation of the Company, enforceable against the
Company in accordance with their respective terms, except as
may be limited by applicable bankruptcy, insolvency,
registration and other laws affecting the enforceability of
creditors' rights generally
23
and the application of equitable principles affecting the
availability of remedies in the nature of specific
enforcement.
(7) All legally required proceedings in connection with the
authorization, issue and sale of the Shares by the Company in
accordance with the provisions of this Agreement have been
taken, and no consent, authorization, approval, order,
license, certificate, declaration or permit of or from, or
filing with, any governmental or regulatory authority, agency,
board, bureau or other body or is required for the execution,
deliv ery or performance by the Company of this Agreement and
the Underwriters' Warrant (except filings with and orders of
the Commission pursuant to the Act which have been made or
received and matters under Blue Sky or state securities laws,
rules or regulations, as to which such counsel need not
express an opinion).
(8) No consent of any party to any material contract, agreement,
instrument, lease or license, or arrangement or understanding
known to such counsel, after due inquiry, to which the Company
is a party, or to which any of the property or assets of the
Company is subject, is required for the execution, delivery or
performance of this Agreement or the Underwriters' Warrant;
and the execution, delivery and performance of this Agreement
and the Underwriters' Warrant will not violate, result in a
breach of, conflict with, or (with or without the giving of
notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract,
agreement, instrument, lease, license, arrangement or
understanding, result in the creation or imposition of any
lien, security interest, pledge, charge or other encumbrance
upon any of the property or assets of the Company pursuant to
the terms of any indenture, mortgage, deed of trust, loan or
credit agreement, lease or other agreement or instrument to
which the Company is a party or by which the Company is bound
or to which any of the property or assets of the Company is
subject, known to such counsel, or violate or result in a
breach of any term of the Certificate of Incorporation or
By-laws of the Company, or violate, result in a breach of, or
conflict with any law, rule, regulation, order, judgment or
decree binding on the Company or to which the operations,
business, property or assets of the Company are subject to.
(9) The Shares are validly authorized. Upon payment of the
purchase price thereunder in accordance with the provisions of
this Agreement, the Underwriters' Warrant will be duly
delivered. The Shares, when issued, paid for and delivered in
accordance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable, without any
personal liability attaching to the ownership thereof, and
will not be issued in violation of any preemptive rights of
stockholders. Upon payment of the purchase price therefor in
accordance with the provisions of this Agreement, you will
receive good title to the Shares and the Underwriters' Warrant
purchased by it from the Company, free and clear of all
Encumbrances.
24
(10) The Underwriters' Warrant Shares are validly authorized and
have been duly and validly reserved for issuance, and when
issued, paid for and delivered upon exercise of the
Underwriters' Warrant in accordance with the provisions of the
Underwriters' Warrant will be validly authorized, validly
issued, fully paid, and nonassessable, with no personal
liability attaching to the ownership thereof, and will not
have been issued in violation of any preemptive rights of
stockholders, and the holders of the Underwriters' Warrant
Shares will receive good title to them, free and clear of all
Encumbrances.
(11) The Shares and the Underwriters' Warrant Shares conform to all
statements relating thereto contained in the Registration
Statement and the Prospectus.
(12) To the knowledge of such counsel, any contract, agreement,
instrument, lease or license required to be described in the
Registration Statement or the Prospectus has been properly
described therein. To the knowledge of such counsel, any
contract, agreement, instrument, lease, or license required to
be filed as an exhibit to the Registration Statement has been
filed with the Commission as an exhibit to or has been
incorporated as an exhibit by reference into the Registration
Statement.
(13) The Shares are duly authorized for quotation on the NASDAQ
SmallCap Market, subject to notice of issuance.
(14) To the knowledge of such counsel, no person or entity has the
right to require registration of shares of Common Stock or
other securities of the Company because of the filing or
effectiveness of the Registration Statement who has not waived
such right.
(15) The Company is not an "investment company" by reason of its
assets and operations as defined in Section 3(a) of the
Investment Company Act.
(16) None of the shares of Common Stock issued by the Company prior
to the date hereof have been offered and sold by the Company
in violation of the Act or applicable Blue Sky or state
securities laws or rules or regulations. All shares of Common
Stock outstanding as of the date hereof have been duly
authorized and validly issued, and are fully paid and
non-assessable, with no personal liability attaching to the
ownership thereof, and have not been issued in violation of
any preemptive rights of stockhold ers.
(17) The statements in the Prospectus under captions "Business",
"Risk Factors", "Use of Proceeds", "Management" and
"Description of Securities" have been reviewed by such counsel
and insofar as such statements refer to descriptions of
agreements, instruments or leases, summarize the status of
litigation or other proceedings, or the provisions of orders,
judgments or decrees, or constitute statements of law,
descriptions of statutes, rules or regulations, or conclusions
of law, such statements
25
fairly present the information called for and are accurate and
complete in all material respects.
(18) Except for liabilities and obligations incurred in the
ordinary course of business, to the knowledge of such counsel,
after due inquiry, there are no claims (absolute, accrued,
contingent or otherwise), except as disclosed in the
Prospectus or such as individually or in the aggregate do not
have and are not expected to have a material adverse effect
upon the operations, businesses, property, assets or condition
(financial or otherwise) of the Company.
(19) The Registration Statement has become effective under the Act,
and to the knowledge of such counsel, no Stop Order has been
issued and no proceedings for that purpose have been
instituted or threatened.
(20) The Registration Statement, any Rule 430A Prospectus, and the
Prospectus, and any amendment or supplement thereto (except
for the financial statements and the notes and schedules
related thereto, and other financial information and
statistical data contained therein or omitted therefrom, as to
which such counsel need express no opinion), comply as to form
in all material respects with the applicable requirements of
the Act.
(21) Such counsel has participated in the preparation of the
Registration Statement and the Prospectus and any amendments
or supplements thereto, and in the course thereof participated
in conferences with officers and other representatives of the
Company, representatives of the independent certified public
accountants for the Company and your representatives at which
the contents of the Registration Statement and Prospec tus and
related matters were discussed and, although such counsel is
not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus, or any
amendment or supplement thereto, on the basis of the
foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration
Statement or any amendment thereto at the time such
Registration Statement or such amendment became effective or
the Prospectus as of its date or any amendment or supplement
thereto as of its date 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 (it being understood that such counsel need
express no comment with respect to the financial statements,
and the notes and schedules related thereto, and other
financial information and statistical data included in the
Registration Statement or Prospectus).
(22) To the knowledge of such counsel, since the effective date of
the Registration Statement, no event has occurred which should
have been set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not been
set forth in such an amendment or supplement.
26
In rendering such opinion, counsel for the Company may rely (i) as to
matters involving the application of laws other than the laws of the United
States, to the extent counsel for the Company deems proper and to the extent
specified in such opinion, upon an opinion or opinions of local counsel (in form
and substance satisfactory to your counsel) acceptable to your counsel, familiar
with the applicable laws, in which case the opinion of counsel for the Company
shall state that the opinion or opinions of such other counsel are satisfactory
in scope, form and substance to counsel for the Company and that reliance
thereon by counsel for the Company is reasonable; (ii) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company; and (iii) to the extent they deem proper, upon written statements or
certificates of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to your counsel.
27
(d) You shall have received letters addressed to you and dated the date
hereof and the Closing Date from Xxxxxx Xxxxxxxx LLP, independent
certified public accountants for the Company, addressed to you, and in
form and substance satisfactory to you, to the effect that:
(1) Such accountants are independent public accountants as
required by the Act and the rules and regulations of the
Commission thereunder and no information need be supplied with
respect to them in answer to Item 13 of Form SB-2.
(2) In their opinion, the financial statements and related notes
of the Company examined by them, at all dates and for all
periods referred to in their report therein, and included in
the Registration Statement and the Prospectus on their
authority as experts comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations of the Commission
promulgated thereunder.
(3) On the basis of limited procedures not constituting an
audit, including a reading of the latest available unaudited
interim financial statements of the Company and the xxxxx-
cial data and accounting records of the Company, inquiries
of officials of the Com pany and others responsible for
financial and accounting matters, a reading of the minute
books of the Company, including without limitation the
minutes (if any) of meetings or consents in lieu of meetings
of the stockholders and of the Board of Directors (and any
committees thereof) of the Company, and other specified
procedures and inquiries requested by you, if any, nothing
has come to their attention which causes them to believe
that:
(i) except as disclosed in or contemplated by the
Registration Statement and the Prospectus, during the
period from the date of the last audited balance sheet
of the Company included in the Registration Statement
and Prospectus to a specified date not more than five
(5) days prior to the date of such letter, there were
any decreases, as compared with the corresponding
period of the preceding year, in net sales, cost of
goods sold, operating, selling, general and
administrative expenses, earnings from operations, the
total or per share amounts of net earnings, or the
weighted average number of shares outstand ing;
28
(ii) except as disclosed in or contemplated by the
Registration Statement and the Prospectus, during the
period from the date of the last audited balance sheet
of the Company included in the Registration Statement
and Prospectus to a specified date not more than five
(5) days prior to the date of such letter, there has
been any change in the capital stock or other
securities of the Company or any payment or declaration
of any dividend or other distribution in respect
thereof or in exchange therefor, or any increase in the
long-term debt of the Company or any decrease in the
net current assets or net assets of the Company as
compared with the amounts shown on the last audited
balance sheet of the Company, included in the
Registration Statement and the Prospectus (other than
in the ordinary course of business); and
(iii)On the basis of their examinations referred to in
their report and consent included in the Registration
Statement and Prospectus and the indicated procedures
and inquiries referred to above, nothing has come to
their attention which, in their judgment, would cause
them to believe or indicate that the financial
statements and related notes and schedules of the
Company included in the Registration Statement and
Prospectus do not present fairly the financial position
and results of operations of the Company, as at the
dates and for the periods indicated, in conformity with
generally accepted account ing principles applied on a
consistent basis, and are not in all material respects
a fair presentation of the information purported to be
shown.
(4) In addition to their examination referred to in their report
included in the Registration Statement and the Prospectus and
the inquiries and limited procedures referred to in clause
(ii) of this Section 7(e), they have performed other
procedures, not constituting an audit, with respect to certain
numerical data, percentages, dollar amounts and other
financial information appearing in the Registration Statement
and the Prospectus, which are derived from the general
accounting records of the Company, and have compared certain
of such data and information with the accounting records of
the Company and found them to be in agreement.
(5) Such other matters as you may have reasonably requested.
(f) The representations and warranties of the Company in this Agreement
shall be true and correct with the same effect as if made on
and as of the Closing Date and the Company shall have complied
with all agreements and satisfied all conditions on its part
to be performed or satisfied at or prior to the Closing Date.
(g) The Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be
stated therein in accordance with the Act and the Rules and Regulations,
and shall in all material respects conform to the requirements thereof, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto shall contain any untrue statement of a material fact or
omit to state any
29
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(h) There shall have been, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, no material
adverse change in the business, property, condition (financial or
otherwise), results of operations, capital stock, long-term or short-term
debt or general affairs of the Company, except changes which the
Registration Statement and the Prospectus indicate might occur after the
effective date of the Registration Statement, and the Company shall not
have incurred any material liabilities or entered into any agreements not
in the ordinary course of business, except as disclosed in the Registration
Statement and the Prospectus.
(i) No action, suit or proceeding, at law or in equity, shall be pending or
threatened against the Company which would be required to be set forth in
the Registration Statement, and no proceedings shall be pending or
threatened against the Company before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would have a materially adverse
affect on the business, property, condition (financial or otherwise),
results of operations or general affairs of the Company.
(j) The Company shall have furnished to you or caused to be furnished to you at
the Closing Date, certificates of the President and chief financial officer
of the Company and of Xxx and Xxx, respectively, in form and substance
satisfactory to you, as to the accuracy of the representations and
warranties of the Company herein at and as of the Closing Date and as to
the performance by the Company of all its obligations hereunder to be
performed at or prior to the Closing Date and the Company shall have
furnished to you a certificate of the President and chief financial officer
of the Company satisfactory to you as to the matters set forth in Sections
7(a) and (b) above.
(k) The NASDR, upon review of the terms of the public offering of the Shares,
shall have indicated that it has no objections to the underwriting
arrangements pertaining to the sale of the Shares and the participation by
you in the sale of the Shares.
(l) Prior to or on the Closing Date, the Company shall have executed and
delivered the Underwriters' Warrant to you.
(m) Prior to or on the Closing Date, the Company shall have delivered to you
executed copies of the Lock-up Letters.
(n) Subsequent to the date hereof, there shall not have occurred any change, or
any development involving a prospective change, in or affecting
particularly the business or financial affairs of the Company which would
materially and adversely affect the market for the Shares.
30
(o) Subsequent to the date hereof, no executive officer of the Company listed
as such in the Prospectus shall have died, become physically or mentally
disabled, resigned or have been removed or discharged.
(p) The Company shall furnish you with such further certificates and documents
as you or your counsel shall have reasonably requested.
All opinions, certificates, letters and other documents required by
this Section 7 to be delivered to you by the Company will be in compliance
with the provisions hereof only if they are satisfactory in form and substance
to you and your counsel. The Company will furnish you with such conformed copies
of such opinions, certificates, letters and other documents as you shall
reasonably request.
(q) Upon the exercise, in whole or in part, by you of the option to purchase
the Additional Shares, referred to in Section 2 hereof, your obligations to
purchase and pay for the Additional Shares will be subject to the
continuing accuracy of the representations and warranties of the Company
contained herein and in each certificate and document contem plated under
this Agreement to be delivered to you, as of the date hereof and as of each
Optional Closing Date, to the performance by the Company of its obligations
hereunder, and the following additional conditions:
(1) The Registration Statement shall remain effective at the
Optional Closing Date, and no Stop Order shall have been
issued by the Commission and no proceedings for that purpose
shall have been instituted or shall be pending, or to your
knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any rea sonable request on
the part of the Commission for additional information shall
have been complied with to the satisfaction of Law Offices of
Xxxxx X. Xxxxxxx, your counsel.
(2) You shall have received an opinion, dated the Optional Closing
Date and satisfactory in form and substance to counsel to you,
from Xxxxxx & Eilen, counsel to the Company, which opinion
shall be substantially the same in scope and substance as the
opinion furnished to you on the Closing Date pursuant to
Section 7(c) hereof, except that such opinion, where
appropriate, shall cover the Additional Shares.
31
(3) You shall have received a letter in form and substance
satisfactory to you from Xxxxxx Xxxxxxxx LLP, independent
certified public accountants for the Company, dated the
Optional Closing Date and addressed to you confirming the
information in their letter referred to in Section 7(e) hereof
and stating that nothing has come to their attention during
the period from the ending date of their review referred to in
said letter to a date not more than five (5) days prior to the
Optional Closing Date, which would re quire any change in said
letter if it were required to be dated the Optional Closing
Date.
(4) You shall have received a certificate of the President and
chief financial officer of the Company, dated the Optional
Closing Date, in form and substance satisfactory to you,
substantially the same in scope and substance as the
certificate furnished to you on the Closing Date pursuant to
Section 7(j) hereof.
32
8. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective at 9:30 A.M., New York City
time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by you
of the Shares, whichever is earlier. The time of the initial public offering
shall mean the time, after the Registration Statement becomes effective, of the
release by you for publication of the first newspaper advertisement which is
subsequently published relating to the Shares or the time, after the
Registration Statement becomes effective, when the Shares are first released by
you for offering by you or dealers by letter or telegram, whichever shall first
occur. You or the Company, may prevent this Agreement from becoming effective
without liability of any party to any other party, except as noted below in this
Section 8, by giving the notice indicated in Section 8(c) before the time this
Agreement becomes effective.
(b) In addition to the right to terminate this Agreement pursuant to
Section 7 hereof by reason of the Company's failure, refusal or inability
to perform all obligations and satisfy all conditions on their part to be
performed or satisfied hereunder prior to the Closing Date or Optional Closing
Date, as the case may be, you shall have the right to terminate this Agreement
at any time prior to the Closing Date or any Optional Closing Date, as the case
may be, by giving notice to the Company, if the Company shall have sustained a
material loss or material adverse interference with its business or properties
from fire, flood, accident, hurricane, earthquake, theft, sabotage, or other
calamity or malicious act, whether or not covered by insurance, or from any
labor dispute or any court or governmental action, order or decree, of such a
character as to have a material adverse effect with the conduct of the business
and operations of the Company; or if there shall have been a general suspension
of, or a general limitation on prices for, trading in securities on the New York
Stock Exchange, the American Stock Exchange or in the over-the-counter market;
or if a banking moratorium has been declared by a state or federal authority; or
if there shall have been an outbreak of major hostilities between the United
States and any foreign power, or any other insurrection, armed conflict or
national calamity, which in your judgment makes it impracticable or inadvisable
to proceed with the offering, sale or delivery of the Firm Shares or the
Additional Shares, as the case may be.
(c) If you elect to prevent this Agreement from becoming effective as
provided in this Section 8, or to terminate this Agreement pursuant to Section 7
or this Section 8, you shall notify the Company promptly by telephone,
telecopier, telex, or telegram, confirmed by letter. If, as so provided in this
Section 8, the Company elects to prevent this Agreement from becoming effective,
the Company shall notify you promptly by telephone, telecopier, telex, or
telegram, confirmed by letter.
33
(d) Anything in this Agreement to the contrary notwithstanding other
than Section 8(e), if this Agreement shall not become effective by reason of an
election pursuant to this Section 8 or if this Agreement shall terminate or
shall otherwise not be carried out within the time specified herein by reason of
any failure on the part of the Company to perform any covenant or agreement or
satisfy any condition of this Agreement by it to be performed or satisfied, the
sole liability of the Company to you, in addition to the obligations the Company
assumed pursuant to Section 4(g), will be to reimburse you for such
out-of-pocket expenses (including the fees and disbursements of their counsel)
as shall have been incurred by them in connection with this Agreement or the
proposed offer, sale, and delivery of the Shares, and upon demand the Company
agrees to pay promptly the full amount thereof to you.
(e) Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 4(b), 4(g), 6, 10(b) and 10(c) shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
9. SUBSTITUTION OF UNDERWRITERS.
If any one or more of the Underwriters shall fail or refuse to purchase
any of the Shares which it or they have agreed to purchase hereunder, and the
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of Shares, the other Underwriters shall be obligated, severally, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase, in the proportions which the number of Shares which they
have respectively agreed to purchase pursuant to Section 2 hereof bears to the
aggregate number of Shares which all such non-defaulting Underwriters have so
agreed to purchase or in such other proportions as you may specify, provided
that in no event shall the maximum number of Shares which any Underwriter has
become obligated to purchase pursuant to Section 2 hereof be increased pursuant
to this Section 9 by more than one-ninth of such number of Shares, without the
written consent of such Underwriter. If any Underwriter or Underwriters shall
fail or refuse to purchase any Shares and the aggregate number of Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase exceeds one-tenth of the aggregate number of Shares and arrangements
satisfactory to you and the Company for the purchase of such Shares are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company for the
34
purchase or sale of any Shares under this Agreement. In any such case either you
or the Company shall have the right to postpone the Closing Date, but in no
event for longer than five business days, in order that the required changes, if
any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. MISCELLANEOUS: (a) Notices required to be in writing shall be
mailed or delivered (i) to the Company at the Company's office at 0000
Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000, Attention: Xxxxx Xxx, with copies to
Xxxx Xxxxxx, Esq., Xxxxxx & Eilen, Suite 505, 50 Xxxxxxx Xxxxxxxxx Blvd.,
Uniondale, NY 11553 or (ii) to you, at the office of Nichols, Safina, Xxxxxx &
Co., Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxx Xxxxxx,
CEO, with copies to: Xxxxxxx Xxxxx & Co., L.L.C., 0000 Xxxxx Xxxx, Xxxxx, XX
00000 and Xxxxx X. Xxxxxxx, Esq., Law Offices of Xxxxx X. Xxxxxxx, 00 Xxxx 00xx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, and shall be deemed given when received.
Any notice not required to be in writing, including but not limited to notices
under Section 7(a) or 8 hereof, may be made by telex, telecopier or telephone
and shall be deemed given at the time the telex, or telecopied communication is
received or the telephone call is made, but if so made shall be subsequently
confirmed in writing.
(b) The representations, warranties, covenants and agreements of the
Company and the indemnity and contribution agreements, contained in
Sections 4, 5 and 6 of this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of you, the Company or any
of its officers or directors or any controlling persons of you or the Company
and will survive acceptance of and payment for any of the Shares and the
termination of this Agreement.
(c) This Agreement has been and is made solely for the benefit of you
and the Company and the controlling persons, directors and officers
referred to in Section 6 hereof and their respective successors and assigns, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall not
include a purchaser, as such purchaser, of Shares from you.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the
00
Xxxxx xx Xxx Xxxx, applicable to contracts made and to be performed entirely
with such State, without regard to conflict of laws provisions thereof.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and you.
Very truly yours,
GALVESTON'S STEAKHOUSE CORP.
By:________________________________
Xxxxx X. Xxx, President
-----------------------------------
XXXXXXX X. XXX
-----------------------------------
XXXXX X. XXX
Confirmed, as of the date first above mentioned.
XXXXXXX, SAFINA & XXXXXX, INC.
XXXXXXX XXXXX & CO., L.L.C.
BY: XXXXXXX, SAFINA & XXXXXX, INC.
By:___________________________
Xxx Xxxxxx, CEO
36
SCHEDULE I
Underwriting Agreement, dated
Underwriter No. of Firm Shares No. of Addtl. Company Shares
----------------------------------- -------------------- ----------------------------
Nichols, Safina, Xxxxxx & Co., Inc
Xxxxxxx Xxxxx & Co., L.L.C.
Total 1,500,000 shares 125,000 shares
37
Galveston's Steakhouse Corp.
000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Nichols, Safina, Xxxxxx & Co., Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx Xxxxx & Company, L.L.C.
0000 Xxxxx Xxxx
Xxxxx, XX 00000
RE: GALVESTON'S STEAKHOUSE CORP.
COMMON STOCK
Dear Sir or Madam:
The undersigned is the record owner of shares of Common Stock, par
value $.01 per share (the "Common Stock") of Galveston's Steakhouse Corp. (the
"Company"). The undersigned has been advised that the Company intends to effect
a public offering of approximately $8,250,000 of gross proceeds (the "Public
Offering") through Nichols, Safina, Xxxxxx & Co., Inc., and Xxxxxxx Xxxxx &
Company L.L.C. (the "Underwriters"). The undersigned further understands that it
is a condition of the successful completion of the Public Offering that the
undersigned execute and deliver this Letter Agreement. The undersigned hereby
agrees that until two (2) years after the effective date of the Public Offering,
the undersigned will not, without the prior written consent of the Underwriters
or, if required, The Nasdaq Stock Market, offer, pledge, sell, contract to sell,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any shares of Common Stock currently owned by the undersigned
(collectively "Lockup Securities").
The undersigned acknowledges and agrees that the Company will request
that the Company's transfer agent place a stop transfer instruction on all
Lockup Securities of Galveston's Steakhouse Corp.
held by the undersigned, reflecting this agreement.
Dated: ________________________________
---------------------------------------
Signature
---------------------------------------
Print Name and Capacity
Please date, sign exactly as name appears on the records of the Company, and
promptly return. When signing as a guardian, executor, administrator, attorney,
trustee, custodian, or in any other similar capacity, please give full title. If
a corporation, sign in full corporate name by president or other authorized
officer, giving title. If a partnership, sign in partnership name by authorized
person. In the case of joint ownership, each joint owner must sign.
