EXHIBIT 1.1
[FORM OF UNDERWRITING AGREEMENT]
2,000,000 SHARES OF COMMON STOCK
BRUNSWICK TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
February ____, 1997
Xxxxxxxxxx Xxxx & Xxxx Incorporated
Southwest Securities, Inc.
(As Representatives of the
several Underwriters named
on Schedule A hereto)
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Brunswick Technologies, Inc., a Maine corporation (the "Company"), and
North Atlantic Venture Fund, L.P. (the "Selling Stockholder"), hereby confirm
their respective agreements with Xxxxxxxxxx Xxxx & Xxxx Incorporated
("Josephthal"), Southwest Securities, Inc. ("Southwest"), and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters," which
term shall also include any Underwriters substituted as hereinafter provided in
Section 13), for whom Josephthal and Southwest are acting as representatives (in
such capacity, Josephthal and Southwest shall hereinafter be referred to as
"Representatives"), with respect to (i) the sale by the Company and the purchase
by the Underwriters, acting severally and not jointly, of an aggregate of
1,500,000 shares (the "Company Firm Shares"), of the Company's common stock,
$0.0001 par value per share ("Common Stock"), and (ii) the sale by the Selling
Stockholder and the purchase by the Underwriters, acting severally and not
jointly, of an aggregate of 500,000 additional shares of the Common Stock (the
"Selling Stockholder Firm Shares"), in the respective amounts set forth on
Schedule A. The Company Firm
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Shares and the Selling Stockholder Firm Shares are hereinafter referred to
sometimes as the "Firm Shares."
Upon your request, as provided in Section 2(b) of this Agreement, the
Selling Stockholder shall also sell to the Underwriters, acting severally and
not jointly, up to an additional 300,000 Shares of Common Stock for the purpose
of covering over-allotments, if any (the "Option Shares"). The Company also
proposes to issue to and sell to Josephthal warrants (the "Representative's
Warrants") pursuant to a Representative's Warrant Agreement in the form of
Exhibit 1 hereto (the "Representative's Warrant Agreement") for the purchase of
an additional 125,000 shares of Common Stock at an exercise price equal to 120%
of the price of the shares in the Offering (as defined below). Any shares of
Common Stock issuable upon the exercise of the Representative's Warrants are
hereinafter referred to as the "Representative's Shares." The Firm Shares and
the Option Shares are hereinafter sometimes referred to as the "Shares."
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date (as hereinafter defined) and each Option
Closing Date (as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission"), a registration statement, and
amendments thereto, on Form S-l (No. 333-10721), including any related
preliminary prospectus ("Preliminary Prospectus"), and any registration
statements filed under Rule 462 under the Securities Act of 1933, as
amended (the "Act"), for the registration of the Firm Shares and the
Option Shares under the Act, which registration statements and
amendment or amendments have been prepared by the Company in conformity
in all material respects with the requirements of the Act. The Company
will not file any amendment thereto to which the Underwriters shall
have objected in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement on Form S-1, as amended and on file with the Commission on
the date hereof (including the prospectus, financial statements,
schedules, exhibits, and all other documents filed as a part thereof or
incorporated therein including without limitation those documents or
information incorporated by reference therein, and all information
deemed to be a part thereof as of such time pursuant to paragraph (b)
of Rule 430A of the Regulations and any registration statements filed
under Rule 462 under the Act with respect to the Firm Shares or the
Option Shares) is hereinafter called the "Registration Statement," and
the form of prospectus contained in the Registration Statement in the
form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes
hereof, "Rules and Regulations" mean the rules and regulations adopted
by the Commission under either the Act or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as applicable. Each reference
herein to the effective date or effective time of the Registration
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Statement shall be deemed to mean in each case each effective date or
time of the Company's registration statement on Form S-1 (No.
333-10721) and any additional registration statements filed under Rule
462 under the Act with respect to the Firm Shares or the Option Shares.
(b) Neither the Commission nor, to the best of the Company's
knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any of the Preliminary Prospectus,
the Registration Statement or the Prospectus or any part of any thereof
and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been
instituted or are pending or, to the best of the Company's knowledge,
threatened. Each of the Preliminary Prospectus, the Registration
Statement and the Prospectus at the time of filing thereof conformed
with the requirements of the Act and the Rules and Regulations, and
none of the Preliminary Prospectus, the Registration Statement or the
Prospectus at the time of filing thereof 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, in light of
the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements made
in reliance upon and in conformity with written information furnished
to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus,
Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option
Closing Date, if any, and during such longer period as the Prospectus
may be required to be delivered in connection with sales by the
Underwriters or a dealer, each of the Registration Statement and the
Prospectus will contain all statements that are required to be stated
therein in accordance with the Act and the Rules and Regulations, and
will conform to the requirements of the Act and the Rules and
Regulations; neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, will contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided,
however, that this representation and warranty does not apply to
statements made or statements omitted in reliance upon and in
conformity with information furnished to the Company in writing by or
on behalf of any Underwriter expressly for use in the Preliminary
Prospectus, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Maine. Except as set forth in the Prospectus, the Company does not
own an interest in any corporation,
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partnership, trust, joint venture or other business entity. The Company
is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification or licensing,
except for jurisdictions where the failure to so file would not have a
Material Adverse Effect (as defined below) upon the Company. The
Company has all requisite corporate power and authority, and has
obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including without
limitation those having jurisdiction over environmental or similar
matters) (collectively, "Permits"), to own or lease its properties and
conduct its business as described in the Prospectus, except where the
failure to obtain any such Permit would not have a Material Adverse
Effect upon the Company; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; and the Company has not received
any notice of proceedings relating to the revocation or modification of
any such authorization, approval, order, license, certificate,
franchise or permit which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, could have a Material
Adverse Effect upon the Company. The disclosures in the Registration
Statement concerning the effects of federal, state, local and foreign
laws, rules and regulations on the Company's business as currently
conducted and as contemplated are correct and do not omit to state any
material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made. As
used herein, "Material Adverse Effect" means any effect on the Company
that, individually or in the aggregate, materially and adversely
affects the business condition (financial or otherwise), operations,
results of operations, earnings, assets, position, prospects,
properties or value of the Company.
(e) The Company has, as of the date specified therein, a duly
authorized, issued and outstanding capitalization as set forth in the
Prospectus under "Capitalization" and "Description of Securities" and
will have the adjusted capitalization set forth therein on the Closing
Date and each Option Closing Date, if any, based upon the assumptions
set forth therein, and the Company is not a party to or bound by any
instrument, agreement, or other arrangement providing for it to issue
any capital stock, warrants, options or other securities, or any rights
with respect thereto, except for this Agreement, the Representative's
Warrant Agreement and as described in the Prospectus. The Selling
Stockholder Firm Shares and the Option Shares are duly authorized,
validly issued, fully paid and non-assessable and conform to the
description thereof in the Prospectus. The Company Firm Shares, the
Representative's Warrants and the Representative's Shares and all other
securities issued or issuable by the Company conform, or when issued
and paid for, will conform, in all respects to all statements with
respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have
been duly authorized and
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validly issued and are fully paid and nonassessable and the holders
thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive rights of
any holders of any security of the Company or similar contractual
rights granted by or binding upon the Company. The Selling Stockholder
Firm Shares and the Option Shares are duly authorized, validly issued,
fully paid and non-assessable and conform to the description thereof in
the Prospectus The Firm Shares, the Option Shares, the Representative's
Warrants and the Representative's Shares are not and will not be
subject to any preemptive or other similar rights of any stockholder or
other person, have been duly authorized, and when issued, paid for, and
delivered in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable and will conform to the description
thereof contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the Firm
Shares, the Option Shares, the Representative's Warrants and the
Representative's Shares has been duly and validly taken; and the
certificates representing the Firm Shares, the Representative's
Warrants and the Representative's Shares are or will be in due and
proper form. Upon the issuance and delivery of, and payment for, the
Firm Shares, the Option Shares, the Representative's Warrants and the
Representative's Shares, the Underwriters will acquire good and
marketable title to such Firm Shares, Option Shares, Representative's
Warrants, or Representative's Shares, free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever other than such as may be
created by the Underwriters and provided that the Underwriters purchase
such shares in good faith and without notice of any adverse claim. The
Company has the full power and authority to issue shares of Common
Stock in payment of certain cash dividends payable to the holders of
the Company's outstanding Series AA Convertible Preferred Stock, no par
value, Series BB Convertible Preferred Stock, no par value, Series C
Convertible Preferred Stock, no par value, and Series D Convertible
Preferred Stock, no par value (collectively, the "Series Preferred
Stock"), pursuant to the terms of such Series Preferred Stock, and upon
such issuance the holders of the Series Preferred Stock will have no
further rights to any dividends, declared or undeclared, with respect
to any periods occurring prior to the Closing Date.
(f) The financial statements of the Company, including the
related notes and schedules thereto, included in the Registration
Statement, the Preliminary Prospectus and the Prospectus fairly present
the financial position, income, changes in cash flow, changes in
stockholders' equity, and the results of operations of the Company at
the respective dates and for the respective periods to which they apply
and such financial statements have been prepared in conformity with
generally accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved. The pro forma
financial
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statements and other pro forma financial information (including the
notes thereto) included in the Registration Statement and the
Prospectus (A) present fairly the information shown therein, (B) have
been prepared in accordance with the applicable requirements of Rule
11-02 of Regulation S-X promulgated under the Act and the Exchange Act,
(C) have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, and (D) have
been properly compiled on the bases described therein, and the
assumptions used in the preparation of the pro forma financial
statements and other pro forma financial information and included in
the Registration Statement and the Prospectus are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein. Except as described
in the Prospectus, there has been no adverse change or development
involving a prospective material change in the business, condition
(financial or otherwise), operations, results of operations, earnings,
assets, position, prospects, properties or value of the Company,
whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement
and the Prospectus and the outstanding debt, assets (both tangible and
intangible), and business of the Company conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. The financial information set forth in
the Prospectus under the headings "Summary Financial Data," "Selected
Financial Data," "Capitalization," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," fairly
present, on the basis stated in the Prospectus, the information set
forth therein, and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in
the Prospectus.
(g) The Company (i) has paid all federal, state, local and
foreign taxes that are due and payable, including, without limitation
withholding taxes and amounts payable under Chapters 21 through 24 of
the Internal Revenue Code of 1986, as amended (the "Code"), and has
duly filed all information returns it is required to file pursuant to
the Code, (ii) has established adequate reserves for such taxes that
are not due and payable, and (iii) does not have any tax deficiency or
claims outstanding, proposed, or assessed against it which would have a
Material Adverse Effect.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the
issuance by the Company of the Firm Shares, the Option Shares, the
Representative's Warrants or the Representative's Shares, (ii) the
purchase by the Underwriters of the Firm Shares, the Option Shares, the
Representative's Warrants or the Representative's Shares, (iii) the
consummation by the Company of any of its obligations under this
Agreement or the Representative's Warrant Agreement, or (iv) resales of
the Firm Shares and Option Shares in connection with the distribution
contemplated hereby.
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(i) The Company maintains insurance policies, including
without limitation general liability and property insurance, that
insure the Company and its employees and agents against such losses and
risks as are generally insured against by comparable businesses. The
Company (A) has not failed to give notice or present any insurance
claim with respect to any matter including without limitation the
Company's business, property or employees, under any insurance policy
or surety bond in a due and timely manner, (B) has no disputes or
claims against any underwriters of such insurance policies or surety
bonds and has not failed to pay any premiums due and payable
thereunder, and (C) has not failed to comply with any condition
contained in such insurance policies or surety bonds. There are no
facts or circumstances under any such insurance policy or surety bond
known to the Company that would relieve any insurer of its obligation
to satisfy in full any otherwise valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding
(including without limitation those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or, to
the Company's knowledge, threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the
Company that (i) questions the validity of the capital stock of the
Company, this Agreement, the Representative's Warrant Agreement or any
action taken or to be taken by the Company pursuant to or in connection
with this Agreement, the Representative's Warrant Agreement or the
public offering of the Firm Shares and the Option Shares contemplated
by this Agreement, (ii) is required to be disclosed in the Registration
Statement that is not so disclosed (and such proceedings, if any, as
are summarized in the Registration Statement are accurately summarized
in all respects), or (iii) might have a Material Adverse Effect.
(k) The Company has full legal right, power and authority to
(A) authorize, issue, deliver and sell the Firm Shares, the Option
Shares, the Representative's Warrants and the Representative's Shares,
(B) enter into this Agreement and the Representative's Warrant
Agreement and to consummate the transactions contemplated hereby and
thereby, and (C) issue shares of Common Stock to the holders of the
Series Preferred Stock in payment of accrued cash dividends as
described in the Prospectus; and this Agreement and the
Representative's Warrant Agreement have been duly and properly
authorized, executed and delivered by the Company. This Agreement and
the Representative's Warrant Agreement constitute legal, valid and
binding agreements of the Company enforceable against the Company in
accordance with their terms, except (i) as such enforceability may be
limited or otherwise affected by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar
laws affecting creditors' rights generally, (ii) as such enforceability
of any indemnification or contribution provisions may be limited under
applicable laws or the public policies underlying such laws and (iii)
that the
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remedies of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding may be brought.
None of the Company's issue and sale of the Firm Shares, the Option
Shares and the Representative's Warrants and, upon exercise of the
Representative's Warrants, the Representative's Shares, execution or
delivery of this Agreement and the Representative's Warrant Agreement,
its performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, its issuance of shares of
Common Stock to the holders of the Series Preferred Stock in payment of
accrued cash dividends as described in the Prospectus, or the conduct
of its business as described in the Registration Statement, the
Prospectus and any amendments or supplements thereto, conflicts with or
will conflict with, or results or will result in any breach or
violation of, any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest,
defect, or other restriction or equity of any kind whatsoever upon,
properties or assets (tangible or intangible) of the Company pursuant
to the terms of, (i) the Restated Articles of Incorporation or Third
Restated By-Laws of the Company, each as amended to date, (ii) any
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or
any other agreement or instrument to which the Company is a party or by
which it is bound or to which any of its properties or assets (tangible
or intangible) is or may be subject, or any indebtedness, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body (including without
limitation those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or
any of its activities or properties.
(l) Except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court,
regulatory body, government agency or other body, domestic or foreign,
or any other person or entity, is required for the issuance of the Firm
Shares or the Option Shares pursuant to the Prospectus and the
Registration Statement, the issuance of the Representative's Warrants
and, upon the exercise thereof, the Representative's Shares, the
performance of the Company's obligations under this Agreement and the
Representative's Warrant Agreement, and the transactions contemplated
hereby, including without limitation any waiver of any preemptive,
first refusal, or other rights that any person or entity may have for
the issue and/or sale of any of the Firm Shares or Option Shares,
except such as have been or may be obtained under the Act (including
the filing by the Company of a Form D under the Act with the Commission
with respect to the issuance of the Representative's Warrants) or may
be required under state securities or Blue Sky laws and the National
Association of Securities Dealers, Inc. (the "NASD") in connection with
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the Underwriters' purchase and distribution of the Firm Shares or
Option Shares hereunder.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as
exhibits to the Registration Statement to which the Company is a party
or by which it is bound or to which any of its assets, properties, or
business are subject, have been duly and validly authorized, executed
and delivered by the Company and constitute the legal, valid and
binding agreements of the Company, enforceable against the Company in
accordance with their respective terms. The descriptions in the
Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be shown with
respect thereto by Form S-1 under the Act, and there are no contracts
or other documents that are required by the Act to be described in the
Registration Statement or filed as exhibits to the Registration
Statement that are not described or filed as required, and the exhibits
that have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except
as may otherwise be indicated or contemplated herein or therein, the
Company has not (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into
any transaction other than in the ordinary course of business, or (iii)
declared or paid any dividend or made any other distribution on or in
respect of its capital stock of any class, and there has not been any
change in the capital stock, or any change in the debt (long or short
term) or liabilities (other than in the ordinary course of business,
none of which are individually or in the aggregate, material) or
material change in or affecting the business, condition (financial or
otherwise), operations, results of operations, earnings, assets,
prospects, position, properties or value of the Company.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders agreement, partnership agreement, note,
loan or credit agreement, purchase order or any other agreement or
instrument evidencing an obligation for borrowed money, or any other
material agreement or instrument to which the Company is a party or by
which it is bound or to which any of the property or assets (tangible
or intangible) of the Company is subject or affected, except for such
defaults that would not individually or in the aggregate have a
Material Adverse Effect.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance
with all federal, state, local and foreign laws and regulations
respecting employment and
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employment practices, terms and conditions of employment, and wages and
hours. There are, to the Company's knowledge, no pending investigations
involving the Company by the U.S. Department of Labor, or any other
governmental agency responsible for the enforcement of such federal,
state, local or foreign laws and regulations. There is, to the
Company's knowledge, no unfair labor practice charge or complaint
against the Company pending before the National Labor Relations Board
or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or threatened against or involving the Company or any
predecessor entity, and none has ever occurred. No representation
question exists respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently
being negotiated by the Company. To the Company's knowledge, no
grievance or arbitration proceeding is pending under any expired or
existing collective bargaining agreements of the Company. No labor
dispute with the employees of the Company exists or, to the Company's
knowledge, is imminent.
(q) Except as described in the Prospectus, or has otherwise
been described in writing to the Representatives, the Company does not
maintain, sponsor, or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan,"
or a "multiemployer plan" as such terms are deemed in Sections 3(2),
3(1), and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). Except as
described in the Prospectus, the Company does not maintain or
contribute, (and has not previously maintained or contributed) to a
"defined benefit plan," as defined in Section 3(35) of ERISA. No ERISA
Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975
of the Code, which could subject the Company to any tax penalty on
prohibited transactions and which has not adequately been corrected.
Each ERISA Plan is in compliance with all material reporting,
disclosure, and other requirements of the Code and ERISA as they relate
to any such ERISA Plan. Except as has been described in writing to the
Representatives, determination letters have been received from the
Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. The Company has
never completely or partially withdrawn from a "multiemployer plan."
(r) None of the Company nor any of its employees, directors,
stockholders, partners or affiliates (within the meaning of the Rules
and Regulations) has taken or will take, directly or indirectly, any
action designed to, or that has constituted or might reasonably be
expected to cause or result in (under the Exchange Act or otherwise),
stabilization or manipulation of the price of any security of the
Company, whether to facilitate the sale or resale of the Shares or
otherwise; and the Company shall not take, or permit any such person to
take, any
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such action, provided, however, that no representation is given by the
Company as to actions taken or that may be taken by the Underwriters.
(s) Except as disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names,
copyrights, technology, and know-how, and none of the licenses or
rights to the foregoing, presently owned or held by the Company or used
in or necessary to the conduct of its business as now conducted or
proposed to be conducted (all of the foregoing, collectively,
"Intellectual Properties"), are in dispute or, to the best knowledge of
the Company, are in any conflict with the right of any other person or
entity. The Company (i) owns or has the right to use all Intellectual
Properties free and clear of all liens, charges, claims (to the extent
known to the Company), encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever,
without infringing upon or otherwise acting adversely to the right or
claimed right of any person, corporation or other entity, and (ii) is
not obligated or under any liability whatsoever to make any payment by
way of royalties, fees or otherwise to any owner or licensee of, or
other claimant to, any Intellectual Properties with respect to the use
thereof or in connection with the conduct of its business or otherwise.
(t) The Company owns and has the unrestricted right to use all
trade secrets, know-how (including all unpatented and/or unpatentable
proprietary or confidential information, systems and procedures),
inventions, designs, processes, works of authorship, computer programs
and technical data and information that are material to the
development, manufacture, operation, and sale of all products and
services sold or proposed to be sold by the Company, free and clear of
and without violating any right, lien, or claim (to the extent known to
the Company) of others, including without limitation former employers
of its employees, former and current employers of each member of the
Company's Board of Directors or members of the Company's Board of
Directors. The Company is not aware of any development of similar or
identical trade secrets or technical information by others.
(u) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all of its
Intellectual Properties.
(v) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it free and
clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind
whatsoever, other than (i) those referred to in the Prospectus, (ii)
liens for taxes not yet due and payable and (iii) those listed on
copies of title policies relating to such property which have been
delivered to the Representatives.
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(w) KPMG Peat Marwick LLP, Coopers & Xxxxxxx, L.L.P. and Ernst
& Young LLP, whose reports are filed with the Commission as a part of
the Registration Statement, are independent certified public
accountants as required by the Act and the Rules and Regulations.
(x) Except as described in the Prospectus under
"Underwriting," there are no agreements, understandings, claims,
payments, issuances, or other arrangements, whether oral or written,
for services in the nature of a finder's or origination fee with
respect to the sale of the Firm Shares or the Option Shares, or any
other agreements, understandings, claims, payments, issuances, or other
arrangements with respect to the Company or any of its officers,
directors, stockholders, partners, employees, or affiliates that may
affect the Underwriters' compensation, as determined by the NASD.
Except as has been previously disclosed to the Representatives and the
NASD, no officer, director or stockholder of the Company is a member of
the NASD, an affiliate of the NASD, a person associated with a member
or an associated person of a member within the meaning of Rule 2710 of
the NASD Conduct Rules.
(y) The Common Stock has been approved for listing on the
NASDAQ National Market ("NNM").
(z) Neither the Company nor any of its officers, employees, or
agents nor any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or
agent of a customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality of any
government (domestic or foreign) or any political party or candidate
for office (domestic or foreign) or other person who was, is, or may be
in a position to help or hinder the business of the Company (or assist
the Company in connection with any actual or proposed transaction) that
(a) might subject the Company or any other such person to any damage or
penalty in any civil, criminal, or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might
have had a materially adverse effect on the assets, business or
operations of the Company, or (c) if not continued in the future, might
adversely affect the assets, business, prospects or operations of the
Company. The Company's internal accounting controls are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of
1977, as amended.
(aa) To the Company's knowledge, except as set forth in the
Prospectus, no officer, director or principal stockholder of the
Company, nor any "affiliate" or "associate" (as these terms are defined
in Rule 405 of the Rules and Regulations) of any of the foregoing
persons or entities has or has had, either directly or indirectly, (i)
an interest in any person or entity that (A) furnishes or sells
services or products that are furnished or sold or are proposed to be
furnished or sold by
-13-
the Company, or (B) purchases from or sells or furnishes to the Company
any goods or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound
or affected. Except as set forth in the Prospectus under "Certain
Transactions," there are no existing or proposed agreements,
arrangements, understandings or transactions between or among the
Company and any officer, director or principal stockholder of the
Company, or any partner, affiliate or associate of any of the foregoing
persons or entities.
(bb) The certificate delivered by the Company to the
Underwriters pursuant to Section 8(i) herein shall be deemed a
representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
(cc) Each of the minute books of the Company has been made
available to the Underwriters and such books contain copies of all
minutes of all meetings and actions of the directors, stockholders,
finance committee, compensation committee and any other committee of
the Board of Directors of the Company since the time of its
incorporation, and reflects accurately in all material respects all
transactions referred to in such minutes.
(dd) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or
other convertible or exchangeable securities of the Company have any
right which has not been waived to include any securities issued by the
Company in the Registration Statement or in any registration statement
to be filed by the Company or to require the Company to file a
registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(ee) The Company has, prior to the effective date of the
Registration Statement, purchased term key-man insurance on the lives
of Xxxxxx Xxxxxxx and Xxxxxxx Xxxxx, in the amount of $1,000,000 each,
of which the Company is the sole beneficiary.
(ff) The conversion of all outstanding shares of the Series
Preferred Stock as set forth in the Prospectus will occur automatically
upon the closing of the purchase of the Firm Shares and upon such
closing, without any further action of the Company's Board of Directors
or any shareholders of the Company, every one (1) share of Series
Preferred Stock of the Company will simultaneously convert into one (1)
validly issued, fully paid and nonassessable share of Common Stock.
(gg) The issuance of shares of Common Stock to the holders of
the Series Preferred Stock in payment of accrued cash dividends as
described in the Prospectus has been duly authorized by the Company and
the shareholders of the
-14-
Company in accordance with all agreements, documents, understandings
and instruments affecting the rights, duties, responsibilities,
obligations and/or privileges of holders of Series Preferred Stock or
to which the Company is bound, including without limitation, the
Restated Articles of Incorporation of the Company, including the
Schedules thereto describing the designations, powers, preferences and
rights of the Series Preferred Stock, and the Company's Third Restated
By-laws, each as amended to date.
(hh) The Company has provided Josephthal with true copies of
duly executed, legally binding and enforceable agreements pursuant to
which each of the Company's officers, directors, stockholders and
holders of securities exchangeable or exercisable for, convertible
into, or evidencing any right to purchase or subscribe for, shares of
Common Stock has agreed that, without the prior written consent of
Josephthal, such person or entity will not directly or indirectly offer
to sell, sell, grant any option for the sale of, assign, transfer,
pledge, hypothecate or otherwise encumber or dispose of any legal or
beneficial interest in any shares of Common Stock, any securities
convertible into or exercisable or exchangeable for shares of Common
Stock, or any warrants, options, or other rights to purchase, subscribe
for, or otherwise acquire any shares of Common Stock (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) until after
thirteen (13) months after the effective date of the Registration
Statement (collectively, the "Lock-up Agreements"). On or before the
Closing Date, the Company shall have delivered instructions to the
Transfer Agent authorizing it to place appropriate legends on the
certificates representing the securities subject to the Lock-up
Agreements and to place appropriate stop transfer orders on the
Company's ledgers.
2. Purchase, Sale, and Delivery of the
Shares and the Representative's Warrants.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and
conditions herein set forth, (i) the Company agrees to issue and sell
the Company Firm Shares to the several Underwriters, (ii) the Selling
Stockholder agrees to sell the Selling Stockholder Firm Shares to the
several Underwriters, and (iii) each Underwriter severally and not
jointly, agrees to purchase from the Company and the Selling
Stockholder, at a price of $____ per Share, the respective number of
Firm Shares (to be adjusted by the Representatives to eliminate
Fractional Shares) determined by multiplying the aggregate number of
Firm Shares by a fraction the numerator of which is the aggregate
number of Firm Shares set forth on Schedule A hereto opposite the name
of such Underwriter, and the denominator of which is the aggregate
number of Firm Shares to be purchased by all the Underwriters, and in
the event and to the extent that the Underwriters shall exercise the
election to purchase any Option Shares as provided below, (A) the
Selling Stockholder
-15-
agrees to sell the Option Shares to the several Underwriters, and (B)
each of the Underwriters agrees, severally and not jointly, to purchase
from the Selling Stockholder, at a price of $____ per Share, that
portion of the number of Option Shares as to which such election shall
have been exercised (to be adjusted by the Representatives so as to
eliminate fractional shares) determined by multiplying the aggregate
number of Option Shares so elected to be exercised by a fraction the
numerator of which is the aggregate number of Firm Shares set forth on
Schedule A hereto opposite the name of such Underwriter, and the
denominator of which is the aggregate number of Firm Shares to be
purchased by all the Underwriters.
(b) On the basis of the representations, warranties,
covenants, and agreements herein contained, but subject to the terms
and conditions herein set forth, the Selling Stockholder hereby grants
an option to the Underwriters, severally and not jointly to purchase
all or any part of an additional 300,000 Shares of Common Stock at a
price of $_______ per Share. The option granted hereby will expire 45
days after (i) the date on which the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under
the Rules and Regulations, or (ii) the date of this Agreement if the
Company has elected to rely upon Rule 430A under the Rules and
Regulations and may be exercised in whole or in part from time to time
only for the purpose of covering over-allotments that may be made in
connection with the offering and distribution of the Firm Shares upon
notice by the Underwriters to the Selling Stockholder setting forth the
respective numbers and types of Option Shares as to which the
Underwriters are then exercising the option and the time and date of
payment and delivery for any such Option Shares. Any such time and date
of delivery (an "Option Closing Date") shall be determined by
Josephthal, but shall not be later than seven (7) full business days
after the exercise of said option, nor in any event prior to the
Closing Date, as hereinafter defined, unless otherwise agreed upon by
Josephthal and the Company. Nothing herein contained shall obligate the
Underwriters to make any over-allotments. No Option Shares shall be
delivered unless the Firm Shares shall be simultaneously delivered or
shall theretofore have been delivered as herein provided.
(c) On the bases of the representations, warranties,
covenants, and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company agrees to issue and sell
the Representative's Warrants to Josephthal, and Josephthal agrees to
purchase the Representative's Warrants from the Company, for an
aggregate purchase price of $125.00.
(d) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of
Josephthal at 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
at such other place as shall be agreed upon by Josephthal and the
Company. Such delivery and payment shall be made
-16-
at 10:00 a.m. (New York City time) on ___________, 1997, or at such
other time and date as shall be agreed upon by Josephthal and the
Company, but not less than three (3) nor more than seven (7) full
business days after the effective date of the Registration Statement
(such time and date of payment and delivery being herein called the
"Closing Date"). In addition, in the event that any or all of the
Option Shares are purchased by the Underwriters, payment of the
purchase price for, and delivery of certificates for, such Option
Shares shall be made at the above-mentioned office of Josephthal or at
such other place as shall be agreed upon by Josephthal and the Selling
Stockholder on each Option Closing Date as specified in the notice from
Josephthal to the Selling Stockholder. Delivery of the certificates for
the Firm Shares and the Option Shares, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not
jointly, of the purchase price for the Firm Shares and the Option
Shares, if any, to the order of the Company or the Selling Stockholder,
as applicable, by wire transfer in the amount of the purchase price
therefor in New York Clearing House funds. Certificates for the Firm
Shares and the Option Shares, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriters may
request in writing at least two (2) business days prior to Closing Date
or the relevant Option Closing Date, as the case may be. The
certificates for the Firm Shares and the Option Shares, if any, shall
be made available to the Underwriters at such office or such other
place as the Underwriters may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to
Closing Date or the relevant Option Closing Date, as the case may be.
3. Public Offering of the Firm Shares. As soon after the effective date
of the Registration Statement as Xxxxxxxxxx xxxxx advisable, the Underwriters
shall make a public offering (the "Offering") of the Firm Shares (other than to
residents of or in any jurisdiction in which qualification of the Firm Shares is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. Josephthal may from time to time increase or decrease
the Offering price of the Firm Shares after the distribution thereof has been
completed to such extent as Josephthal, in its sole discretion, deems advisable.
The Underwriters may enter into one or more agreements as the Underwriters, in
each of their sole discretion, deems advisable with one or more broker-dealers
who shall act as dealers in connection with such public offering.
4. Representations of the Selling Stockholder. The Selling Stockholder
represents and warrants to, and agrees with, each of the Underwriters that:
(a) All consents, approvals, authorization and orders
necessary for the execution and delivery by the Selling Stockholder of
this Agreement, and for the sale and delivery of the Selling
Stockholder Firm Shares and the Option Shares hereunder, have been
obtained; and the Selling Stockholder has full right, power
-17-
and authority to enter into this Agreement and to sell, assign,
transfer and deliver the Shares to be sold by the Selling Stockholder
hereunder;
(b) This Agreement has been duly authorized, executed and
delivered by the Selling Stockholder and constitutes a valid and
binding obligation of the Selling Stockholder, enforceable in
accordance with its terms;
(c) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is
required in connection with the sale of the Selling Stockholder Firm
Shares or the Option Shares by the Selling Stockholder or the
consummation by the Selling Stockholder of the transactions on its part
contemplated by this Agreement, except such as have been obtained under
the Act or the rules and regulations thereunder and such as may be
required under state securities or Blue Sky laws or the by-laws and
rules of the NASD in connection with the purchase and distribution by
the Underwriters of the Shares;
(d) The sale of the Shares to be sold by the Selling
Stockholder hereunder and the performance by the Selling Stockholder of
this Agreement and the consummation of the transactions contemplated
hereby will not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or give any party a right
to terminate any of its obligations under, or result in the
acceleration of any obligation under, any indenture, mortgage, deed of
trust, voting trust agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease, contract or other
agreement or instrument to which the Selling Stockholder is a party or
by which the Selling Stockholder or any of its properties is bound or
affected, or violate or conflict with the Certificate of Incorporation
or Limited Partnership, By-laws or partnership agreement of the Selling
Stockholder or any judgment, ruling, decree, order, statute, rule or
regulation of any court or other governmental agency or body applicable
to the Selling Stockholder;
(e) The Selling Stockholder has, and at the Closing Date and
any Option Closing Date will have, good and valid title to the Shares
to be sold by the Selling Stockholder hereunder, free and clear of all
liens, encumbrances, equities or claims; and, upon delivery of such
Shares and payment therefor pursuant hereto, good and valid title to
such Shares, free and clear of all liens, encumbrances, equities or
claims, will pass to each of the several Underwriters who have
purchased such Shares in good faith and without notice of any such
lien, encumbrance, equity or claim or any other adverse claim within
the meaning of the Uniform Commercial Code;
(f) The Selling Stockholder will not, directly or indirectly,
offer, sell or otherwise dispose of any shares of Common Stock within
thirteen (13) months
-18-
after the date of the Prospectus otherwise than hereunder or with your
express written consent;
(g) The Selling Stockholder has not taken and will not at any
time take, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result in, or which will
constitute, stabilization of the price of shares of Common Stock to
facilitate the sale or resale of any of the Shares;
(h) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by the
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement and
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and 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, in the light of the
circumstances under which they were made, not misleading; and
(i) The Selling Stockholder is not a member of or directly or
indirectly an affiliate of or associated with any member of the NASD,
except to the extent previously disclosed in writing to the Company and
the Representatives.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, the Selling
Stockholder agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof).
The Selling Stockholder specifically agrees that the obligations of the
Selling Stockholder hereunder shall not be terminated by the operation of law,
whether by the death or incapacity of the Selling Stockholder or, in the case of
an estate or trust, by the death or incapacity of any executor or trustee or the
termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or by the
occurrence of any other event. If the Selling Stockholder or any such executor
or trustee should die or become incapacitated, or if any such estate or trust
should be dissolved, or if such corporation or partnership should be dissolved,
or if any other such event should occur, before the delivery of the Shares
hereunder, certificates representing the Shares to be sold by the Selling
Stockholder shall be delivered by or on behalf of the Selling Stockholder in
accordance with the terms and conditions of this Agreement.
-19-
5. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective
as promptly as practicable and shall not at any time, whether before or
after the effective date of the Registration Statement, file any
amendment to the Registration Statement or supplement to the Prospectus
or file any document under the Act or Exchange Act before termination
of the offering of the Firm Shares by the Underwriters of which
Josephthal shall not previously have been advised and furnished with a
copy, or to which Josephthal shall have objected or which is not in
compliance with the Act, the Exchange Act and the Rules and
Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company shall advise Josephthal and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes
effective, or if the provisions of Rule 430A promulgated under the Act
will be relied upon, when the Prospectus has been filed in accordance
with said Rule 430A and when any post-effective amendment to the
Registration Statement becomes effective, (ii) of the issuance by the
Commission of any stop order or of the initiation, or the threatening,
of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the
Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, or the institution of proceedings for that purpose,
(iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification
of any of the Firm Shares and the Option Shares for offering or sale in
any jurisdiction or of the initiation or threatening of any proceeding
for that purpose, (iv) of the receipt of any comments from the
Commission; and (v) of any request by the Commission for any amendment
to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any
state securities commission authority shall enter a stop order or
suspend such qualification at any time, the Company shall make every
effort to obtain promptly the lifting of such order or suspension.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to Josephthal or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission
pursuant to Rule 424(b)(1) (or, if applicable and if consented to by
the Representative, pursuant to Rule 424(b)(4)) not later than the
Commission's close of business on the earlier of (i) the second
business day following the execution and delivery of this Agreement and
(ii) the fifteenth business day after the effective date of the
Registration Statement.
-20-
(d) The Company will give Josephthal notice of its intention
to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement
to the Prospectus (including any revised prospectus that the Company
proposes for use by the Underwriters in connection with the offering of
the Shares that differs from the corresponding prospectus on file at
the Commission at the time the Registration Statement becomes
effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) of the Rules and Regulations), and will
furnish Josephthal with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the
case may be, and will not file any such prospectus to which Josephthal
or Xxxxxxx, Xxxx & Xxxxx LLP ("Underwriters' Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with Josephthal, at or prior to the time the Registration Statement
becomes effective, to qualify the Firm Shares and the Option Shares for
offering and sale under the securities laws of such jurisdictions as
Josephthal may designate to permit the continuance of sales and
dealings therein for as long as may be necessary to complete the
distribution, and shall make such applications, file such documents and
furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign
corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company shall, unless Josephthal agrees that
such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such
times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts
to comply with all requirements imposed upon it by the Act and the
Exchange Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Shares in
accordance with the provisions hereof and the Prospectus, or any
amendments or supplements thereto. If at any time when a prospectus
relating to the Firm Shares and the Option Shares is required to be
delivered under the Act, any event shall have occurred as a result of
which, in the opinion of counsel for the Company or Underwriters'
Counsel, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company shall notify Josephthal
promptly and prepare and file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Act, each
such amendment or supplement to be satisfactory
-21-
to Underwriters' Counsel, and the Company shall furnish to the
Underwriters copies of such amendment or supplement as soon as
available and in such quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the twelve-month period beginning on the day
after the end of the fiscal quarter of the Company during which the
effective date of the Registration Statement occurs (90 days in the
event that the end of such fiscal quarter is the end of the Company's
fiscal year), the Company shall make generally available to its
security holders, in the manner specified in Rule 158(b) of the Rules
and Regulations, and to Josephthal, an earnings statement in the detail
required by, and otherwise complying with, the provisions of Section
11(a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act, covering a
period of at least twelve consecutive months after the effective date
of the Registration Statement.
(h) During a period of five years after the date hereof, the
Company shall furnish to its stockholders and the Representatives, as
soon as practicable, annual reports (including financial statements
audited by independent public accountants) and to the Representatives
and, upon request, the stockholders, unaudited quarterly reports of
earnings, and shall deliver to the Representatives:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the
Company for each quarter in the form furnished to the
Company's stockholders and certified by the Company's
principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports
to its stockholders, a balance sheet of the Company as at the
end of the preceding fiscal year, together with statements of
operations, stockholders' equity, and cash flows of the
Company for such fiscal year, accompanied by a copy of the
certificate thereon of independent certified public
accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with
the Commission, the NASD or any securities exchange;
(v) every press release and every material news item
or article of interest to the financial community in respect
of the Company or its affairs that was released or prepared by
or on behalf of the Company; and
-22-
(vi) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its
(or their) business that the Representative may request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a
consolidated basis to the extent that the accounts of the Company and
its subsidiaries are consolidated, and will be accompanied by similar
financial statements for any significant subsidiary that is not so
consolidated.
(i) The Company shall maintain a Transfer Agent, and if
necessary under the jurisdiction of incorporation of the Company, a
Registrar (which may be the same entity as the Transfer Agent) for its
Common Stock.
(j) During such period as a prospectus is required by law to
be delivered in connection with sales by an Underwriter or dealer, the
Company shall furnish to the Representatives or by mail to the
Underwriter's order, without charge, at such place as the Underwriters
may designate, copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments thereto
(two of which copies shall be signed and shall include all financial
statements and exhibits), the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as
available and in such quantities as the Underwriters may request for
purposes contemplated by the Act.
(k) On or before the effective date of the Registration
Statement, the Company shall provide Josephthal with true copies of
additional duly executed, legally binding and enforceable Lock-Up
Agreements for any additional officers, directors and stockholders of
the Company and holders of the Company's securities exchangeable or
exercisable for, convertible into, or evidencing any right to purchase
or subscribe for, shares of Common Stock, pursuant to which such
officers, directors, stockholders and option holders have agreed that,
without the prior written consent of Josephthal, such person or entity
will not directly or indirectly offer to sell, sell, grant any option
for the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of any legal or beneficial interest in any shares
of Common Stock, any securities convertible into or exercisable or
exchangeable for shares of Common Stock, or any warrants, options, or
other rights to purchase, subscribe for, or otherwise acquire any
shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) until at least thirteen (13) months after the
effective date of the Registration Statement. On or before the Closing
Date, the Company shall deliver instructions to the Transfer Agent
authorizing it to place appropriate legends on the certificates
representing the securities subject to the Lock-up Agreements and to
place appropriate stop transfer orders on the Company's ledgers. During
the thirteen-month period commencing with the effective date of the
Registration
-23-
Statement, the Company shall not, without the prior written consent of
Josephthal, sell, contract, or offer to sell, issue, transfer, assign,
pledge, distribute, or otherwise dispose of, directly or indirectly,
any shares of Common Stock or any warrants, options, or other rights
with respect to any shares of Common Stock, except for (x) the issuance
of options to purchase shares of Common Stock pursuant to stock option
plans described in the Prospectus or approved by the Board of Directors
prior to the date hereof, copies of which have been provided to the
Underwriters, provided that no more than 371,590 such options may be so
granted, and none of such options shall be issued with an exercise or
strike price which is less than the greater of (a) the public offering
price of the Shares set forth herein, or (b) the fair market value of
the underlying Common Stock on the date of grant, or (y) shares of
Common Stock which may be issued (i) to the holders of the Series
Preferred Stock upon the conversion of such shares into shares of
Common Stock in accordance with the terms of such Series Preferred
Stock or in payment of accrued cash dividends on such Series Preferred
Stock as described in the Prospectus, (ii) upon the exercise of stock
options or warrants outstanding on the date hereof and described in the
Prospectus, (iii) upon the conversion of that certain Convertible
Promissory Note of the Company, dated as of October 30, 1996, in the
aggregate principal of $7,863,000, (iv) upon the exercise of options
granted under stock option or stock incentive plans that have been
adopted by the Board of Directors on or before the date hereof and
copies of which have been provided to the Representatives, provided,
that any such options granted after the dates hereof comply with the
provisio to clause (y) above, and (v) 2,000 shares of Common Stock in
the aggregate to be issued to director-elects of the Company as
described in the Prospectus (the "Director Shares").
(l) None of the Company, nor any of its officers, directors,
or stockholders, nor any of their respective affiliates (within the
meaning of the Rules and Regulations) will take, directly or
indirectly, any action designed to, or that might reasonably be
expected to cause or result in, stabilization or manipulation of the
price of any securities of the Company, provided, however, that no
representation is given with respect to actions taken or that may be
taken by the Underwriters.
(m) The Company shall apply the net proceeds from the sale of
the Firm Shares and Option Shares in the manner, and subject to the
conditions, set forth under "Use of Proceeds" in the Prospectus. No
portion of the net proceeds will be used, directly or indirectly, to
acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms, and
other documents (including without limitation a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time under
the Act, the Exchange Act, and the Rules and Regulations, and all such
reports, forms and documents filed
-24-
shall comply in all material respects as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules
and Regulations.
(o) The Company shall furnish to the Representatives as early
as practicable prior to each of the date hereof, the Closing Date, and
each Option Closing Date, if any, but no later than two (2) full
business days prior thereto, a copy of the latest available unaudited
interim financial statements of the Company (which in no event shall be
as of a date more than thirty (30) days prior to the date of the
Prospectus) which have been read by the Company's independent public
accountants, as stated in their letters to be furnished pursuant to
subsections 6(j), 6(l) and 6(k) hereof.
(p) The Company shall cause the Shares to be quoted on NNM or
any national securities exchange registered under Section 6 of the
Exchange Act and, for a period of seven (7) years from the date hereof,
shall use its best efforts to maintain the NNM quotation of the Common
Stock (to the extent outstanding).
(q) For a period of three (3) years from the Closing Date, the
Company shall furnish to the Representatives, upon the request of the
Representatives and at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock and (ii) the
list of holders of all of the Company's securities.
(r) The Company shall, as soon as practicable, (i) but in no
event less than 5 business days before the effective date of the
Registration Statement, file a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Firm Shares and
Option Shares and (ii) but in no event more than 30 days from the
effective date of the Registration Statement, take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions or Xxxxx'x OTC Manual and to continue such inclusion for a
period of not less than seven (7) years.
(s) The Company hereby agrees that it will not for a period of
thirteen (13) months from the effective date of the Registration
Statement, adopt, propose to adopt, or otherwise permit to exist any
employee, officer, director, consultant or compensation plan or
arrangement (with the exception of the Company's 1991 Stock Option
Plan, 1994 Stock Option Plan or 1997 Equity Incentive Plan, hereinafter
referred to as the "Existing Plans"), permitting the grant, issue or
sale of any shares of Common Stock or other securities of the Company,
other than the Director Shares, (i) in an amount greater than an
aggregate of 932,679 shares (including shares subject to options or
other grants, or available for options or other grants, or issued after
December 31, 1996 pursuant to options granted under the Existing
Plans), of Common Stock (including securities convertible into or
exchangeable for shares of Common Stock), (ii) at an exercise price
that is less than the greater of (a) the public offering price of the
Shares set forth herein and (b) the fair market value on the date of
grant or sale, (iii) upon payment for such
-25-
securities with any form of consideration other than cash or Common
Stock, or (iv) upon payment of less than the full purchase or exercise
price for such shares of Common Stock or other securities of the
Company on or before the date of issuance. Neither during such thirteen
month period shall the Company adopt or permit the existence of any
stock appreciation rights, phantom options or similar arrangements with
respect to the Common Stock.
(t) Until the completion of the distribution of the Firm
Shares, the Company shall not without the prior written consent of
Josephthal and Underwriters' Counsel, issue, directly or indirectly,
any press release or other communication or hold any press conference
with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary
course of the Company's business consistent with past practices with
respect to the Company's operations.
(u) For a period of seven (7) years from the date hereof, the
Company shall not take any action or actions that might prevent or
disqualify the Company's use of Form's S-l and S-3 (or other
appropriate form) for the registration under the Act of any shares of
Common Stock which may be owned by Josephthal.
(v) From the effective date of the Registration Statement
until the third anniversary of the Closing Date, Josephthal shall have
the right to designate one (1) individual for election to the Board of
Directors of the Company (the "Board"), and the Company shall use its
best efforts to cause any person so designated for election to be
elected as a director of the Company. In the event Josephthal shall not
have designated such individual at the time of any meeting of the Board
or such person is unavailable to serve, (i) the Company shall notify
Josephthal of each meeting of the Board, and (ii) an individual
selected by Josephthal shall be permitted to attend all meetings of the
Board and to receive all notices and other correspondence and
communications sent by the Company to members of the Board. Such
individual shall be reimbursed for their reasonable and documented
out-of-pocket expenses incurred in connection with his service on, or
attendance of meetings of, the Board.
(w) The Company agrees that in the event of the sale or merger
of the Company, any significant subsidiary thereof, or any significant
assets thereof (each a "Transaction"), prior to the Closing Date, the
Company shall pay Josephthal a fee of 5% of the Legal Consideration (as
hereinafter defined) of the first $5 million of the Transaction and 2%
of the Legal Consideration which exceeds $5 million. For purposes of
this Section 4(w), "Legal Consideration" is defined as the total market
value on the day of closing of stock, cash, assets and all other
property (real or personal, tangible or intangible) exchanged or
received, directly or indirectly by the Company or any of its security
holders in connection with any Transaction, including without
limitation any excess
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above market amounts paid or received pursuant to any employment
agreement, any excess above market amounts paid or received pursuant to
any consulting agreement, any excess above market amounts paid or
received pursuant to any covenant not to compete, any excess above
market amounts paid or received pursuant to any earn-out or contingent
payment right or similar arrangement, agreement or understanding,
whether oral or written, associated with such Transaction. Property
shall be valued for this purpose at the fair market value thereof as
agreed to by the parties hereto or if the parties are unable to agree,
as determined by a mutually acceptable independent appraiser, the cost
of which shall be borne by the Company. Securities which are publicly
traded shall be valued at the closing price of such securities as
reported on a national exchange or NNM if so listed or quoted, or if
not so listed or quoted, the average of the closing ask prices, as
reported by NASDAQ, in either event for the last day prior to the
closing date of such Transaction; if the securities are not so listed
or quoted, the securities shall be valued in the same manner as
property described above. All debt instruments or evidences thereof and
all amounts payable to shareholders pursuant to any employment
agreements, consulting agreements, covenants not to compete, earn-out
or contingent payment rights or other similar agreements, arrangements
or understanding shall be valued at the aggregate amount payable
thereunder. All amounts payable pursuant to this Section 4(w) hereof
are due and payable to Josephthal, in cash or by certified check, at
the closing or closings of any Transaction or when received by the
Company, if later. In the event of a conflict or inconsistency among
the fees to be paid by the Company pursuant to that certain Financial
Advisory Agreement dated as of June 24, 1996, by and between the
Company and Josephthal (the "Financial Advisory Agreement"), and this
Agreement, the higher fee shall apply.
(x) The Company agrees that it shall not, without the prior
consent of Josephthal, grant to any person any rights which are
exercisable during the period ending thirteen (13) months from the
effective date of the Registration Statement, or modify any rights
previously granted to any person so as to cause the Company to register
any securities of the Company with the Commission within the period
ending thirteen (13) months from the effective date of the Registration
Statement.
6. Covenants of the Selling Stockholder. The Selling Stockholder agrees
to pay or cause to be paid all taxes, if any, on the transfer and sale of the
Shares to be sold by the Selling Stockholder hereunder and the fees and
expenses, if any, of counsel and accountants retained by the Selling
Stockholder. The Company agrees with the Selling Stockholder to pay all costs
and expenses incident to the performance of the obligations of the Selling
Stockholder under this Agreement (except as set forth above), including, but not
limited to, all expenses incident to the delivery of the certificates for the
Shares to be sold by the Selling Stockholder, the costs and expenses incident to
the preparation, printing and filing of the Registration Statement (including
all exhibits thereto) and the Prospectus and any amendments or supplements
thereto, the expenses of qualifying the Shares to be sold by the Selling
Stockholder under the state securities or Blue Sky laws,
-27-
all filing fees and the reasonable fees and expenses of counsel for the
Underwriters payable in connection with the review of the offering of the Shares
by the NASD, and the cost of furnishing to the Underwriters the required copies
of the Registration Statement and Prospectus and any amendments or supplements
thereto; provided that the Selling Stockholder agrees to pay or cause to be paid
its pro rata share (based on the percentage which the number of Shares sold by
the Selling Stockholder bears to the total number of Shares sold) of all
underwriting discounts, commissions and expenses.
7. Payment of Expenses.
(a) The Company hereby agrees to pay, on each of the Closing
Date and each Option Closing Date (to the extent not paid at the
Closing Date) all expenses and fees (other than fees and expenses of
Underwriters' Counsel, except as provided in clauses (iv) and (x)
below) incident to the performance of the obligations of the Company
under this Agreement, including without limitation (i) the fees and
expenses of accountants and counsel for the Company, (ii) all costs and
expenses incurred in connection with the preparation, duplication,
printing, (including mailing and handling charges) filing, delivery,
and mailing (including the payment of postage with respect thereto) of
the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of
postage with respect thereto), and delivery of this Agreement, any
Agreement among Underwriters, Selected Dealer Agreements, and related
documents entered into in connection with the Offering, including the
cost of all copies thereof and of the Preliminary Prospectuses and of
the Prospectus and any amendments thereof or supplements thereto
supplied to the Underwriters and such dealers as the Underwriters may
request, in quantities as hereinabove stated, (iii) the printing,
engraving, issuance, and delivery of the Shares including without
limitation (A) the purchase by the Underwriters or the Representatives,
as the case may be, of the Firm Shares, the Option Shares, and the
Representative's Shares, (B) the consummation by the Company of any of
its obligations under this Agreement and (C) resale of the Firm Shares
and the Option Shares by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Shares
under state or foreign securities or "Blue Sky" laws and determination
of the status of such securities under legal investment laws, including
the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum," and the "Legal
Investments Survey," if any, and disbursements and fees of counsel in
connection therewith, which such expenses shall not exceed $15,000, (v)
advertising costs and expenses of both the Company and the
Representatives, including without limitation all costs and expenses in
connection with the "road show," information meetings, and
presentations, bound volumes and prospectus memorabilia and
"tomb-stone" advertisement expenses, (vi) costs and expenses in
connection with Company counsel's due diligence investigations,
including without limitation the fees of any independent counsel or
consultant
-28-
retained, (vii) fees and expenses of the Transfer Agent and Registrar,
(viii) the fees payable to the Commission and the NASD, (ix) the fees
and expenses incurred in connection with the quotation of the Shares on
NNM and any other exchange, and (x) any and all reasonable due
diligence fees and expenses of the Underwriters incurred in connection
with any intellectual property matters in connection with the offering
which shall not exceed $15,000.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 8, Section 12(a) or Section
14, the Company shall reimburse and indemnify the Representatives for
all of their reasonable and documented out-of-pocket expenses,
including the fees and disbursements of Underwriters' Counsel, less any
amounts already paid pursuant to Section 7(c) hereof; provided,
however, that if this Agreement is terminated by the Underwriters in
accordance with Section 12(a), the total amount of such reimbursement
and indemnification of the Representatives' expenses shall not exceed
$50,000.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 7, it shall
pay to the Representatives on the Closing Date by certified or bank
cashier's check or, at the election of the Representatives, by
deduction from the proceeds of the offering contemplated hereby a
non-accountable expense allowance equal to three quarters of one
percent (.75%) of the gross proceeds received by the Company from the
sale of the Firm Shares. In the event the Representatives elect to
exercise the over-allotment option described in Section 2(b) hereof,
the Company agrees to pay to the Representatives on each Option Closing
Date (by certified or bank cashier's check or, at the Representatives'
election, by deduction from the proceeds of the Offering) a
non-accountable expense allowance equal to three quarters of one
percent (.75%) of the gross proceeds from the sale of the Option Shares
sold on such Option Closing Date.
8. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company and the Selling Stockholder herein
as of the date hereof and as of the Closing Date and each Option Closing Date,
if any, as if they had been made on and as of the Closing Date or Option Closing
Date, as the case may be; the accuracy on and as of the Closing Date or Option
Closing Date, if any, of the statements of the officers of the Company made
pursuant to the provisions hereof; and the performance by the Company and the
Selling Stockholder on and as of the Closing Date and each Option Closing Date,
if any, of its covenants and obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 Noon, New York time, on the date of this Agreement or
such later date
-29-
and time as shall be consented to in writing by Josephthal, and at the
Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated by the Commission and
any request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of
Underwriters' Counsel. If the Company has elected to rely upon Rule
430A of the Rules and Regulations, the price of the Shares and any
price-related information 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
Closing Date the Company shall have provided evidence satisfactory to
Josephthal of such timely filing, or a post-effective 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.
(b) The Representatives shall not have advised the Company
that the Registration Statement, or any amendment thereto, contains an
untrue statement of fact that, in the Representatives' opinion, is
material, or omits to state a fact that, in the Representatives'
opinion, is material and is required to be stated therein or is
necessary to make the statements therein not misleading, or that the
Prospectus, or any supplement thereto, contains an untrue statement of
fact that, in the Representatives' opinion, is material, or omits to
state a fact that, in the Representatives' opinion, is material and is
required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) On or prior to the Closing Date, the Representatives shall
have received from Underwriters' Counsel, such opinion or opinions with
respect to the Registration Statement, the Prospectus, and other
related matters as the Representatives may request and Underwriters'
Counsel shall have received such papers and information as they request
to enable them to pass upon such matters.
(d) At Closing Date, the Underwriters shall have received the
favorable opinion of Xxxxxx & Hannah LLP, counsel to the Company, dated
the Closing Date, addressed to the Underwriters and in the form
attached hereto as Exhibit 2.
(e) At each Option Closing Date, if any, the Underwriters
shall have received the favorable opinion of Xxxxxx & Hannah LLP,
counsel to the Company, dated the Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters'
Counsel, confirming as of Option Closing Date the statements made by
such counsel in its opinion delivered on the Closing Date.
-30-
(f) On or prior to each of the Closing Date and each Option
Closing Date, if any, Underwriters' Counsel shall have been furnished
such documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the
matters referred to in subsection (c) of this Section 6, or in order to
evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties, or conditions of the Company, or herein
contained.
(g) On the Closing Date and each Option Closing Date,
Xxxxxxxx, Xxxxxxx & Xxxxxxx, P.C., counsel to the Selling Stockholder,
shall have furnished to you their written opinion, dated such date, in
the form attached hereto as Exhibit 3:
(h) Prior to the Closing Date and each Option Closing Date, if
any, (i) there shall have been no material adverse change, or any
development involving a prospective adverse change, in the business,
condition (financial or otherwise), operations, results of operations,
earnings, assets, prospects, properties, position or value of the
Company, whether or not in the ordinary course of business, from the
latest dates as of which such are set forth in the Registration
Statement and Prospectus; (ii) there shall have been no transaction,
not in the ordinary course of business, entered into by the Company,
from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus that is
materially adverse to the Company; (iii) the Company shall not be in
material default under any provision of any instrument relating to any
outstanding indebtedness; (iv) except as is described in or
contemplated by the Prospectus, for shares of Common Stock which may be
issued (A) to the holders of the Series Preferred Stock upon conversion
of, and in payment of accrued cash dividends on, such Series Preferred
Stock, or (c) upon the exercise of option or warrants to purchase
Common Stock outstanding at September 30, 1996, as described in the
Prospectus, the Company shall not have issued any securities (other
than the Firm Shares, the Option Shares and the Director Shares) or
declared or paid any dividend or made any distribution in respect of
its capital stock of any class and there shall not have been any change
in the capital stock or any material change in the debt (long or short
term) or liabilities (other than in the ordinary course of business,
none of which are individually, or in the aggregate, material) or
material obligations of the Company contingent or otherwise; (v) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and
Prospectus; (vi) no action, suit or proceeding, at law or in equity,
shall have been pending or threatened (or circumstances giving rise to
same) against the Company, or involving or affecting its business or
properties, before or by any court or federal, state or foreign
commission, board, or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect
the business, condition (financial or otherwise),
-31-
operations, results of operations, earnings, assets, prospects,
properties, position or value of the Company, except as set forth in
the Registration Statement and Prospectus; and (vii) no stop order
shall have been issued under the Act and no proceedings therefor shall
have been initiated, threatened, or contemplated by the Commission.
(i) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company,
signed by the principal executive officer and by the chief financial or
chief accounting officer of the Company, dated the Closing Date or
Option Closing Date, as the case may be, to the effect that each of
such persons has carefully examined the Registration Statement, the
Prospectus and this Agreement, and that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as
of the Closing Date or such Option Closing Date, as the case
may be, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the case may
be;
(ii) No stop order suspending the effectiveness of
the Registration Statement or any part thereof has been
issued, and no proceedings for that purpose have been
instituted or are pending or, to the best of each of such
persons knowledge, after due inquiry, are contemplated or
threatened under the Act;
(iii) The Registration Statement and the Prospectus
and each amendment and each supplement thereto, if any,
contain all material statements and information required to be
included therein, and none of the Registration Statement, the
Prospectus, or any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading and neither the
Preliminary Prospectus or any supplement thereto included any
untrue statement of a material fact or omitted 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; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, and except as is described in or contemplated by
the Prospectus: (a) the Company has not incurred, up to and
including the Closing Date or the Option Closing Date, as the
case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or
contingent; (b) except for shares of Common Stock which may be
issued to the holders of the Series
-32-
Preferred Stock in payment of accrued cash dividends on such
Series Preferred Stock, as described in the Prospectus, the
Company has not paid or declared any dividends or other
distributions on its capital stock; (c) the Company has not
entered into any transactions not in the ordinary course of
business; (d) there has not been any change in the capital
stock or debt (long or short-term) of the Company (other than
in the ordinary course of business, none of which are
individually or in the aggregate, material); (e) the Company
has not sustained any material loss or damage to its property
or assets, whether or not insured; (f) there is no litigation
pending or threatened (or circumstances giving rise to same)
against the Company or any affiliated party of it that is
required to be set forth in an amended or supplemented
Prospectus and that has not been set forth; and (g) there has
occurred no event required to be set forth in an amended or
supplemented Prospectus that has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the
date of such certificate.
(j) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters, as described in the Registration
Statement.
(k) At the time this Agreement is executed, the Underwriters
shall have received a letter from Coopers & Xxxxxxx L.L.P. dated such
date, addressed to the Underwriters and in form and substance
satisfactory in all respects to the Underwriters and Underwriters'
Counsel:
(i) Confirming that they are independent certified
public accountants with respect to the Company within the
meaning of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company
as of December 31, 1995, and September 30, 1996 and for the
year or, in the case of the period ending September 30, 1996,
the nine months, then ended, included in the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules
and Regulations thereunder and that the Representatives may
rely upon such opinion with respect to such financial
statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited
interim financial statements of the Company, a reading of the
latest available minutes of the stockholders
-33-
and board of directors and the various committees of the board
of directors of the Company, consultations with officers and
other employees of the Company responsible for financial and
accounting matters and other specified procedures and
inquiries, nothing has come to their attention which would
lead them to believe that (A) the pro forma financial
information contained in the Registration Statement and
Prospectus does not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
Rules and Regulations or is not fairly presented in conformity
with generally accepted accounting principles applied on a
basis consistent with that of the audited financial statements
of the Company or the unaudited pro forma financial
information included in the Registration Statement, (B) the
unaudited financial statements and supporting schedules of the
Company included in the Registration Statement do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements of the Company included in the Registration
Statement, or (C) at a specified date not more than five (5)
days prior to the effective date of the Registration
Statement, there has been any change in the capital stock of
the Company, any change in the long-term debt of the Company,
or any decrease in the stockholders' equity of the Company or
any decrease in the net current assets or net assets of the
Company as compared with amounts shown in the September 30,
1996 balance sheets included in the Registration Statement,
other than as set forth in or contemplated by the Registration
Statement, or, if there was any change or decrease, setting
forth the amount of such change or decrease, and (D) during
the period from September 30, 1996 to a specified date not
more than five (5) days prior to the effective date of the
Registration Statement, there was any decrease in net revenues
or net earnings of the Company or decrease in net earnings per
common share of the Company, in each case as compared with the
corresponding period beginning October 1, 1995 other than as
set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount
of such decrease;
(iv) setting forth, at a date not later than five (5)
days prior to the effective date of the Registration
Statement, the amount of liabilities of the Company (including
a break-down of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus in each
case to the extent that such amounts, numbers,
-34-
percentages, statements and information may be derived from
the general accounting records, including work sheets, of the
Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not
constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found
them to be in agreement: and
(vi) statements as to such other matters incident to
the transaction contemplated hereby as the Representatives may
request.
(l) At the time this Agreement is executed, the Underwriters
shall have received a letter from KPMG Peat Marwick LLP, dated such
date, addressed to the Underwriters and in form and substance
satisfactory in all respects to the Underwriters and Underwriters'
Counsel:
(i) Confirming that they are independent certified
public accountants with respect to the Company within the
meaning of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company
as of December 31, 1993 and 1994 and for the years then ended,
included in the Registration Statement comply as to form in
all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations
thereunder and that the Representatives may rely upon such
opinion with respect to such financial statements and
supporting schedules included in the Registration Statement;
(iii) stating that they have compared specific dollar
amounts, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set
forth in the Prospectus in each case to the extent that such
amounts, percentages, statements and information may be
derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring
an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not
constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found
them to be in agreement: and
(iv) statements as to such other matters incident to
the transaction contemplated hereby as the Representatives may
request.
-35-
(m) At the time this Agreement is executed, the Underwriters
shall have received a letter from Ernst & Young LLP, dated such date,
addressed to the Underwriters and in form and substance satisfactory in
all respects to the Underwriters and Underwriters' Counsel:
(i) Confirming that they are independent certified
public accountants with respect to Advanced Textiles, Inc.
("ATI") within the meaning of the Act and the applicable Rules
and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of ATI as of
September 28, 1996 and September 30, 1995, and for each of the
three years in the period ended September 28, 1996 included in
the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations thereunder and that the
Representatives may rely upon such opinion with respect to
such financial statements and supporting schedules included in
the Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited
interim financial statements of ATI, a reading of the latest
available minutes of the stockholders and board of directors
and the various committees of the board of directors of ATI,
consultations with officers and other employees of ATI
responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that the unaudited
financial statements and supporting schedules of ATI included
in the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited financial statements of ATI included in
the Registration Statement;
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and other financial information
pertaining to ATI set forth in the Prospectus in each case to
the extent that such amounts, numbers, percentages, statements
and information may be derived from the general accounting
records, including work sheets, of ATI and excluding any
questions requiring an interpretation by legal counsel, with
the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter
and found them to be in agreement: and
-36-
(v) statements as to such other matters incident to
the transaction contemplated hereby as the Representative may
request.
(n) At Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from each of KPMG Peat Marwick LLP,
Coopers & Xxxxxxx, L.L.P. and Ernst & Young LLP letters, dated as of
the Closing Date or such Option Closing Date, as the case may be, to
the effect that they reaffirm that the statements made in the letters
furnished pursuant to subsections (k), (l) or (m), as applicable, of
this Section, except that the specified date referred to therein as of
which the examination made by them as described therein shall be a date
not more than five days prior to Closing Date or such Option Closing
Date, as the case may be, and if the Company has elected to rely on
Rule 430A of the Rules and Regulations, such letter shall also contain
such statements as to procedures and results in connection therewith as
the Representatives may request.
(o) The Company shall have delivered to the Representatives a
letter from each of KPMG Peat Marwick and Coopers & Xxxxxxx L.L.P.
addressed to the Company stating that they have not during the
immediately preceding two year period brought to the attention of the
Company's management any "weakness" as defined in Statement of Auditing
Standards No. 60 "Communication of Internal Control Structure Related
Matters Noted in an Audit," in any of the Company's internal controls.
(p) The Company shall have delivered to the Representatives a
letter from Ernst & Young LLP addressed to ATI stating that they have
not during the immediately preceding two year period brought to the
attention of the ATI's management any "weakness" as defined in
Statement of Auditing Standards No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit," in any of the
Company's internal controls.
(q) On or before the Closing Date, the Underwriters shall have
received the favorable opinion of Fish & Xxxxxxxxxx, special counsel to
the Company, dated the Closing Date, addressed to the Underwriters, in
form and substance satisfactory to Underwriter's Counsel, and in
substantially the form attached hereto as Exhibit 4.
(r) On each of Closing Date and each Option Closing Date, if
any, there shall have been duly tendered to the Representatives for the
several Underwriters' accounts, certificates representing the
appropriate number of Firm Shares or Option Shares, as the case may be.
(s) No order suspending the sale of the Securities in any
jurisdiction designated by the Representatives pursuant to subsection
(e) of Section 4 hereof
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shall have been issued on either the Closing Date or the Option Closing
Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(t) The Selling Stockholder shall have furnished or caused to
be furnished to you at the Closing Date and any Option Closing Date
certificates of the Selling Stockholder dated as of the Closing Date or
such Option Closing Date, as the case may be, satisfactory to you, as
to the accuracy of the representations and warranties of the Selling
Stockholder, herein at and as of such date, as to the performance by
the Selling Stockholder of all of its obligations hereunder to be
performed at or prior to such date, and as to such other matters as you
may reasonably request.
(u) On or before Closing Date, the Common Stock shall have
been duly approved for quotation on NNM, subject to official notice of
issuance.
(v) On or before Closing Date, there shall have been delivered
to the Underwriters all of the Lock-up Agreements, in form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
that have not been fulfilled or extend the time for their fulfillment.
9. Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless
each of the Underwriters (for purposes of this Section 9 "Underwriters"
shall include the officers, directors, partners, employees, agents, and
counsel of each Underwriter), and each person, if any, who controls
such Underwriter (each a "controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any and all losses, claims, damages, expenses, or liabilities,
joint or several (and actions in respect thereof), whatsoever
(including but not limited to any and all reasonable and documented
expenses incurred in investigating, preparing, or defending against any
litigation commenced or threatened, or any claim whatsoever), as such
are incurred to which the Underwriters or such controlling person may
become subject under the Act, the Exchange Act, or any other statute or
at common law or otherwise or under the laws of foreign countries,
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time
to time amended and supplemented); (ii) in any post-effective amendment
or amendments or any new registration statement or prospectus in which
is included
-38-
securities of the Company issued or issuable upon exercise of the Firm
Shares or the Option Shares; or (iii) in any application or other
document or written communication (in this Section 9 collectively
called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to
qualify the Firm Shares or the Option Shares under the securities laws
thereof or filed with the Commission, any state securities commission
or agency, NNM or any other securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in the light of the circumstances under
which they were made), unless such statement or omission was made in
reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any other theory of liability that the Company may have at
common law or otherwise.
(b) The Selling Stockholder hereby agrees to indemnify and
hold harmless each of the Underwriters and each controlling person
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, from and against any and all losses, claims, damages,
expenses, or liabilities, joint or several (and actions in respect
thereof), whatsoever (including but not limited to any and all
reasonable and documented expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened,
or any claim whatsoever), as such are incurred upon presentation of
reasonably satisfactory invoices in respect thereof, to which the
Underwriters or such controlling person may become subject under the
Act, the Exchange Act, or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or
based upon any untrue statement or alleged untrue statement of a
material fact contained (i) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended
and supplemented); or (ii) in any post-effective amendment or
amendments or any new registration statement or prospectus in which is
included securities of the Company issued or issuable upon exercise of
the Firm Shares or the Option Shares; or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of
the Prospectus, in the light of the circumstances under which they were
made), unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters
expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement
thereto, as the case may be, provided, however, that the total
liability of the Selling Stockholder under the indemnity agreement in
this Section 9 shall not exceed the lesser of
-39-
(i) that percentage of the total amount of such losses, claims, damages
or liabilities indemnified under this Section 9 which equals the
percentage obtained by dividing the total number of Shares sold by the
Selling Stockholder by the total number of Shares sold hereunder, or
(ii) the total initial public offering price of the Shares sold by the
Selling Stockholder under this Agreement, less underwriters' discounts
and commissions.
The indemnity agreement in this subsection (b) shall be in
addition to any other theory of liability that the Selling Stockholder
may have at common law or otherwise, provided that the total liability
of the Selling Stockholder shall not exceed the amounts as limited
above. In addition, the indemnity and contribution obligations of the
Selling Stockholder under this Section 9 shall terminate without
recourse to the partners thereof with respect to any claim not made
with respect thereto prior to December 31, 1998.
(c) Each of the Underwriters agree severally, but not jointly,
to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, each other
person, if any, who controls the Company within the meaning of the Act,
and the Selling Stockholder, to the same extent as the foregoing
indemnity from the Company to the Underwriters but only with respect to
statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any application made in reliance upon, and in
strict conformity with, written information furnished to the Company
with respect to any Underwriter by such Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any
such application, provided that such written information or omissions
only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this
Offering. The Company acknowledges that the statements with respect to
the public offering of the Shares set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute
the only information furnished in writing by or on behalf of the
Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (c) shall be in
addition to any liability which the Underwriters may have at common law
or otherwise.
(d) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, suit or
proceeding, such indemnified party shall, if a claim in respect thereof
is to be made against one or more indemnifying parties under this
Section 9, notify each party against whom indemnification is to be
sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability
-40-
which it may have under this Section 9 except and only to the extent
that it has been actually materially prejudiced by such failure or from
any liability that it may have otherwise). In case any such action is
brought against any indemnified party, and it notifies an indemnifying
party or parties of the commencement thereof, the indemnifying party or
parties will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the 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 (i) the employment
of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at
the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such
indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them that are different from
or additional to those available to one or all of the indemnifying
parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such reasonable and
documented fees and expenses of one additional counsel shall be borne
by the indemnifying parties. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in addition
to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances. Anything in this Section 9
to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement of any claim or action effected without its
written consent unless such consent was unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle, compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action,
investigation, inquiry, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim
or action), unless such settlement, compromise or consent (i) includes
an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and (ii) does not
include a statement as to or an admission of fact, culpability or a
failure to act by or on behalf of any indemnified party.
(e) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 9, but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or
-41-
the denial of the last right of appeal) that such indemnification may
not be enforced in such case, notwithstanding the fact that the express
provisions of this Section 9 provide for indemnification in such case,
or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses, or
liabilities (or actions in respect thereof) (A) in such proportion as
is appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified
on the other hand, from the offering of the Firm Shares and the Option
Shares, or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above
but also the relative fault of each of the contributing parties, on the
one hand, and the party to be indemnified on the other hand, in
connection with the statements or omissions that resulted in such
losses, claims, damages, expenses, or liabilities, as well as any other
relevant equitable considerations. In any case where the Company or the
Selling Stockholder is a contributing party and the Underwriters are
the indemnified party, the relative benefits received by each of the
Company or the Selling Stockholder on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares
(before deducting expenses) bear to the total underwriting discounts
received by the Underwriters hereunder, in each case as set forth in
the table on the Cover Page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company, the Selling Stockholder or by the Underwriters, and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such untrue statement or omission.
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions in respect
thereof) referred to above in this subparagraph (e) shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action, claim, investigation, inquiry, suit or proceeding.
Notwithstanding the provisions of this paragraph (e), the Underwriters
shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by the
Underwriters hereunder and the Selling Stockholder shall not be
required to contribute any amount in excess of the net proceeds
received by the Selling Stockholder in connection with the sale of
shares to the Underwriters. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 9, each
person, if any, who controls the Company within the meaning of the Act,
each officer of the Company who has signed any registration statement
included in the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company,
subject in each case to this subparagraph (e). Any
-42-
party entitled to contribution will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in
respect to which a claim for contribution may be made against another
party or parties under this subparagraph (e), notify such party or
parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties
from whom contribution may be sought from any obligation it or they may
have hereunder or otherwise than under this subparagraph (e), or to the
extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in
addition to any liabilities that any indemnifying party may have at
common law or otherwise.
(f) In the event that any of the Underwriters suffers any
losses, claims, damages, expenses or liabilities which may be the
subject of an indemnification claim under Section 9(a) of this
Agreement or a contribution claim under Section 9(e) of this Agreement,
the Underwriters agree to use all reasonable diligence to pursue any
such claims against the Company. Except with respect to claims based on
written information provided by the Selling Stockholder expressly for
inclusion in any Preliminary Prospectus, the Registration Statement or
Prospectus, to the extent that any of the Underwriters is able to
recover the full amount of such indemnification or contribution claim
(including without limitation reimbursement of expenses) from the
Company, the Underwriters agree not to pursue recovery for such amounts
from the Selling Stockholder under Sections 9(b) and 9(e) hereof and
will promptly reimburse the Selling Stockholder for any amounts
previously paid (including without limitation any amounts paid in
reimbursement of expenses) to any of the Underwriters under Sections
9(b) or 9(e) with respect to such claim.
10. Representations and Agreements to Survive Delivery. All
representations, warranties, and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the applicable Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and respective
indemnity agreements contained in Section 9 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
any Underwriters, the Selling Stockholder, the Company, or any controlling
person of any Underwriters, the Selling Stockholder or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the Firm
Shares, Option Shares and Representative's Warrants to the Underwriters and
Josephthal, as the case may be.
11. Effective Date. This Agreement shall become effective at 10:00
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as Josephthal, in its discretion, shall release the Shares for the
sale to the public; provided, however, that the
-43-
provisions of Sections 7, 9 and 12 of this Agreement shall at all times be
effective. For purposes of this Section 11, the Shares to be purchased hereunder
shall be deemed to have been so released upon the earlier of dispatch by the
Underwriters of telegrams to securities dealers releasing such shares for
offering or the release by Josephthal for publication of the first newspaper
advertisement that is subsequently published relating to the Shares.
12. Termination.
(a) Subject to subsection (b) of this Section 12, the
Representatives shall have the right to terminate this Agreement, (i)
if any domestic or international event or act or occurrence has
disrupted, or in the Representatives' opinion will in the immediate
future disrupt the financial markets; or (ii) any material adverse
change in the financial markets shall have occurred; or (iii) if
trading on the New York Stock Exchange, the American Stock Exchange, or
in the over-the-counter market shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter
market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iv) if the United States
shall have become involved in a war or major hostilities, or if there
shall have been an escalation in an existing war or major hostilities
or a national emergency shall have been declared in the United States;
or (v) if a banking moratorium has been declared by a state or federal
authority; or (vi) if a moratorium in foreign exchange trading has been
declared; or (vii) if the Company shall have sustained a loss material
or substantial to the Company by fire, flood, accident, hurricane,
earthquake, theft, sabotage, or other calamity or malicious act that,
whether or not such loss shall have been insured, will, in the
Representatives' opinion, make it inadvisable to proceed with the
delivery of the Shares; or (viii) if there shall have been such a
material adverse change in the conditions or prospects of the Company,
or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere as in the
Representatives' judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Shares.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section l2(a), the Company shall
promptly reimburse and indemnify the Underwriters for all of its
reasonable and documented expenses, including the reasonable and
documented fees and disbursements of counsel for the Underwriters in an
amount not to exceed $50,000. Notwithstanding any contrary provision
contained in this Agreement, if this Agreement shall not be carried out
within the time specified herein, or any extension thereof granted to
the Underwriters, by reason of any failure on the part of the Company
or the Selling Stockholder to perform any undertaking or satisfy any
condition of this Agreement by them to be performed or satisfied
(including without limitation
-44-
pursuant to Sections 8 or 14 hereof) then, the Company shall promptly
reimburse and indemnify the Representatives for all reasonable and
documented expenses, including the reasonable and documented fees and
disbursements of counsel for the Underwriters (less amounts previously
paid pursuant to Section 7(c) hereof including the Blue Sky counsel
fees and expenses and Blue Sky funding fees limited as set forth in
Section 7(b) above. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this
Agreement (including without limitation pursuant to Sections 8, 12, 13,
and 14 hereof), and whether or not this Agreement is otherwise carried
out, the provisions of Sections 7 and 9 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.
13. Substitution of Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8, Section 12 or Section 14
hereof) to purchase the Firm Shares or the Option Shares that it or they are
obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), Josephthal shall have the right, within 24 hours thereafter, to
make arrangement for one or more of the non-defaulting Underwriters, or any
other Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, Josephthal shall not have completed such arrangements within
such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Firm Shares to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Shares, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section 13 shall relieve any
defaulting Underwriters from liability in respect of any default by such
Underwriters under this Agreement.
In the event of any such default that does not result in a termination
of this Agreement, Josephthal shall have the right to postpone the Closing Date
for a period not exceeding seven days in order to effect any required changes in
the Registration Statement or Prospectus or in any other documents or
arrangements.
14. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Shares that it is
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obligated to sell hereunder on such date, then this Agreement shall terminate
(or, if such default shall occur with respect to any Option Shares to be
purchased on an Option Closing Date, the Underwriters may at the
Representatives' option, by notice from the Representatives to the Company,
terminate the Underwriters' obligation to purchase Option Shares from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Sections 7, 9, and 12 hereof. No action taken
pursuant to this Section 14 shall relieve the Company from liability, if any, in
respect of such default.
15. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Underwriters at Xxxxxxxxxx Xxxx & Xxxx Incorporated, 000 Xxxx Xxxxxx - 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxxxx; with a copy to
Xxxxxxx, Xxxx & Xxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000,
Attention: Xxxxxx X. Xxxx, Esq. Notices to the Company shall be directed to the
Company at 00 Xxxxxx Xxxxxxx, Xxxxxxxxx, Xxxxx 00000, Attention: Xxxx
X'Xxxxxxxx, Chief Financial Officer, with a copy to Xxxxxx & Hannah LLP, 000
Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxxx,
Esq. and Xxxxxxxx Xxxxxxxx, Esq. Notices to the Selling Stockholder shall be
directed to: North Atlantic Ventures, 00 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxx 00000;
with a copy to Xxxxxxxx, Xxxxxxx & Xxxxxxx, P.C., 000 Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxx, III, Esq.
16. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the other indemnities
referred to in Section 9 hereof, and their respective successors, legal
representatives, and assigns, no other person shall have or be construed to have
any legal or equitable right, remedy, or claim under or in respect of or by
virtue of this Agreement or any provisions herein contained. No purchaser of
Shares from the Underwriters shall be deemed to be a successor by reason merely
of such purchase.
17. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to choice of law or conflict of laws principles.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same agreement.
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19. Entire Agreement; Amendments. This Agreement, the Representative's
Warrant Agreement, and the Financial Advisory Agreement, constitute the entire
agreement of the parties hereto and supersede all prior written or oral
agreements, understandings, and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing signed by the
Underwriters and the Company.
[Signature page follows.]
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If the foregoing correctly sets forth the understanding among the
Underwriters, the Selling Stockholders and the Company, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
BRUNSWICK TECHNOLOGIES, INC.
By:
------------------------------
Name:
Title:
THE SELLING STOCKHOLDER
NORTH ATLANTIC VENTURE FUND,
Limited Partnership
By: North Atlantic Capital Partners,
Limited Partnership, General Partner
By:
------------------------------
Name:
Title: General Partner
Confirmed and accepted
as of the date first above written:
XXXXXXXXXX XXXX & XXXX INCORPORATED
SOUTHWEST SECURITIES, INC.
For themselves and as Representatives
of the several Underwriters
named in Schedule A hereto
BY: XXXXXXXXXX XXXX & XXXX INCORPORATED
By:
---------------------------------
Name:
Title:
-48-
SCHEDULE A
Number of Firm
Shares to
Name of Underwriters be Purchased
-------------------- ------------
Xxxxxxxxxx Xxxx & Xxxx
Incorporated.....................................
Southwest Securities, Inc..........................
---------
TOTAL: 2,000,000
