EXHIBIT 1.1
A4S SECURITY, INC.
UNDERWRITING AGREEMENT
, 2005
Newbridge Securities Corporation
Bathgate Capital Partners LLC
As Representatives of the several
Underwriters named in Schedule I hereto
Dear Sirs:
A4S Security, Inc., a Colorado corporation (the "Company"), proposes,
subject to the terms and conditions contained herein, to sell to you and the
other underwriters named on Schedule I to this Agreement (the "Underwriters")
for whom you are acting as Representatives (the "Representatives"), an aggregate
of 1,300,000 units (the "Firm Units"), each unit ("Unit") comprised of one (1)
share (a "Share") of the Company's common stock (the "Common Stock") and one (1)
Redeemable Common Stock Purchase Warrant (the "Warrants"). The aforesaid Units,
Shares, and Warrants are together referred to as the "Firm Securities." Until
notice is given by the Company ("Notice of Separation") to holders of the Units
and to The Nasdaq SmallCap Market and the Archipelago Exchange, the Common Stock
and the Warrants will be traded only as Units. The Notice of Separation will
provide a date that the Units will separate (the "Separation Date"). On the
Separation Date the Units will be deemed separated and the Common Stock and
Warrants shall thereafter be traded only on a separate basis. The separation of
the Units into shares of Common Stock and Warrants will occur upon the earlier
to occur of ninety days from the date of this Agreement or 30 days after such
Notice of Separation is given. However, the Company shall not allow separation
of the Units until the earlier to occur of 90 days immediately following the
date of this Agreement or 30 days after the exercise by the Underwriters of
their entire over allotment option described below. The Warrants are to be
issued under the terms of a Warrant Agreement (the "Warrant Agreement") by and
between the Company and Corporate Stock Transfer, Inc. (the "Warrant Agent"), in
substantially the form as most recently filed as an exhibit to the Registration
Statements (as hereinafter defined). The Underwriters, severally and not
jointly, agree to purchase from the Company the number of Firm Units set forth
opposite their respective names on Schedule I attached hereto and made a part
hereof at a purchase price (net of discounts and commissions) of $____ per Firm
Unit. Each Warrant entitles its holder to exercise it to purchase one share of
Common Stock at an exercise price equal to the offering price of a Firm Unit
during the period commencing on the Separation Date and terminating on the
five-year anniversary of the Effective Date (as hereinafter defined). The
Warrants shall be redeemable by the Company at a price of $.10 per Warrant,
provided (i) the Warrants are exercisable, (ii) the Shares are subject of an
effective registration statement permitting their sale under the Securities Act
(as hereinafter defined), and (iii) the Common Stock has closed at a price of
225% of the Exercise Price for each of the 30 consecutive trading days prior to
the date that the Warrants are called for redemption by the Company.
The Company has prepared and filed in conformity with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
published rules and regulations thereunder (the "Regulations") adopted by the
Securities and Exchange Commission (the "Commission"), a Registration Statement
(as hereinafter defined) on Form S-1 (No. 333-124238), including a Preliminary
Prospectus (as hereinafter defined) relating to the Securities (as hereinafter
defined), and such amendments thereof as may have been required to the date of
this Underwritig Agreement (the "Agreement"). The Company has heretofore
delivered copies of the Registration Statement (including all amendments
thereto) and of the related Preliminary Prospectus to you. The term "Preliminary
Prospectus" means any preliminary prospectus included at any time as a part of
the Registration Statement or filed with the Commission by the Company pursuant
to Rule 424(a) of the Regulations. The term "Registration Statement" as used in
this Agreement means the initial registration statement (including all exhibits,
all financial schedules and all documents and information deemed to be a part of
the Registration Statement through incorporation by reference or otherwise), as
amended at the time and on the date it becomes effective (the "Effective Date"),
including the information (if any) contained in the form of final Prospectus (as
hereinafter defined) filed with the Commission pursuant to Rule 424(b) of the
Regulations and deemed to be part thereof at the time of effectiveness pursuant
to Rule 430A of the Regulations. If the Company has filed an abbreviated
registration statement to register additional Units (as hereinafter defined)
pursuant to Rule 462(b) under the Regulations (the "462(b) Registration
Statement"), then any reference herein to the Registration Statement shall also
be deemed to include such 462(b) Registration Statement. The term "Prospectus"
as used in this Agreement means the Prospectus in the form included in the
Registration Statement at the time of effectiveness or, if Rule 430A of the
Regulations is relied on, the term Prospectus shall also include the final
Prospectus filed with the Commission pursuant to Rule 424(b) of the Regulations.
The Company understands that the Underwriters propose to make a public
offering of the Units, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representatives
deem advisable (the "Offering"). The Company hereby confirms that the
Underwriters and dealers have been authorized to distribute or cause to be
distributed each Preliminary Prospectus and are authorized to distribute the
Prospectus (as from time to time amended or supplemented if the Company
furnishes amendments or supplements thereto to the Underwriters).
1. Sale, Purchase, Delivery, and Payment for the Units. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to issue and sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from the
Company, at a purchase price of $___ per Unit (net of discounts and commissions)
(the "Initial Price"), the number of Firm Units set forth opposite the name of
such Underwriter under the column "Number of Firm Units to be Purchased" on
Schedule I to this Agreement, subject to adjustment in accordance with Section 6
hereof.
(b) For the purposes of covering any over-allotments in connection with the
distribution and sale of the Firm Units, the Company hereby grants to the
Underwriters, severally and not jointly, an option to purchase up to an
additional 195,000 Units from the Company ("Over-allotment Option"). Such
additional 195,000 Units are hereinafter referred to as "Option Units." The Firm
Units and the Option Units are hereinafter referred to as the "Units," and the
Units and the Shares and Warrants included in the Units are hereinafter
collectively referred to as the "Securities." The purchase price to be paid for
the Option Units will be the same price per Option Unit as the price per Firm
Unit set forth in Section 1(a) hereof.
The Over-allotment Option granted pursuant to Section 1(b) hereof may be
exercised by the Representatives as to all (at any time) or any part (from time
to time) of the Option Units within 60 days after the Effective Date. The
Underwriters will not be under any obligation to purchase any Option Units prior
to the exercise of the Over-allotment Option. The Over-allotment Option granted
hereby may be exercised by the giving of oral notice to the Company by the
Representatives, which must be confirmed in writing by overnight mail or
facsimile transmission setting forth the number of Option Units to be purchased
and the date and time for delivery of and payment for the Option Units (the
"Option Closing Date"), which will not be later than five full business days nor
earlier than two full business days after the date of the notice or such other
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time as shall be agreed upon by the Company and the Representatives, at the
offices of Newbridge Securities Corporation ("NSC") or at such other place as
shall be agreed upon by the Company and the Representatives. Upon exercise of
the Over-allotment Option, the Company will become obligated to convey to the
Underwriters, and, subject to the terms and conditions set forth herein, the
Underwriters will become obligated to purchase, the number of Option Units
specified in such notice.
(c) Payment of the purchase price for, and delivery of the certificates
for, the Firm Units shall be made at 10:00 A.M., East Coast time, on ______, or
such other date, not later than the fifth business day thereafter, or at such
earlier time as shall be agreed upon by the Representatives and the Company at
the offices of NSC or at such other place as shall be agreed upon by the
Representatives and the Company. The hour and date of delivery and payment for
the Firm Units are called the "Closing Date." Payment for the Firm Units shall
be made on the Closing Date at the Representatives' election by wire transfer in
Federal (same day) funds or by certified or bank cashier's check(s) in New York
Clearing House funds, paid to the order of the Company upon delivery to you of
certificates (in form and substance satisfactory to the Underwriters)
representing the Firm Units (or through the facilities of the Depository Trust
Company ("DTC")) for the account of the Underwriters. The Firm Units shall be
registered in such name or names and in such authorized denominations as the
Representatives may request in writing at least two full business days prior to
the Closing Date. The Company will permit the Representatives to examine and
package the Firm Units for delivery, at least one full business day prior to the
Closing Date. The Company shall not be obligated to sell or deliver the Firm
Units except upon tender of payment by the Representatives for all the Firm
Units.
In addition, in the event that any or all of the Option Units are purchased by
the Underwriters, payment of the purchase price for, and delivery of the
certificates representing, the Option Units shall be made on the Option Closing
Date at the Representatives' election by wire transfer in Federal (same day)
funds or by certified or bank cashier's check(s) in New York Clearing House
funds, payable to the Company at the offices of NSC or at such other place as
shall be agreed upon by the Representatives and the Company upon delivery to you
of certificates representing such securities (or through the facilities of DTC)
for the account of the Underwriters. The certificates representing the Option
Units to be delivered will be in such denominations and registered in such names
as the Representatives request not less than two full business days prior to the
Option Closing Date, and will be made available to the Representatives for
inspection, checking and packaging at the aforesaid office of the Company's
transfer agent or correspondent not less than one full business day prior to the
Option Closing Date.
(d) On the Closing Date, the Company shall sell and issue to the
Representatives (and/or their designees) for a total purchase price of $130.00
Representatives' Options entitling the Representatives or their assigns to
purchase (i) 130,000 shares of Common Stock at a price of $___ per share, which
is equal to 120% of the public offering price of the Common Stock , and (ii)
130,000 Representatives' Warrants at a price of $.12 per Warrant, which is equal
to 120% of the public offering price of the Warrants. The exercise price of the
Representatives' Warrants shall be $___, which is equal to 120% of the exercise
price of the Warrants. The terms of the Representatives' Options, including
exercise period, anti-dilution provisions, exercise price, exercise provisions,
transferability, and registration rights, shall be in the form filed as an
exhibit to the Registration Statement of the Company.
The Representatives' Purchase Options shall be exercisable, in whole or in part,
commencing 180 days from the Effective Date and expiring on the five-year
anniversary of the Effective Date. The Representatives' Options may not be may
not be sold, transferred, assigned, pledged or hypothecated until 180 days after
the Effective Date, except that they may be transferred, in whole or in part,
(i) to one or more officers or partners of the Representatives (or the officers
or partners of any such partner); (ii) to a member of the underwriting syndicate
and/or its officers or partners; or (iii) by reason of reorganization
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Payment of the purchase price of, and delivery of the certificates for,
the Representatives' Options shall be made on the Closing Date. The Company
shall deliver to the Representatives, upon payment therefor, certificates for
the Representatives' Options in the name or names and in such authorized
denominations as the Representatives may request.
2. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter, as of the date hereof, as of the Closing Date
and as of each Option Closing Date (if any), as follows:
(a) At the time the Registration Statement became effective and at all
times subsequent thereto up to the Closing Date and the Option Closing Date, if
any, the Registration Statement and the Prospectus will contain all material
statements that are required to be stated therein in accordance with the
Securities Act and the Regulations, and will in all material respects conform to
the requirements of the Securities Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, 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. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Securities Act and the
Regulations and did not and will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The representation and warranty made
in this Section 2(a) does not apply to statements made or statements omitted in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by the Representatives expressly for
use in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(b) The Company has filed with the Commission a Form 8-A registration
statement providing for the registration under the Securities Exchange Act of
1934, as amended ("Exchange Act"), of the Securities, which registration
statement complies in all material respects with the Exchange Act. The
registration of the Securities under the Exchange Act has been declared
effective by the Commission on the date hereof. Neither the Commission nor, to
the best of the Company's knowledge, any state regulatory authority has issued
any order or threatened to issue any order preventing or suspending the use of
any Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
(c) The agreements and documents described in the Registration Statement
and the Prospectus conform to the descriptions thereof contained therein and
there are no agreements or other documents required to be described in the
Registration Statement or the Prospectus or to be filed with the Commission as
exhibits to the Registration Statement that have not been so described or filed.
Each agreement or other instrument (however characterized or described) to which
the Company is a party or by which its property or business is or may be bound
or affected and (i) that is referred to in the Prospectus, or (ii) is material
to the Company's business, has been duly and validly executed by the Company, is
in full force and effect and is enforceable against the Company and, to the
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Company's knowledge, the other parties thereto, in accordance with its terms,
except (x) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (y) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (z) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought,; and none of such agreements or instruments
has been assigned by the Company, and neither the Company nor, to the best of
the Company's knowledge, any other party is in breach or default thereunder and,
to the best of the Company's knowledge, no event has occurred that, with the
lapse of time or the giving of notice, or both, would constitute a breach or
default thereunder. To the best of the Company's knowledge, performance by the
Company of the material provisions of such agreements or instruments will not
result in a violation of any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its assets or
businesses, including, without limitation, those relating to environmental laws
and regulations.
(d) No securities of the Company have been sold by the Company or by or on
behalf of, or for the benefit of, any person or persons controlling, controlled
by, or under common control with the Company within the three years prior to the
date hereof, except as disclosed in the Registration Statement.
(e) The disclosures in the Registration Statement summarizing the effects
of federal, state and local regulation on the Company's business as currently
contemplated are correct summaries in all material respects and do not omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The statistical and related data included in the Registration Statement
are based on or derived from sources that the Company believes to be reliable
and accurate.
(g) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise specifically
stated therein, (i) there has been no material adverse change in the condition,
financial or otherwise, or business of the Company; (ii) there have been no
material transactions entered into by the Company, other than as contemplated
pursuant to this Agreement; and (iii) no member of the Company's senior
management has resigned from any position with the Company.
(h) Subsequent to the respective dates as of which information is given in
the Registration Statement and the 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; or (ii) declared or paid any dividend or made any other
distribution on or in respect to its equity securities.
(i) GHP Xxxxxxx, P.C. ("Xxxxxxx"), whose report is filed with the
Commission as part of the Registration Statement, are independent accountants as
required by the Securities Act and the Regulations, and such accountants, in the
performance of their work for the Company, are not in violation of the auditor
independence requirements of the Xxxxxxxx-Xxxxx Act of 2002. Xxxxxxx has not,
during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Exchange Act. There are no material off-balance sheet
transactions, arrangements, obligations (including contingent obligations) or
any other relationships with unconsolidated entities or other persons, that may
have a material current or, to the Company's knowledge, a material future effect
on the Company's financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or significant
components of revenues or expenses.
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(j) The financial statements, including the notes thereto and supporting
schedules included in the Registration Statement and Prospectus, fairly present
in all material respects the financial position, the results of operations and
the cash flows of the Company at the dates and for the periods to which they
apply; such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved; and the supporting schedules included in the Registration Statement
present fairly in all material respects the information required to be stated
therein. Neither the Company nor its subsidiary has engaged in any material
off-balance sheet transactions, arrangements, or obligations (including
contingent obligations), and neither the Company nor its subsidiary has any
other relationship with any unconsolidated entity or other person that may have
a material current or future effect on the Company's financial condition,
changes in financial condition, results of operations, liquidity, capital
expenditures, capital resources, or significant components of revenues or
expenses.
(k) The Company had at the date or dates indicated in the Prospectus the
duly authorized, issued and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. Based on the assumptions stated in
the Registration Statement and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein. Except as set
forth in, or contemplated by, the Registration Statement and the Prospectus, on
the Effective Date and on the Closing Date, there will be no options, warrants,
or other rights to purchase or otherwise acquire any authorized but unissued
shares of Common Stock of the Company or any security convertible into shares of
Common Stock of the Company, or any contracts or commitments to issue or sell
shares of Common Stock or any such options, warrants, rights or convertible
securities.
(l) All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; except as
described in or expressly contemplated by the Registration Statement, there are
no outstanding rights (including, without limitation, pre-emptive rights),
warrants or options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any kind
relating to the issuance of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants or options.
The authorized Common Stock conforms in all material respects to all statements
relating thereto contained in the Registration Statement and the Prospectus. The
offers and sales of the outstanding Common Stock were at all relevant times
either registered under the Securities Act and the applicable state securities
or Blue Sky laws or, based in part on the representations and warranties of the
purchasers of such shares of Common Stock, exempt from such registration
requirements.
(m) The Securities have been duly authorized and, when issued and paid for,
will be validly issued, fully paid and non-assessable; the holders thereof are
not and will not be subject to personal liability by reason of being such
holders; the Securities are not and will not be subject to the preemptive rights
of any holders of any security of the Company or similar contractual rights
granted by the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Securities conform in all material respects to all statements with
respect thereto contained in the Registration Statement. The Representatives'
Securities have been duly and validly authorized by the Company, and, when
executed or issued, the Warrant Agreement and the Representatives' Purchase
Option and the Representatives' Warrants will constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and payment
of the respective exercise prices therefor, the number and type of securities of
the Company called for thereby in accordance with the terms thereof, and such
Warrant Agreement, Representatives' Purchase Option, and Representatives'
Warrants are enforceable against the Company in accordance with their respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under federal and state securities laws; and (iii) that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
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(n) Except as set forth in the Prospectus, no holders of any securities of
the Company or any rights exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Securities Act or to include any such
securities in a registration statement to be filed by the Company.
(o) Each of this Agreement, the Warrant Agreement, and the Representatives'
Securities has been duly and validly authorized by the Company and constitutes
the valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws; and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(p) The execution, delivery, and performance by the Company of this
Agreement, the Warrant Agreement, and the Representatives' Securities, the
consummation by the Company of the transactions herein and therein contemplated
and the compliance by the Company with the terms hereof and thereof do not and
will not, with or without the giving of notice or the lapse of time or both (i)
result in a breach of, or conflict with any of the terms and provisions of, or
constitute a default under, or result in the creation, modification, termination
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company pursuant to the terms of any agreement or instrument to which the
Company is a party; (ii) result in any violation of the provisions of the
Articles of Incorporation or the Bylaws of the Company; or (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business.
(q) No material default exists in the due performance and observance of any
term, covenant or condition of any material license, contract, indenture,
mortgage, deed of trust, note, loan or credit agreement, 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 the Company
may be bound or to which any of the properties or assets of the Company is
subject. The Company is not in violation of any term or provision of its
Articles of Incorporation or Bylaws or in violation of any material franchise,
license, permit, applicable law, rule, regulation, judgment or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or businesses.
(r) The Company has all requisite corporate power and authority, and has
all necessary authorizations, approvals, orders, licenses, certificates, and
permits of and from all governmental regulatory officials and bodies that it
needs as of the date hereof to conduct its business as described in the
Prospectus. The disclosures in the Registration Statement concerning the effects
of federal, state and local regulation on the Offering and the Company's
business purpose as currently contemplated are correct in all material respects
and do not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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(s) The Company has all corporate power and authority to enter into this
Agreement and to carry out the provisions and conditions hereof, and all
consents, authorizations, approvals and orders required in connection therewith
have been obtained. No consent, authorization or order of, and no filing with,
any court, government agency or other body is required for the valid issuance,
sale and delivery, of the Securities and the consummation of the transactions
and agreements contemplated by this Agreement, the Warrant Agreement, the
Representatives' Warrants, and as contemplated by the Prospectus, except with
respect to applicable federal and state securities laws and the bylaws and rules
of the National Association of Securities, Inc. ("NASD").
(t) To the best of the Company's knowledge, all information contained in
the questionnaires ("Questionnaires") completed by each of the Company's
officers, directors, and 5% or greater stockholders ("Initial Stockholders") and
provided to the Underwriters is true and correct in all material respects, and
the Company has not become aware of any information which would cause the
information disclosed in the Questionnaires completed by each Initial
Stockholder to become inaccurate and incorrect in all material respects.
(u) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the best of
the Company's knowledge, threatened against, or involving the Company or, to the
best of the Company's knowledge, any Initial Stockholder which has not been
disclosed in the Registration Statement or the Questionnaires.
(v) The Company has been duly organized and is validly existing as a
corporation and is in good standing under the laws of its state of
incorporation, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the Company.
(w) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus or Prospectus or any part thereof.
(x) Except as described in the Prospectus, there are no claims, payments,
arrangements, agreements or understandings relating to the payment of a
finder's, consulting or origination fee by the Company or any Initial
Stockholder with respect to the sale of the Securities hereunder or any other
arrangements, agreements or understandings of the Company or, to the best of the
Company's knowledge, any Initial Stockholder that may affect the Underwriters'
compensation, as determined by the NASD.
(y) The Company has not made any direct or indirect payments (in cash,
securities or otherwise) (i) to any person, as a finder's fee, consulting fee or
otherwise, in consideration of such person raising capital for the Company or
introducing to the Company persons who raised or provided capital to the
Company; (ii) to any NASD member; or (iii) to any person or entity that has any
direct or indirect affiliation or association with any NASD member, within the
twelve months prior to the date on which the Registration Statement was filed
with the Commission or thereafter, other than payments to the Representatives.
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(z) The Company will not pay any of the net proceeds of the Offering to any
participating NASD member or its affiliates.
(aa) Based on the Questionnaires, except as set forth on Schedule 2(aa), no
officer, director or any beneficial owner of the Company's unregistered
securities has any direct or indirect affiliation or association with any NASD
member. The Company will advise the Representatives and their counsel if it
learns that any officer, director, or owner of at least 5% of the Company's
outstanding Common Shares is or becomes an affiliate or associated person of an
NASD member participating in the Offering.
(bb) Neither the Company nor any of the Initial Stockholders or 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 or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (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 it in connection with any actual or proposed transaction)
that (i) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding; (ii) if not given in the
past, might have had a material adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus; or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
(cc) Any certificate signed by any duly authorized officer of the Company
and delivered to you or to your counsel shall be deemed a representation and
warranty by the Company to the Underwriters as to the matters covered thereby.
(dd) No Initial Stockholder, employee, officer, or director of the Company
is subject to any noncompetition agreement or non-solicitation agreement with
any employer or prior employer that could materially adversely affect his
ability to be an Initial Stockholder, employee, officer and/or director of the
Company.
(ee) No more than 45% of the "value" (as defined in Section 2(a)(41) of the
Investment Company Act of 1940 ("Investment Company Act")) of the Company's
total assets consist of, and no more than 45% of the Company's net income after
taxes is derived from, securities other than "Government securities" (as defined
in Section 2(a)(16) of the Investment Company Act).
(ff) The Company does not own an interest in any corporation, partnership,
limited liability company, joint venture, trust, or other business entity,
except as described in the Prospectus.
(gg) There are no business relationships or related party transactions
involving the Company or any other person required to be described in the
Prospectus that have not been described as required.
9
(hh) The Company has obtained the agreement (the "Lock-up Agreements") of
each of its officers, directors, and 1% shareholders that he will not, without
the prior written consent of the Representatives, during the twelve-month period
after the date of the Prospectus,;. offer, sell, contract to sell, make short
sales of, loan, grant any option or contract to purchase, or otherwise dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, whether these
shares or any such securities are then owned by the person or are thereafter
acquired, directly from the Company; provided, however, that such persons may
sell, convey or transfer all or any portion of such securities to the
Corporation .
3. Covenants of the Company. The Company covenants and agrees as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto, to become effective as promptly as possible. The Company
shall prepare the Prospectus in a form approved by the Representatives and file
such Prospectus pursuant to Rule 424(b) under the Securities Act no later than
the Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by the Regulations.
(b) The Company shall promptly advise the Representatives in writing (i)
when any post-effective amendment to the Registration Statement shall have
become effective; (ii) of any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the institution or
threatening of any proceeding for that purchase; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Units for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and (v) of the happening of any event during
the period described in Section 3(c) hereof that, in the judgment of the
Company, makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or that requires the making of any changes in
the Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company shall not file any amendment of the Registration
Statement or supplement to the Prospectus or any document incorporated by
reference in the Registration Statement unless the Company has furnished the
Representatives a copy for review prior to filing and shall not file any such
proposed amendment or supplement to which the Representatives reasonably object.
The Company shall use its best efforts to prevent the issuance of any such stop
order and, if issued, to obtain as soon as possible the withdrawal thereof.
(c) During the time when a Prospectus is required to be delivered under the
Securities Act, or the Exchange Act, the Company will use all reasonable efforts
to comply with all requirements imposed upon it by the Securities Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Units in accordance with the provisions hereof and
the Prospectus. If at any time when a Prospectus relating to the Units is
required to be delivered under the Securities Act, or the Exchange Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Underwriters, 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 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 Securities Act, the Company will notify the Representatives
promptly and prepare and file with the Commission, subject to Section 3(b)
hereof, an appropriate amendment or supplement in accordance with Section 10 of
the Securities Act.
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(d) For a period of five years from the Effective Date or until such
earlier time at which the Company is liquidated, the Company will use its best
efforts to maintain the registration of the Common Stock under the provisions of
the Exchange Act. The Company will not deregister the Units under the Exchange
Act without the prior written consent of the Representatives.
(e) The Company will endeavor in good faith, in cooperation with the
Representatives, at or prior to the time the Registration Statement becomes
effective, to qualify the Units for offering and sale under the securities laws
of such jurisdictions as the Representatives may reasonably designate within the
United States, provided that no such qualification shall be required in any
jurisdiction where, as a result thereof, the Company would be subject to service
of general process or to taxation as a foreign corporation doing business in
such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representatives agree 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 be required by the
laws of such jurisdiction. The Company and the Representatives agree that with
respect to qualifying the Units for offering and sale under securities laws
outside of the United States, the Representatives will be relying solely on the
Company and its agents to perfect all filings required by such foreign
jurisdictions and to make all such statements and reports at such times as are
or may be required by the laws of such foreign jurisdictions, provided that the
Representatives will provide any assistance as reasonably requested by the
Company for such perfection.
(f) The Company will deliver to each of the several Underwriters, without
charge, from time to time during the period when the Prospectus is required to
be delivered under the Securities Act or the Exchange Act, such number of copies
of each Preliminary Prospectus and the Prospectus as such Underwriters may
reasonably request and, as soon as the Registration Statement or any amendment
or supplement thereto becomes effective, deliver to you two original executed
Registration Statements, including exhibits, and all post-effective amendments
thereto and copies of all exhibits filed therewith or incorporated therein by
reference and all original executed consents of certified experts.
(g) For a period of five years from the Effective Date or until such
earlier time at which the Company is liquidated, the Company, at its expense,
shall cause its regularly engaged independent certified public accountants to
review (but not audit) the Company's financial statements for each of the first
three fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company's Form 10-Q (or 10-QSB) quarterly report
and the mailing of quarterly financial information to stockholders.
(h) The Company will apply to be included in Standard & Poor's Daily News
and Corporation Records Corporate Descriptions for a period of five years from
the Effective Date. Promptly after the consummation of the Offering, the Company
shall take such steps as may be necessary to obtain a secondary market trading
exemption for the Company's securities in the State of California. The Company
shall also take such other action as may be reasonably requested by the
Representatives to obtain a secondary market trading exemption in such other
states as may be requested by the Representatives.
(i) The Company shall retain a financial public relations firm reasonably
acceptable to the Representatives for a term to be agreed upon by the Company
and the Representatives.
(j) Within 10 days of the Closing Date, the Company will retain a research
firm to provide coverage of the Company for a period of not less than 12 months.
The research firm must be acceptable to the Representatives in their sole
discretion.
11
(k) For a period of five years from the Effective Date or until such
earlier time at which the Company is liquidated, the Company will furnish to the
Representatives and their counsel copies (which may be electronic copies) of
such financial statements and other periodic and special reports as the Company
from time to time furnishes generally to holders of any class of its securities,
and promptly furnish or otherwise make available to the Representatives (i) a
copy of each periodic report the Company shall be required to file with the
Commission; (ii) a copy of every press release and every news item and article
with respect to the Company or its affairs which was released by the Company;
(iii) a copy of each Form 8-K or Schedules 13D, l3G, 14D-l or 13E-4 received or
prepared by the Company; (iv) five copies of each registration statement filed
by the Company with the Commission under the Securities Act; (v) a copy of
monthly statements, if any, setting forth such information regarding the
Company's results of operations and financial position (including balance sheet,
profit and loss statements and data regarding outstanding purchase orders) as is
regularly prepared by management of the Company; and (vi) such additional
documents and information with respect to the Company and the affairs of any
future subsidiaries of the Company as the Representatives may from time to time
reasonably request.
(l) For a period of five years following the Effective Date or until such
earlier time at which the Company is liquidated, the Company shall retain a
transfer agent acceptable to the Representatives ("Transfer Agent") and will
furnish to the Representatives at the Company's sole cost and expense such
transfer sheets of the Company's securities as the Representatives may request,
including the daily and monthly consolidated transfer sheets of the Transfer
Agent and DTC.
(m) On the Effective Date, the Company shall deliver a written report
detailing those states in which the Securities may be traded in non-issuer
transactions under the Blue Sky laws of the fifty states ("Secondary Trading
Survey").
(n) During such time, if at all, as the Units, the Shares, and the Warrants
are quoted on the NASD OTC Bulletin Board (or any successor trading market such
as the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar publisher of
quotations) and no other automated quotation system, the Company shall provide
to the Representatives, at its expense, such reports published by the NASD or
the Pink Sheets, LLC relating to price trading of the Units, the Shares, and the
Warrants, as the Representatives shall reasonably request.
(o) For a period of seven years from the date hereof, the Company will not
take any action or actions which may prevent or disqualify the Company's use of
Form S-1 (or other appropriate form) for the registration of the
Representatives' Securities under the Securities Act.
(p) The Company hereby agrees to pay on each of the Closing Date and the
Option Closing Date, if any, to the extent not paid at the Closing Date, all
expenses incident to the performance of the obligations of the Company under
this Agreement, including, without limitation, the following: (i) the
preparation, printing, filing and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement and exhibits thereto, the
Preliminary and Final Prospectuses and the printing and mailing of this
Agreement and related documents, including the cost of all copies thereof and
any amendments thereof or supplements thereto supplied to the Underwriters in
quantities as may be required by the Underwriters; (ii) the printing, engraving,
issuance and delivery of the Securities and the Representatives' Securities,
including any transfer or other taxes payable thereon; (iii) the qualification
of the Units under state or foreign securities or Blue Sky laws, including the
costs of printing and mailing the Preliminary and Final Blue Sky Memoranda and
all amendments and supplements thereto; and the fees and disbursements of its
counsel retained for such purpose; (iv) filing fees, costs and expenses
(excluding fees of the Representatives' counsel) incurred in registering the
Offering with the NASD; (v) costs of placing "tombstone" advertisements in The
Wall Street Journal, The New York Times and a third publication to be selected
by the Representatives not to exceed $10,000 in the aggregate; (vi) fees and
12
disbursements of the Transfer Agent; (vii) all expenses incurred in connection
with any road shows and any "due diligence" meetings arranged by the
Representatives, including a videotape or PowerPoint presentation; (viii) the
preparation, binding and delivery of transaction "bibles," in form and style
reasonably satisfactory to the Representatives, and transaction lucite cubes or
similar commemorative items in a style and quantity as reasonably requested by
the Representatives; and (ix) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 3(p). The Representatives may deduct from the net
proceeds of the Offering payable to the Company on the Closing Date, or the
Option Closing Date, if any, the expenses set forth herein to be paid by the
Company to the Representatives and others. If the Offering contemplated by this
Agreement is not consummated for any reason whatsoever for reasons not
attributable to the Underwriters, then the Company shall reimburse the
Underwriters in full for their out of pocket expenses, including, without
limitation, its legal fees and disbursements and "road show" and due diligence
expenses. The Representatives shall retain such part of the nonaccountable
expense allowance (described below in Section 3(q) previously paid as shall
equal its actual out-of-pocket expenses and refund the balance. If the amount
previously paid is insufficient to cover such actual out-of-pocket expenses, the
Company shall remain liable for and promptly pay any other actual out-of-pocket
expenses.
(q) The Company further agrees that, in addition to the expenses payable
pursuant to Section 3(p), on each of the Closing Date and Option Closing Date
(if any), it will pay to the Representatives a nonaccountable expense allowance
equal to three percent (3%) of the gross proceeds received by the Company from
the sale to the public of the Firm Units, (less any amounts previously paid), by
deduction from the proceeds of the Offering.
(r) The Company will apply the net proceeds from the Offering received by
it in a manner consistent with the application described under the caption "Use
of Proceeds" in the Prospectus.
(s) The Company will make generally available to its security holders as
soon as practicable, but not later than the first day of the fifteenth full
calendar month following the Effective Date, an earnings statement (which need
not be certified by independent public or independent certified public
accountants unless required by the Securities Act or the Regulations, but which
shall satisfy the provisions of Rule 158(a) under Section 11(a) of the
Securities Act) covering a period of at least 12 consecutive months beginning
after the Effective Date.
(t) Neither the Company nor, to its knowledge, any of its employees,
directors or stockholders (without the consent of the Representatives) has taken
or will take, directly or indirectly, any action designed to or that has
constituted or that 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 to facilitate the sale or resale of the Securities.
(u) The Company will maintain a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary in order to permit preparation of
financial statements in accordance with generally accepted accounting principles
and to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(v) For a period of five years from the Effective Date or until such
earlier time upon which the Company is required to be liquidated, the Company
shall retain Xxxxxxx or other independent public accountants reasonably
acceptable to the Representatives.
13
(w) The Company shall advise the NASD if it is aware that any 5% or greater
stockholder of the Company becomes an affiliate or associated person of an NASD
member participating in the distribution of the Units.
(x) All corporate proceedings and other legal matters necessary to carry
out the provisions of this Agreement and the transactions contemplated hereby
shall have been done to the reasonable satisfaction of counsel for the
Underwriters.
(y) The Company agrees not to solicit Warrant exercises other than through
the Representatives. Upon any exercise of the Warrants after twelve months from
the Effective Date, the Company agrees to pay any Representative a fee of 5% of
the aggregate Warrants exercise price, if: (i) the market price of the Common
Stock on the date the Warrants are exercised is greater than the then exercise
price of the Warrants; (ii) the exercise of the Warrants is solicited by such
Representative at such time as it is a member of the NASD and such
Representative is designated in writing by the holder of the Warrants as the
NASD member soliciting the exercise; (iii) the Warrants are not held in a
discretionary account; (iv) the disclosure of compensation arrangements was made
both at the time of the Offering and at the time of exercise of the Warrants;
and (v) the solicitation of exercise of the Warrant was not in violation of
Regulation M promulgated under the Exchange Act. No Warrant solicitation by a
Representative will occur for a period of 12 months after the Effective Date.
The Representatives may engage sub-agents in their solicitation efforts.
(z) In connection with the solicitation of exercise of the Warrants, the
Company will (i) assist the Representatives with respect to such solicitation,
if requested by the Representatives, and (ii) at the Representatives' request,
provide the Representatives, and direct the Company's transfer agent and warrant
agent to provide to the Representatives, at the Company's cost, lists of the
record and, to the extent known, beneficial owners of, the Warrants.
(aa) The Company will reserve and keep available the maximum number of its
authorized but unissued shares of Common Stock that are issuable upon exercise
of the Warrants, the Representatives' Purchase Option, and the Representatives'
Warrant outstanding from time to time.
(bb) The Company will afford the Representatives the right, but not the
obligation, commencing on the Effective Date and surviving for a period of three
years, to designate one observer to attend meetings of the Board of Directors.
The designee, if any, and the Representatives will receive notice of each
meeting of the Board of Directors in accordance with Colorado law. Any such
designee will receive reimbursement for all reasonable costs and expenses
incurred in attending meetings of the Board of Directors, including, but not
limited to, food, lodging and transportation, together with such other fee or
such compensation as is paid by the Company to the highest compensated outside
member of the Board of Directors. Moreover, to the extent permitted by law, the
Representatives and their designee shall be indemnified for the actions of such
designee as an observer to the Board of Directors and in the event the Company
maintains a liability insurance policy affording coverage for the acts of its
officers and/or directors, to the extent permitted under such policy, each of
the Representatives and their designee shall be an insured under such policy.
During the stated three-year period, the Representatives' observer to the
Company's Board of Directors will be (i) invited to attend meetings of the
Company's Board of Directors; (ii) given written notice of each such meeting and
provided with an agenda and minutes of the meeting no later than the date such
notice and items are provided to the other directors (iii) provided with a copy
of all Actions by Unanimous Written consent of the Board of Directors in lieu of
an actual meeting; (iv) furnished with a copy of all public filings by the
Company and Company press releases as released; (v) updated by the Company's
management on at least a quarterly basis, regarding the Company's activities,
14
prospects and financial condition; and (vi) advised immediately of material
events to the extent consistent with applicable law. During the subject
three-year period, the Company will hold meetings of its Board of Directors at
intervals of not less than 90 days. Any observer designated by the
Representatives, as herein provided, shall be acceptable to the Company, which
acceptance shall not be unreasonably withheld, and such designated observer
shall make certain representations in writing to the Company concerning his
responsibilities under the federal securities laws with respect to information
obtained by such observer as a result of his attendance at meetings of the Board
of Directors of the Company and as a result of the receipt by him of other
nonpublic information concerning the Company; and provided further that upon
written notice to the Representatives, the Company may exclude the
representative from meetings where, in the written opinion of counsel for the
Company, the representative's presence would destroy the attorney-client
privilege. It is currently anticipated that the Representatives will request
Xxxx Xxxxxx to be appointed as Board observer.
(cc) The Company shall deliver the Notice of Separation, after consulting
with the Representatives, in accordance with the time frames set forth in the
first paragraph of this Agreement
(dd) On the Closing Date, the Company shall enter into a Consulting
Agreement with the Representatives (the "Consulting Agreement") whereby the
Company will agree to pay the Representatives a financial consulting fee of
$2,500 per month for each of the next succeeding 24 months. The entire 24 month
consulting fee ($60,000) will be due and payable on the Closing Date.
4. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Units, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
(a) The Registration Statement has been declared effective on the date of
this Agreement, and, at each of the Closing Date and the Option Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for such 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 counsel to the Underwriters.
(b) By the Effective Date, the Representatives shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters as described in the Registration Statement.
(c) No order suspending the sale of the Units in any jurisdiction
designated by you pursuant to Section 3(e) hereof shall have been issued on or
before either the Closing Date or the Option Closing Date, and no proceedings
for that purpose shall have been instituted or, to the best of the Company's
knowledge, shall be contemplated.
(d) On the Effective Date, the Representatives shall have received the
favorable opinion of Xxxxxx Xxxxx LLP, counsel to the Company, dated the
Effective Date, addressed to the Representatives and in form and substance
reasonably satisfactory to counsel to the Underwriters to the effect that:
15
(i) The Company has been duly incorporated and is validly existing as a
corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which it has certified to us
that it owns or leases any properties or maintains employees, except where the
failure to qualify could not reasonably be expected to have a material adverse
effect on the Company.
(ii) All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; to such
counsel's knowledge, except as described in or expressly contemplated by the
Registration Statement, there are no outstanding rights (including, without
limitation, pre-emptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Company, or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any capital
stock of the Company, any such convertible or exchangeable securities or any
such rights, warrants or options. The authorized Common Stock conforms as to
legal matters in all material respects to all statements relating thereto
contained in the Registration Statement and the Prospectus. To such counsel's
knowledge, the offers and sales of the outstanding Common Stock and Preferred
Stock were at all relevant times either registered under the Securities Act and
the applicable state securities or Blue Sky laws or, based in part on the
representations and warranties of the purchasers of such shares of Common Stock,
exempt from such registration requirements. To such counsel's knowledge, the
authorized and outstanding capital stock of the Company is as set forth in the
Prospectus.
(iii) The Securities have been duly authorized and, when issued and paid
for, will be validly issued, fully paid and non-assessable. The Securities are
not and will not be subject to the preemptive rights of any holders of any
security of the Company arising by operation of law or under the Articles of
Incorporation or Bylaws of the Company. When issued, the Representatives'
Purchase Option and the Representatives' Warrants will constitute valid and
binding obligations of the Company to issue and sell, upon exercise thereof and
payment therefor, the number and type of securities of the Company called for
thereby, and such Representatives' Purchase Option and Representatives'
Warrants, when issued, will be enforceable against the Company in accordance
with their respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (b) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. The
certificates representing the Securities are in due and proper form.
(iv) This Agreement has been duly authorized, executed, and delivered by
the Company and it constitutes, and the Representatives' Purchase Option and
Representatives' Warrants and the Consulting Agreement have been duly and
validly authorized by the Company and, when executed and delivered, will
constitute, the valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except (a) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (b) as enforceability of any
indemnification or contribution provisions may be limited under the federal and
state securities laws; and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
16
(v) The execution, delivery and performance of this Agreement, the
Consulting Agreement, the Representatives' Purchase Option, the Representatives'
Warrants, the issuance and sale of the Securities, the consummation of the
transactions contemplated hereby and thereby, and compliance by the Company with
the terms and provisions hereof and thereof, do not and will not, with or
without the giving of notice or the lapse of time, or both, (a) to such
counsel's knowledge, conflict with, or result in a breach of, any of the terms
or provisions of, or constitute a default under, or result in the creation or
modification of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company pursuant to the terms of, any mortgage,
deed of trust, note, indenture, loan, contract, commitment or other agreement or
instrument filed as an exhibit to the Registration Statement; (b) result in any
violation of the provisions of the Articles of Incorporation or the Bylaws of
the Company; or (c) to such counsel's knowledge, violate any United States
statute or any judgment, order or decree, rule or regulation applicable to the
Company of any court, United States federal, state or other regulatory authority
or other governmental body having jurisdiction over the Company, its properties
or assets.
(vi) The Registration Statement, each Preliminary Prospectus and the
Prospectus and any post-effective amendments or supplements thereto (other than
the financial statements included therein, as to which no opinion need be
rendered), each as of their respective dates, complied as to form in all
material respects with the requirements of the Securities Act and Regulations.
The Securities and each agreement filed as an exhibit to the Registration
Statement conform in all material respects to the description thereof contained
in the Registration Statement and the Prospectus. No United States federal or
state statute or regulation required to be described in the Prospectus is not
described as required, nor, to such counsel's knowledge, are any contracts or
documents of a character required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement not
so described or filed as required.
(vii) The Registration Statement is effective under the Securities Act. To
such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or threatened under the Securities Act or
applicable state securities laws.
(viii) To such counsel's knowledge, there is no action, suit, or proceeding
before or by any court or governmental agency or body, domestic or foreign, now
pending or threatened against the Company that is required to be described in
the Registration Statement.
In addition, counsel has participated in conferences with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Underwriters at which the
contents of the Registration Statement, the Prospectus and related matters were
discussed and although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as otherwise set
forth in this opinion), on the basis of the foregoing (relying as to materiality
to a significant extent upon facts provided by officers and other
representatives of the Company), no facts have come to the attention of such
counsel which would lead them to believe that either the Registration Statement
at the time it became effective (including the information deemed to be part of
the Registration Statement at the time of effectiveness pursuant to Rule
430A(b)), contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of its date and as
of the Closing Date contained or contains an untrue statement of a material fact
or omitted or omits 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 (it being understood that such counsel need
express no opinion with respect to the exhibits (other than with respect to the
summaries thereof contained in the Registration Statement and Prospectus),
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
17
(e) On each of the Closing Date and the Option Closing Date, if any, the
Representatives shall have received the favorable opinion of Xxxxxx Xxxxx LLP,
dated the Closing Date or the Option Closing Date, as the case may be, addressed
to the Representatives and in form and substance reasonably satisfactory to
counsel for the Underwriters, confirming as of the Closing Date and, if
applicable, the Option Closing Date, the statements made by Xxxxxx Xxxxx LLP in
its opinion delivered on the Effective Date.
In rendering its opinion, Xxxxxx Xxxxx LLP may rely (i) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent Xxxxxx Xxxxx LLP deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to counsel to the
Underwriters) of other counsel reasonably acceptable to counsel to the
Underwriters, familiar with the applicable laws; and (ii) as to matters of fact,
to the extent they deem proper, on certificates or other written statements of
officers of the Company and officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to the Underwriters' counsel if requested. The opinion of
Xxxxxx Xxxxx LLP and any opinion relied upon by Xxxxxx Xxxxx LLP shall include a
statement to the effect that it may be relied upon by counsel for the
Underwriters in its opinion delivered to the Underwriters.
(f) At the time this Agreement is executed, and at each of the Closing Date
and the Option Closing Date, if any, you shall have received a letter, addressed
to the Representatives and in form and substance satisfactory in all respects
(including the non-material nature of the changes or decreases, if any, referred
to in clause (iii) below) to you and to counsel to the Underwriters from GHP
Xxxxxxx, P.C. dated, respectively, as of the date of this Agreement and as of
the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with respect to
the Company within the meaning of the Securities Act and the applicable
Regulations and that they have not, during the periods covered by the
financial statements included in the Prospectus, provided to the Company
any non-audit services, as such term is used in Section 10A(g) of the
Exchange Act;
(ii) Stating that in their opinion the financial statements of the
Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements
of the Securities Act and the published Regulations thereunder;
(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 (with an indication of the date of the latest available
unaudited interim financial statements), a reading of the latest available
minutes of the stockholders and board of directors and the various
committees of the board of directors, 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 unaudited financial
statements 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 Securities Act and the 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;
(b) at a date not later than five days prior to the Effective Date, Closing
Date or Option Closing Date, as the case may be, there was any change in
the capital stock or long-term debt of the Company, or any decrease in the
18
stockholders' equity of the Company as compared with amounts shown in the
March 31, 2005, balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if
there was any decrease, setting forth the amount of such decrease; and (c)
during the period from March 31, 2005, to a specified date not later than
five days prior to the Effective Date, Closing Date or Option Closing Date,
as the case may be, there was any decrease in revenues, net earnings or net
earnings per share of Common Stock, in each case as compared with the
corresponding period in the immediately preceding year and as compared with
the corresponding period in the immediately preceding quarter, 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 days prior to the
Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers 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, 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;
(vi) Stating that they have not during the immediately preceding five
year period brought to the attention of the Company's management any
reportable condition related to internal structure, design or operation, as
defined in the Statement on Auditing Standards No. 60 "Communication of
Internal Control Structure Related Matters Noted in an Audit," in the
Company's internal controls; and
(vii) Statements as to such other matters incident to the transaction
contemplated hereby as you may reasonably request.
(g) At each of the Effective Date, the Closing Date and the Option Closing
Date, if any, the Representatives shall have received a certificate of the
Company signed by the Chairman of the Board or the President and the Secretary
or Assistant Secretary of the Company, dated the Effective Date, the Closing
Date or the Option Closing Date, as the case may be, respectively, to the effect
that (i) the Company has performed all covenants and agreements and complied
with all conditions required by this Agreement to be performed or complied with
by the Company prior to and as of the Effective Date, the Closing Date, or the
Option Closing Date, as the case may be; (ii) the conditions set forth in
Section 4(h) hereof have been satisfied as of such date; (iii) as of Effective
Date, the Closing Date and the Option Closing Date, as the case may be, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct; (iv) they have carefully examined the Registration Statement
and the Prospectus and, in their opinion, (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue statement of a
material fact and did not omit 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, and (B) since the
Effective Date no event has occurred which should have been set forth in a
supplement or otherwise required an amendment to the Registration Statement or
the Prospectus; and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and, to their knowledge, no proceedings
for that purpose have been instituted or are pending under the Securities Act.
In addition, the Representatives will have received such other and further
certificates of officers of the Company as the Representatives may reasonably
request.
19
(h) At each of the Closing Date and the Option Closing Date, if any, the
Representatives shall have received a certificate of the Company signed by the
Secretary or Assistant Secretary of the Company, dated the Closing Date or the
Option Date, as the case may be, respectively, certifying (i) that the copies of
the Bylaws and Articles of Incorporation of the Company attached thereto are
true and complete, have not been modified and are in full force and effect; (ii)
that the resolutions relating to the Offering are in full force and effect and
have not been modified; (iii) all correspondence between the Company or its
counsel and the Commission; and (iv) as to the incumbency of the officers of the
Company. The documents referred to in such certificate shall be attached to such
certificate.
(i) Prior to and on each of the Closing Date and the Option Closing Date,
if any, (i) there shall have been no material adverse change or development
involving a prospective material adverse change in the condition or the business
activities, financial or otherwise, of the Company from the latest dates as of
which such condition is set forth in the Registration Statement and Prospectus;
(ii) no action suit or proceeding, at law or in equity, shall have been pending
or threatened against the Company or any Initial Stockholder before or by any
court or federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations or financial condition or income of the Company,
except as set forth in the Registration Statement and Prospectus; (iii) no stop
order shall have been issued under the Securities Act and no proceedings
therefor shall have been initiated or threatened by the Commission; and (iv) the
Registration Statement and the Prospectus and any amendments or supplements
thereto shall contain all material statements which are required to be stated
therein in accordance with the Securities Act and the Regulations and shall
conform in all material respects to the requirements of the Securities Act and
the Regulations, and neither the Registration Statement nor the Prospectus nor
any amendment or supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(j) On the Closing Date, the Company shall have delivered to the
Representatives executed copies of the Representatives' Warrants.
(k) All proceedings taken in connection with the authorization, issuance or
sale of the Securities as herein contemplated shall be reasonably satisfactory
in form and substance to you and to counsel to the Underwriters.
(l) On the Closing Date, the Representatives shall have received the
Secondary Market Trading Survey.
(m) The Company has delivered to the Representatives the Lock-up Agreements
referred to in Paragraph 2(hh).
(n) The Company shall have received notice that the Units are eligible to
be listed on The Nasdaq SmallCap Market as of the Effective Date.
20
5. Indemnification.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each of the Underwriters, and each dealer selected
by you that participates in the offer and sale of the Securities (each a
"Selected Dealer") and each of their respective directors, officers and
employees and each person, if any, who controls any such Underwriter
("controlling person") within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, against any and all loss, liability, claim,
damage and expense whatsoever (including, without limitation, any and all legal
or other expenses reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever,
whether arising out of any action between any of the Underwriters and the
Company or between any of the Underwriters and any third party or otherwise) to
which they or any of them may become subject under the Securities 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 in (i) any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
each may be amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the
Representatives' Warrants; or (iii) any application or other document or written
communication (in this Section 5 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Units under the securities laws thereof or
filed with the Commission, any state securities commission or agency, The Nasdaq
Stock Market or any 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, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company with
respect to an Underwriter by or on behalf of such Underwriter expressly for use
in any Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be. With
respect to any untrue statement or omission or alleged untrue statement or
omission made in the Preliminary Prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of any Underwriter to the
extent that any loss, liability, claim, damage or expense of such Underwriter
results from the fact that a copy of the Prospectus was not given or sent to the
person asserting any such loss, liability, claim or damage at or prior to the
written confirmation of sale of the Securities to such person as required by the
Securities Act and the Regulations, and if the untrue statement or omission has
been corrected in the Prospectus, unless such failure to deliver the Prospectus
was a result of non-compliance by the Company with its obligations under Section
3(f) hereof. The Company agrees promptly to notify the Representatives of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors, or controlling persons in connection with the issue and
sale of the Securities or in connection with the Registration Statement or
Prospectus.
(b) If any action is brought against an Underwriter, a Selected Dealer or a
controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5(a), such Underwriter or Selected Dealer shall
promptly notify the Company in writing of the institution of such action, and
the Company shall assume the defense of such action, including the employment
and fees of counsel (subject to the reasonable approval of such Underwriter or
Selected Dealer, as the case may be) and payment of actual expenses. Such
Underwriter, Selected Dealer or controlling person 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 Underwriter, Selected Dealer or
controlling person unless (i) the employment of such counsel at the expense of
the Company shall have been authorized in writing by the Company in connection
with the defense of such action; (ii) the Company shall not have employed
21
counsel to have charge of the defense of such action; or (iii) such indemnified
party or parties shall have reasonably concluded that there will be material
defenses available to it or them which are different from or additional to those
available to the Company (in which case the Company 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 the reasonable fees and expenses of not more
than one additional firm of attorneys selected by the Underwriter, Selected
Dealer and/or controlling person shall be borne by the Company. Notwithstanding
anything to the contrary contained herein, if the Underwriter, Selected Dealer
or controlling person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement on
behalf of the Company of such action, which approval shall not be unreasonably
withheld.
(c) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Company, its directors, officers and employees and agents who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any and all loss, liability, claim,
damage and expense described in the foregoing indemnity from the Company to the
several Underwriters, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any application, in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
such Underwriter by or on behalf of the Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the several Underwriters,
by the provisions of Section 5(b).
(d) In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any person entitled to indemnification
under this Section 5 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for indemnification in
such case; or (ii) contribution under the Securities Act, the Exchange Act or
otherwise may be required on the part of any such person in circumstances for
which indemnification is provided under this Section 5, then, and in each such
case, the Company and the Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company and the Underwriters, as incurred,
in such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial offering price appearing
thereon and the Company is responsible for the balance; provided that no person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Notwithstanding the provisions
of this Section 5(d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Units underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
in respect of such losses, liabilities, claims, damages and expenses. For
purposes of this Section 5(d), each director, officer, and employee of an
Underwriter or the Company, as applicable, and each person, if any, who controls
an Underwriter or the Company, as applicable, within the meaning of Section 15
of the Securities Act shall have the same rights to contribution as the
Underwriters or the Company, as applicable.
22
(e) Within 15 days after receipt by any party to this Agreement (or its
representatives) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party ("contributing party"), notify the contributing
party of the commencement thereof, but the omission to so notify the
contributing party will not relieve it from any liability which it may have to
any other party other than for contribution hereunder. In case any such action,
suit, or proceeding is brought against any party, and such party notifies a
contributing party or its representatives of the commencement thereof within the
aforesaid fifteen days, the contributing party will be entitled to participate
therein with the notifying party and any other contributing party similarly
notified. Any such contributing party shall not be liable to any party seeking
contribution on account of any settlement of any claim, action or proceeding
effected by such party seeking contribution on account of any settlement of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of such contributing party. The contribution provisions
contained in this Section 5(e) are intended to supersede, to the extent
permitted by law, any right to contribution under the Securities Act, the
Exchange Act or otherwise available. The Underwriters' obligations to contribute
pursuant to this Section 5(e) are several and not joint.
6. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or their
obligations to purchase the Firm Units or the Option Units, if the
Over-allotment Option is exercised, hereunder, and if the number of the Firm
Units or Option Units with respect to which such default relates does not exceed
in the aggregate 10% of the number of Firm Units or Option Units that all
Underwriters have agreed to purchase hereunder, then such Firm Units or Option
Units to which the default relates shall be purchased by the non-defaulting
Underwriters in proportion to their respective commitments hereunder.
(b) In the event that the default addressed in Section 6(a) above relates
to more than 10% of the Firm Units or Option Units, you may in your discretion
arrange for yourself or for another party or parties to purchase such Firm Units
or Option Units to which such default relates on the terms contained herein. If
within one business day after such default relating to more than 10% of the Firm
Units or Option Units you do not arrange for the purchase of such Firm Units or
Option Units, then the Company shall be entitled to a further period of one
business day within which to procure another party or parties satisfactory to
you to purchase said Firm Units or Option Units on such terms. In the event that
neither you nor the Company arranges for the purchase of the Firm Units or
Option Units to which a default relates as provided in this Section 6, this
Agreement may be terminated by you or the Company without liability on the part
of the Company (except as provided in Sections 3(s) and 5 hereof) or the several
Underwriters (except as provided in Section 5 hereof); provided, however, that
if such default occurs with respect to the Option Units, this Agreement will not
terminate as to the Firm Units; and provided further that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
(c) In the event that the Firm Units or Option Units to which the default
relates are to be purchased by the non-defaulting Underwriters, or are to be
purchased by another party or parties as aforesaid, you or the Company shall
have the right to postpone the Closing Date or Option Closing Date for a
reasonable period, but not in any event exceeding five business days, in order
to effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment to the Registration Statement or
the Prospectus that in the opinion of counsel for the Underwriters may thereby
be made necessary. The term "Underwriter" as used in this Agreement shall
include any party substituted under this Section 6 with like effect as if it had
originally been a party to this Agreement with respect to such Securities.
23
7. Additional Covenants.
(a) The Company shall not take any action or omit to take any action that
would cause the Company to be in breach or violation of its Articles of
Incorporation or Bylaws.
(b) The Company agrees that it will use its best efforts to prevent the
Company from becoming subject to Rule 419 under the Securities Act, including,
without limitation, to using its best efforts to prevent any of the Company's
outstanding securities from being deemed to be a "xxxxx stock", as defined in
Rule 3a-5l-1 under the Exchange Act, during such period.
8. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates, and such representations, warranties and
agreements of the Underwriters and Company, including the indemnity agreements
contained in Section 5 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter,
the Company or any controlling person, and shall survive the issuance and
delivery of the Securities to the several Underwriters until the earlier of the
expiration of any applicable statute of limitations and the seventh anniversary
of the later of the Closing Date or the Option Closing Date, if any, at which
time the representations, warranties and agreements shall terminate and be of no
further force and effect.
9. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective on the Effective Date at the time
the Registration Statement is declared effective by the Commission.
(b) You shall have the right to terminate this Agreement at any time prior
to any Closing Date (i) if any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, general securities markets in the United States; (ii)
if trading on The New York Stock Exchange, the American Stock Exchange, the
Boston Stock Exchange or on The NASDAQ Stock Market (or successor trading
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 fixed, or maximum ranges for prices for securities shall have been required
on The Nasdaq Stock Market or by order of the Commission or any other government
authority having jurisdiction; (iii) if the United States shall have become
materially involved in a new war or an increase in major hostilities; (iv) if a
banking moratorium has been declared by a New York State or federal authority;
(v) if a moratorium on foreign exchange trading has been declared which
materially adversely impacts the United States securities market; (vi) if the
Company shall have sustained a material loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act which,
whether or not such loss shall have been insured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Shares; (vii) if any of the
Company's representations, warranties or covenants hereunder is breached, and if
not otherwise qualified by materiality, there is a material adverse effect; or
(viii) if the Representatives shall have become aware after the date hereof of
such a material adverse change in the conditions or prospects of the Company, or
such adverse material change in general market conditions, including, without
limitation, as a result of terrorist activities after the date hereof, as in the
Representatives' judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Shares or to enforce contracts made by the
Underwriters for the sale of the Securities.
24
(c) In the event that this Agreement shall not be carried out for any
reason whatsoever, within the time specified herein or any extensions thereof
pursuant to the terms herein, the obligations of the Company to pay the out of
pocket expenses related to the transactions contemplated herein shall be
governed by Section 3(p) hereof.
(d) Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement, and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 shall not be in
any way effected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
10. Miscellaneous.
(a) All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and shall be mailed, delivered or telecopied and
confirmed and shall be deemed given when so delivered or telecopied and
confirmed or if mailed, two days after such mailing.
If to the Representatives:
Newbridge Securities Corporation
0000 Xxxx Xxxxxxx Xxxxx Xxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxx X. Xxxxx, President
and
Bathgate Capital Partners LLC
0000 X. Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. X. Xxxxxx, Senior Managing Partner
If to the Company:
A4S Security, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx Siemens, President
Copy to (which shall not constitute notice to the Company):
Xxxxxx Xxxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
25
(b) The headings contained herein are for the sole purpose of convenience
of reference, and shall not in any way limit or affect the meaning or
interpretation of any of the terms or provisions of this Agreement.
(c) This Agreement may only be amended by a written instrument executed by
each of the parties hereto.
(d) This Agreement (together with the other agreements and documents being
delivered pursuant to or in connection with this Agreement) constitute the
entire agreement of the parties hereto with respect to the subject matter hereof
and thereof, and supersede all prior agreements and understandings of the
parties, oral and written, with respect to the subject matter hereof.
(e) This Agreement shall inure solely to the benefit of and shall be
binding upon the Representatives, the Underwriters, the Company and the
controlling persons, directors and officers referred to in Section 5 hereof, and
their respective successors, legal representatives and assigns, and 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.
(f) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Florida, without giving effect to
conflict of laws. The Company hereby agrees that any action, proceeding or claim
against it arising out of, relating in any way to this Agreement shall be
brought and enforced in the courts of the State of Florida of the United States
of America, and irrevocably submits to such jurisdiction, which jurisdiction
shall be exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any such
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 10(a) hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding, or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
(g) This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together shall constitute one and the
same agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the other
parties hereto.
(h) The failure of any of the parties hereto to at any time enforce any of
the provisions of this Agreement shall not be deemed or construed to be a waiver
of any such provision, nor to in any way effect the validity of this Agreement
or any provision hereof or the right of any of the parties hereto to thereafter
enforce each and every provision of this Agreement. No waiver of any breach,
non-compliance or non-fulfillment of any of the provisions of this Agreement
shall be effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver is sought; and
no waiver of any such breach, non-compliance or non-fulfillment shall be
construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
[Balance of page intentionally left blank]
26
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
A4S SECURITY, INC.
By:
------------------------
Name: Xxxxxxx Siemens
Title: President
Accepted on the date first above written.
NEWBRIDGE SECURITIES CORPORATION
Acting severally on behalf of itself
and as one of the Representatives of
the several Underwriters named in
Schedule I annexed hereto
By:
--------------------------------------------
Xxx X. Xxxxx
President
BATHGATE CAPITAL PARTNERS LLC Acting severally on behalf of itself and as one of
the Representatives of the several Underwriters named in Schedule I annexed
hereto
By:
--------------------------------------------
Xxxxx X. X. Xxxxxx
Senior Managing Partner
27
SCHEDULE I
A4S SECURITY, INC.
1,300,000 UNITS
Underwriter Number of Firm Units to be Purchased
----------- ------------------------------------
Newbridge Securities Corporation
Bathgate Capital Partners LLC
28
