1,200,000 SHARES OF COMMON STOCK
OF
JEREMY'S MICROBATCH ICE CREAM, INC.
UNDERWRITING AGREEMENT
Red Bank, New Jersey
_________, 2000
First Montauk Securities Corp.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Jeremy's MicroBatch Ice Cream, Inc., a Delaware corporation (the
"Company"), confirms its agreement with First Montauk Securities corp. (the
"Underwriter"), with respect to the sale by the Company and the purchase by the
Underwriter, of 1,200,000 shares of the Company's common stock, par value $.01
per share ("Common Stock") and with respect to the grant by the Company to the
Underwriter of the option described in Section 2(b) hereof to purchase all or
any part of 180,000 additional shares for the purpose of covering
over-allotments, if any. The aforesaid 1,200,000 shares of Common Stock (the
"Firm Securities") and together with all or any part of the 180,000 additional
shares of Common Stock subject to the over allotment option described in Section
2(b) hereof (the "Over allotment Securities") are hereinafter collectively
referred to as the "Securities". The Company will also issue and sell, for an
aggregate purchase price of $120.00, to the Underwriter, warrants (the
"Underwriter's Warrant") pursuant to the Underwriter's Warrant Agreement (the
"Underwriter's Warrant Agreement") for the purchase of an aggregate of up to
120,000 additional shares of Common Stock (the "Underwriter's Warrant Shares").
The Securities, the Underwriter's Purchase Option Agreement and Underwriter's
Warrant Shares are more fully described in the Registration Statement (as
defined in Subsection 1(a) hereof) and the Prospectus (as defined in Subsection
1(a) hereof) referred to below. Unless the context otherwise requires, all
references to the "Company" shall include all presently existing subsidiaries
and any entities created or acquired by the Company on or prior to the Closing
Date (defined in Subsection 2(c) hereof). All representations, warranties and
opinions of counsel required hereunder shall cover any such subsidiaries and
acquired entities taken as a whole.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Underwriter as of the date hereof, and as
of the Closing Date and any Over allotment Closing Date (as defined in
Subsection 2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, and an amendment or amendments thereto,
on Form SB-2 (No. 333-89625) including any related preliminary prospectus (each
a "Preliminary
Prospectus"), for the registration of the Securities, the Underwriters Warrant
and the Underwriters Warrant Shares under the Securities Act of 1933, as amended
(the "Act"), which registration statement and any amendment or amendments have
been prepared by the Company in conformity with the requirements of the Act and
the rules and regulations of the Commission under the Act. Following execution
of this Agreement, the Company will promptly file (i) if the Registration
Statement has been declared effective by the Commission, (A) a Term Sheet (as
defined in the Rules and Regulations (as hereinafter defined)) pursuant to Rule
434 under the Act or (B) a Prospectus under Rules 430A and/or 424(b) under the
Act, in either case in form satisfactory to the Underwriter or (ii) in the event
the registration statement has not been declared effective, a further amendment
to said registration statement in the form heretofore delivered to the
Underwriter and will not, before the registration statement becomes effective,
file any other amendment thereto unless the Underwriter shall have consented
thereto after having been furnished with a copy thereof. Except as the context
may otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations)(as hereinafter defined), is hereinafter called the "Registration
Statement" and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part thereof and
no proceedings for a stop order have been instituted or are pending or, to
the best knowledge of the Company, threatened. Each of the Preliminary
Prospectus, the Registration Statement and the Prospectus at the time of
filing thereof conformed in all material respects with the requirements of
the Act and the Rules and Regulations, and neither the Preliminary
Prospectus, the Registration Statement nor the Prospectus at the time of
filing thereof, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein and necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does not
apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to
the Underwriter by or on behalf of the Underwriter expressly for use in such
Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Over allotment
Closing Date (as hereinafter defined) and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all material statements which are required to be stated therein in
compliance with the Act and the
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Rules and Regulations, and will in all material respects conform to the
requirements of the Act and the Rules and Regulations; neither the Registration
Statement, nor any amendment thereto, at the time the Registration Statement or
such amendment is declared effective under the Act, 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, not misleading, and
the Prospectus at the time the Registration Statement becomes effective, at the
Closing Date and at any Over allotment Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, not misleading; provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information supplied to the
Company in writing by or on behalf of the Underwriter expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto.
(d) The Company has been duly incorporated and is now, and at the
Closing Date and any Over allotment Closing Date will be, validly existing as
a corporation in good standing under the laws of the State of Delaware. The
Company does not own, directly or indirectly, an interest in any corporation,
partnership, trust, joint venture or other business entity; provided, that
the foregoing shall not be applicable to the investment of the net proceeds
from the sale of the Securities in short-term, low-risk investments as set
forth under "Use of Proceeds" in the Prospectus and provided further, except
to the extent that any failure of the Company to comply with the foregoing
does not have a material adverse effect on the Company. The Company is duly
qualified to do business and in good standing as a foreign corporation in
each jurisdiction in which its ownership or leasing of its properties or the
character of its operations require such qualification to do business, except
where the failure to so qualify would not have a material adverse effect on
the Company. The Company has all requisite power and authority (corporate and
other), and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters),
to own or lease its properties and conduct its business as described in the
Prospectus; the Company is and has been doing business in compliance with all
such authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state, local and foreign laws, rules and
regulations upon the Company; and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operation of
the Company. The disclosures, if any, in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the Company's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not
misleading.
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(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption
"Capitalization" and will have the adjusted capitalization set forth therein
on the Closing Date, based upon the assumptions set forth therein, and the
Company is not a party to or bound by any instrument, agreement or other
arrangement providing for the Company to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Securities, the Underwriter's
Warrant and the Underwriter's Warrant Shares and all other securities issued
or issuable by the Company conform or, when issued and paid for, will conform
in all respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company, or similar contractual rights granted by the Company to subscribe
for or purchase securities. The Securities, the Underwriter's Warrant and the
Underwriter's Warrant Shares to be issued and sold by the Company hereunder,
and upon payment therefor, are not and will not be subject to any preemptive
or other similar rights of any stockholder to subscribe for or purchase
securities, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof and thereof, will be validly
issued, fully paid and non-assessable and will conform to the descriptions
thereof contained in the Prospectus; the holders thereof will not be subject
to any liability solely as such holders; all corporate action required to be
taken for the authorization, issuance and sale of the Securities, the
Underwriter's Warrant and the Underwriter's Warrant Shares has been duly and
validly taken; and the certificates, if any, representing the Securities and
the Underwriter's Warrant Shares will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Securities to be
sold to the Underwriter by the Company hereunder, the Underwriter will
acquire good and marketable title to such Securities free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement,
the Preliminary Prospectus and the Prospectus fairly present the financial
position and the results of operations of the Company at the respective dates
and for the respective periods to which they apply; and such financial
statements have been prepared in conformity with generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. There has been no material adverse change or
development involving a prospective change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business, or results of operation of the Company,
whether or not arising in the ordinary course of business, since the dates of
the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and
intangible, and the business of the Company, conform in all material respects
to the descriptions thereof contained in the Registration Statement and in
the Prospectus.
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(g) BDO ▇▇▇▇▇▇▇ LLP whose report is filed with the Commission as a
part of the Registration Statement, is an independent certified public
accountant as required by the Act and the Rules and Regulations.
(h) The Company (i) has paid all federal, state, local, and foreign
taxes for which it is liable, including, but not limited to, withholding
taxes and taxes payable under the Internal Revenue Code of 1986 (the "Code"),
(ii) has furnished all tax and information returns it is required to furnish
pursuant to the Code, and has established adequate reserves for such taxes
which are not due and payable, and (iii) does not have knowledge of any tax
deficiency or claims outstanding, proposed or assessed against it.
(i) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to be
adequate for its business, including, but not limited to, personal injury and
product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(j) There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, pending or to the knowledge of the Company threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of the Company which: (i) questions the validity of the capital
stock of the Company or this Agreement or of any action taken or to be taken
by the Company pursuant to or in connection with this Agreement; (ii) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects); or (iii) might
materially affect the condition, financial or otherwise, or the earnings,
business affairs, position, prospects, value, operation, properties, business
or results of operations of the Company.
(k) The Company has full legal right, power and authority to enter
into this Agreement, the Underwriter's Warrant Agreement, the Consulting
Agreement (as described in Section 4(x) hereof) and to consummate the
transactions provided for in such agreements; and this Agreement, the
Underwriter's Warrant Agreement and the Consulting Agreement have each been
duly authorized, executed and delivered by the Company. Each of this
Agreement, the Underwriter's Warrant Agreement and the Consulting Agreement,
constitutes a legally valid and binding agreement of the Company, subject to
due authorization, execution and delivery by the Underwriter, enforceable
against the Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights
to indemnity or contribution may be limited by applicable law). Neither the
Company's execution or delivery of this Agreement, the Underwriter's Warrant
Agreement, or the Consulting Agreement, its performance hereunder and
thereunder, its consummation of the transactions
5
contemplated herein and therein, nor the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
material breach or violation of any of the terms or provisions of, or
constitutes or will constitute a material default under, or result in the
creation or imposition of any material lien, charge, claim, encumbrance, pledge,
security interest defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of: (i) the Certificate of Incorporation or ByLaws of the Company;
(ii) any material license, contract, indenture, mortgage, deed of trust, voting
trust agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of its properties or assets (tangible or
intangible) is or may be subject; or (iii) any statute, judgment, decree, order,
rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company or
any of its activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic
or foreign, is required for the performance by the Company of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriter's purchase and distribution of
the Firm Securities and Over allotment Securities to be sold by the Company
hereunder; or (ii) the issuance and delivery of the Underwriter's Warrant or
the Underwriter's Warrant Shares.
(m) All executed agreements or copies of executed agreements (whether
electronically scanned or otherwise) filed as exhibits to the Registration
Statement to which the Company is a party or by which the Company may be
bound or to which any of its assets, properties or businesses may be subject
have been duly and validly authorized, executed and delivered by the Company,
and constitute legally valid and binding agreements of the Company,
enforceable against it in accordance with their respective terms, except to
the extent there is no material adverse effect upon the Company. The
descriptions contained in the Registration Statement of contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Rules and
Regulations and there are no material contracts or other documents which are
required by the Act or the Rules and Regulations to be described in the
Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required, and the exhibits which have
been filed are materially or substantially complete and correct copies of the
documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has
not: (i) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money in any material amount; (ii) entered
into any
6
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business; or
(v) made any material changes in or affecting the general affairs, management,
financial operations, stockholders equity or results of operations of the
Company.
(o) No default exists in the due performance and observance of any
material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by which
any of the Company may be bound or to which any of its property or assets
(tangible or intangible) of the Company is subject or affected except where
such default does not, and will not, have a material adverse effect upon the
Company.
(p) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance in all material
respects with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours.
(q) Since its inception, the Company has not incurred any liability
arising under or as a result of the application of the provisions of the Act.
(r) Except as disclosed in the Prospectus, the Company does not
presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed to, any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan " or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37) respectively of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). Except as disclosed in the Prospectus, the
Company does not maintain or contribute, now or at any time previously, to a
defined benefit plan, as defined in Section 3(35) of ERISA.
(s) The Company is not in violation of any domestic or foreign laws,
ordinances or governmental rules or regulations to which it is subject.
(t) No holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the
Company or to require the Company to file a registration statement under the
Act.
(u) Neither the Company, nor, to the Company's best knowledge after
due inquiry, any of its employees, directors, stockholders or affiliates
(within the meaning of the Rules and Regulations) has taken, directly or
indirectly, any action designed to or which has constituted or
7
which 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 or otherwise.
(v) None of the patents, patent applications, trademarks, service
marks, trade names and copyrights, or licenses and rights to the foregoing
presently owned or held by the Company is in dispute or are in any conflict
with the right of any other person or entity within the Company's current
area of operations nor has the Company received notice of any of the
foregoing. The Company: (i) owns or has the right to use, free and clear of
all liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever, all
patents, trademarks, service marks, trade names and copyrights, technology
and licenses and rights with respect to the foregoing, used in the conduct of
its business as now conducted or proposed to be conducted without infringing
upon or otherwise acting adversely to the right or claimed right of any
person, corporation or other entity under or with respect to any of the
foregoing; and (ii) except as set forth in the Prospectus, is not obligated
or under any liability whatsoever to make any payments by way of royalties,
fees or otherwise to any owner or licensee of, or other claimant to, any
patent, trademark, service ▇▇▇▇ trade name, copyright, know-how, technology
or other intangible asset, with respect to the use thereof or in connection
with the conduct of its business or otherwise.
(w) The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all the material trade secrets,
trademarks, know-how (including unpatented and/or unpatentable proprietary
and confidential information) technical data and information ("Intellectual
Property") material to its operations.
(x) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
owned or leased by it free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects, or other restrictions or
equities of any kind whatsoever, other than liens for taxes or assessments
not yet due and payable.
(y) The Company has not incurred any liability and there are no
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or any other
arrangements, agreements, understandings, payments or issuances with respect
to the Company or any of its officers, directors, employees or affiliates
that may adversely affect the Underwriter's compensation, as determined by
the National Association of Securities Dealers, Inc. ("NASD").
(z) The Firm Securities have been approved for quotation on the
Nasdaq SmallCap Market of the Nasdaq Stock Market, Inc. and the Boston Stock
Exchange, subject to official notice of issuance.
8
(aa) Neither the Company nor any of its respective officers,
employees, agents 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
(domestic or foreign) or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or foreign)
or other person who was, is, or may be in a position to help or hinder the
business of the Company (or assist the Company in connection with any actual
or proposed transaction) which: (i) might subject the Company, or any other
such person to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign); (ii) if not given in the
past, might have had a materially adverse effect on the assets, business or
operations of the Company; and (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 are sufficient to cause
the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
(bb) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any
such person or entity or the Company, has or has had, either directly or
indirectly, (i) a material interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or
sells or furnishes to the Company any goods or services, except with respect
to the beneficial ownership of not more than 1% of the outstanding shares of
capital stock of any publicly-held entity; or (ii) a beneficial interest in
any material contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus
under "Certain Transactions", there are no presently existing, and have not
been during the last three years prior to the date hereof, any agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company,
and any officer, director, or principal stockholder of the Company, or any
affiliate or associate of any such person or entity.
(cc) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriter's counsel shall be deemed
a representation and warranty by the Company to the Underwriter as to the
matters covered thereby.
(dd) The Company has entered into employment agreements with each of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ upon the terms as described in the
Prospectus. The Employment Agreements are valid and binding agreements on
each of the Company, ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇, respectively, and have been
duly and validly authorized by the Board of Directors of the company, and are
enforceable in accordance with their terms. The Company has obtained key-man
life insurance policy with respect to such individuals in an amount of at
least $1,000,000 and the Company is the beneficiary of said insurance
policies.
9
(ee) No securities of the Company have been sold by the Company since
its inception, except as disclosed in Part II of the Registration Statement.
(ff) The minute books of the Company have been made available to
Underwriter's counsel and contain a complete summary of all meetings and
actions of the Board of Directors and Stockholders of the Company since the
date of its inception. the stock ledger books have also been delivered to the
Underwriter's counsel, and are accurate and complete in all respects.
(gg) Except as disclosed in writing to the Underwriter no officer, or
director or to the Company's knowledge, stockholder of the Company has any
affiliation or association with any member of the NASD.
(hh) The Company has filed Form 8-A with the Commission providing for
the registration under the Exchange Act of its Common Stock.
2. Purchase, Sale and Delivery of the Securities and Agreement to
Issue Underwriter's Warrant.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriter, and the Underwriter
agrees to purchase from the Company, 1,200,000 shares of Common Stock at a
net purchase price of $5.40 per share.
(b) Payment of the purchase price for, and delivery of definitive
certificates in negotiable form for, the Firm Securities shall be made at the
offices of the Underwriter at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ or at such other place as shall be designated by the Underwriter. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
February ___, 2000 or at such other time and date as shall be designated by
the Underwriter but not less than three (3) nor more than five (5) business
days after the effective date of the Registration Statement (such time and
date of payment and delivery being hereafter called "Closing Date"). In
addition, in the event that any or all of the Over allotment Securities are
purchased by the Underwriter, payment of the purchase price for, and delivery
of certificates for such Over allotment Securities shall be made at the
above-mentioned office or at such other place and at such time (such time and
date of payment and delivery being hereinafter called "Over allotment Closing
Date") as shall be agreed upon by the Underwriter and the Company on each
Over allotment Closing Date as specified in the notice from the Underwriter
to the Company. Delivery of the certificates for the Firm Securities and the
Over allotment Securities, if any, shall be made to the Underwriter against
payment by the Underwriter of the purchase price for the Firm Securities and
the Over allotment Securities, if any, to the order of the Company as the
case may be by certified check in New York Clearing House funds, certificates
for the Firm Securities and the Over allotment Securities, if any, shall be
in definitive, fully registered form, shall bear no restrictive legends and
shall be in such denominations and registered in such names as the
Underwriter may request in writing at least two (2) business days prior to
Closing Date or the
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relevant Over allotment Closing Date, as the case may be. The certificates for
the Firm Securities and the Over allotment Securities, if any, shall be made
available to the Underwriter at the above-mentioned office or such other place
as the Underwriter may designate for inspection, checking and packaging no later
than 9:30 a.m. on the last business day prior to Closing Date or the relevant
Over allotment Closing Date, as the case may be.
(c) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase up to an additional 180,000 shares of Common Stock.
The option granted hereby will expire 45 days after the date of this
Agreement, and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Firm Securities upon notice by the
Underwriter to the Company setting forth the number of Over allotment
Securities as to which the Underwriter is then exercising the option and the
time and date of payment and delivery for such Over allotment Securities. Any
such time and date of delivery shall be determined by the Underwriter, but
shall not be later than seven full business days after the exercise of said
option, nor in any event prior to the Closing Date, as defined in paragraph
(c) below, unless otherwise agreed to between the Underwriter and the
Company. Nothing herein contained shall obligate the Underwriter to make any
over-allotments. No Over allotment Securities shall be delivered unless the
Firm Securities shall be simultaneously delivered or shall theretofore have
been delivered as herein provided.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriter, the Underwriter's Warrant at a purchase price of $120.00 which
Underwriter's Warrant shall entitle the holders thereof to purchase an
aggregate of 120,000 shares of Common Stock. The Underwriter's Warrant shall
be exercisable for a period of four (4) years commencing one (1) year from
the effective date of the Registration Statement at an initial exercise price
equal to one hundred forty-five percent (145%) of the initial public offering
price of the Firm securities. The Underwriter's Warrant Agreement and form of
Warrant Certificate shall be substantially in the form filed as an Exhibit to
the Registration Statement. Payment for the Underwriter's Warrant shall be
made on the Over Allotment Closing Date. The Underwriter's Warrants shall not
be sold, transferred, hypothecated or pledged except to members of the
Selling Group, if any, and the bona fide officers of the Underwriter or the
Selling Group members.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Underwriter deems advisable, but in no
event more than five (5) business days after such effective date, the
Underwriter shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities
is required and has not become effective) at the price and upon the other
terms set forth in the Prospectus and otherwise in compliance with the Rules
and Regulations. The Underwriter may allow such concessions and discounts
upon sales to other dealers as set forth in the Prospectus. After the
completion of the initial public offering, the Underwriter may from time to
time increase or
11
decrease the public offering price, the concessions and the reallowance to such
extent as the Underwriter, in its sole discretion, deems advisable.
4. Covenants of the Company. The Company covenants and agrees with
the Underwriter as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective
date of the Registration Statement, file any amendment to the Registration
Statement or supplement to the Prospectus or file any document under the
Exchange Act or within 25 days after the Closing Date except for Form 8-A:
(i) before termination of the offering of the Securities by the Underwriter
which the Underwriter shall not previously have been advised and furnished
with a copy; or (ii) to which the Underwriter shall have objected; or (iii)
which is not in compliance with the Act, the Exchange Act or the Rules and
Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Underwriter and confirm by notice in writing: (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective;
(ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening of any proceeding, suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution or proceeding for that
purpose; (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Securities for
offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose; (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every
reasonable effort to obtain promptly the lifting of such order.
(c) If required under the Act or the Rules or Regulations, the
Company shall file the Prospectus (in form and substance satisfactory to the
Underwriter) or transmit the Prospectus by a means reasonably calculated to
result in filing with the Commission pursuant to Rule 424(b)(1) (or, if
applicable and if consented to by the Underwriter pursuant to Rule 424(b)(4))
not later than the Commission's close of business on the earlier of (i) the
second business day following the execution and delivery of this Agreement
and (ii) the fifth business day after the effective date of the Registration
Statement.
(d) The Company will give the Underwriter notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company
12
proposes for use by the Underwriter in connection with the offering of the
Securities which differs from the corresponding prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether or
not such revised prospectus is required to be filed pursuant to Rule 424(b) of
the Rules and Regulations), will furnish the Underwriter with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Underwriter or Underwriter's counsel, shall reasonably object.
(e) The Company shall cooperate in good faith with the Underwriter,
and Underwriter's counsel, at or prior to the time the Registration Statement
becomes effective, in endeavoring to qualify the Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, and shall cooperate with the Underwriter and
Underwriter's counsel in the making of such applications, and filing such
documents and shall furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general consent to service of process in any
such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Underwriter agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file
and make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with
all requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings
in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If at any time when the
Prospectus relating to the Securities is required to be delivered under the
Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or Underwriter's counsel, the Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend
the Prospectus to comply with the Act, the Company will notify the
Underwriter promptly and prepare and file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Act, each such
amendment or supplement to be reasonably satisfactory to Underwriter's
counsel, and the Company will furnish to the Underwriter a reasonable number
of copies of such amendment or supplement.
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period commencing on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such
fiscal quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Rules and
13
Regulations, and to the Underwriter, an earnings statement which will be in such
form and detail required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(h) During a period of five (5) years after the date hereof and
provided that the Company is required to file reports with the Commission
under Section 12 of the Exchange Act, the Company will furnish to its
stockholders, as soon as practicable, annual reports (including financial
statements audited by independent public accountants), and will deliver to
the Underwriter:
(i) as soon as they are available, copies of all reports (financial
or other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or
any securities exchange;
(iii) every press release and every material news item or article of
interest to the financial community in respect of the Company and any future
subsidiaries or their affairs which was released or prepared by the Company;
(iv) any additional information of a public nature concerning the
Company and any future subsidiaries or their respective businesses which the
Underwriter may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4 received
or filed by the Company from time to time.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) For as long as the Company is required to file reports with the
Commission under Section 12 of the Exchange Act, the Company will maintain a
registrar and transfer agent for its Common Stock, which shall be reasonably
acceptable to the Underwriter.
(j) The Company will furnish to the Underwriter or pursuant to the
Underwriter's direction, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which
copies will be signed and will include all financial statements and
exhibits), the Prospectus, and all amendments and supplements thereto,
including any
14
prospectus prepared after the effective date of the Registration Statement, in
each case as soon as available and in such quantities as the Underwriter may
reasonably request.
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company except as may be
permitted under the Exchange Act.
(l) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth under the
caption "Use of Proceeds" in the Prospectus. No portion of the net proceeds
will be used directly or indirectly to acquire any securities issued by the
Company.
(m) For a period of five (5) years following the effective date of
the Registration Statement, the Company shall timely file all such reports,
forms or other documents as may be required from time to time, under the Act,
the Exchange Act, and the Rules and Regulations, and all such reports, forms
and documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Over
allotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) days prior to the date of the Registration
Statement) which have been read by the Company's independent public
accountants, as stated in their letters to be furnished pursuant to Section
6(k) hereof.
(o) For a period of five (5) years from the Closing Date, the Company
shall furnish to the Underwriter at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Securities upon the
Underwriter's request; (ii) a list of holders of Common Stock upon the
Underwriter's request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Underwriter's request.
(p) Until a date which is three (3) years from the Closing Date , the
Underwriter shall be entitled to appoint an individual who shall be permitted
to attend all meetings of the Board and to receive all notices and other
correspondence and communications sent by the Company to members of the
Board, and copies of all minutes thereof. The Company shall reimburse the
Underwriter's designee for his or her out-of-pocket
15
expenses reasonably incurred and authorized in advance by the Company in
connection with his or her attendance of the Board meetings. To the extent
permitted by law, the Company agrees to indemnify and hold the designee (as a
director or observer) and the Underwriter harmless against any and all claims,
actions, awards and judgements arising out of his or her service as a director
or an observer and the Company shall maintain a liability insurance policy in an
amount of not less than $1,000,000 affording coverage for the action of its
officer and directors, to include such designee and the Underwriter as an
insured under such policy. The Underwriter's nominee or designee, as the case
may be, shall agree not to disclose any non-public information and shall, if
requested by the Company, execute and deliver a non-disclosure agreement upon
terms reasonably acceptable to the Company.
(q) For a period equal to the lesser of (i) five (5) years from the
date hereof, or (ii) the sale to the public of the Underwriter's Warrant
Shares, the Company will not take any action or actions that may prevent or
disqualify the Company's use of Form SB-2 or, if applicable, Form S-3 (or
other appropriate form) for the registration under the Act of the
Underwriter's Warrant Shares.
(r) For a period of five (5) years from the date hereof, use its best
efforts at its cost and expense to maintain the listing of the Company's
Common Stock on the Nasdaq SmallCap or National Market System and the Boston
Stock Exchange.
(s) Following the Effective Date of the Registration Statement and
for a period of two (2) years thereafter, the Company shall, at its sole cost
and expense, prepare and file such blue sky trading applications with such
jurisdictions as the Underwriter may reasonably request after consultation
with the Company, and on the Underwriter's request, furnish the Underwriter
with a secondary trading survey prepared by securities counsel to the
Company.
(t) During the term of any existing employment agreement between the
Company and an executive officer, the Company shall not amend or alter the
terms of any written or oral employment agreement between the Company and any
executive officer in a manner more favorable to such employee without the
prior consent of the Underwriter, which consent shall not be unreasonably
withheld by the Underwriter. For a period of three (3) years from the date
hereof prior to the Company entering into any oral or written employment
agreement with any person who will, upon commencement of such persons duties
be deemed an executive officer, the Company shall consult with the
Underwriters and the entire Board of Directors as to the proposed terms of
such employment.
(u) Until the completion of the distribution of the Securities, the
Company shall not without the prior written consent of the Underwriter, which
consent shall not be unreasonably withheld, issue, directly or indirectly,
any press release or other communication or hold any press conference with
respect to the Company or its activities or the offering contemplated hereby,
other
16
than trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations.
(v) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of five (5) years
from the Closing Date.
(w) On the Closing Date, the Company and the Underwriter shall enter
into a financial consulting agreement, in the form filed as an Exhibit to the
Registration Statement, pursuant to which the Underwriter will provide
financial consulting services to the Company for a two year period for an
aggregate fee of $2,500 per month, payable in full at the Closing and the
term of which shall commencing on the Closing Date (the "Financial Consulting
Agreement"). Among other provisions, the Consulting Agreement shall contain
terms which provide that the Company shall pay the Underwriter a fee equal to
five (5%) percent of the amount up to $5,000,000 and two and one half (2 1/2
percent) of the excess, if any, over $5,000,000 of the consideration involved
in any transaction (regardless of the form of transaction, whether by merger,
acquisition or sale of assets or otherwise) consummated by the Company with a
party introduced by the Underwriter to the Company for a period of four (4)
years commencing on the Closing Date.
(x) For a period of 12 months commencing on the Closing Date, except
with the written consent of the Underwriter, will not issue or sell, directly
or indirectly, any shares of its capital stock, or sell or grant options, or
warrants or rights to purchase any shares of its capital stock, except
pursuant to (i) this Agreement, (ii) the Underwriter's Warrant , (iii) the
exercise of warrants and options of the Company heretofore issued and
described in the Prospectus, and (iv) the grant of options and the issuance
of shares issued upon exercise of options issued or to be issued under the
Company's stock option plans as described in the Prospectus. Except as
discussed in the Prospectus, prior to the Closing Date, the Company will not
issue any options or warrants without the prior written consent of the
Underwriter.
(y) The Company will not file any registration statement relating to
the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the 24 months following the
Closing Date without the Underwriter's prior written consent.
(z) Subsequent to the dates as of which information is given in the
Registration Statement and Prospectus and prior to the Closing Dates, except
as disclosed in or contemplated by the Registration Statement and Prospectus,
(i) the Company will not have incurred any liabilities or obligations, direct
or contingent, or entered into any material transactions other than in the
ordinary course of business; (ii) there shall not have been any change in the
capital stock, funded debt (other than regular repayments of principal and
interest on existing indebtedness) or other securities of the Company, any
material adverse change in the condition (financial or other), business,
operations, income, net worth or properties, including any material loss or
damage to the properties of the Company (whether or not such loss is insured
against), which could materially adversely affect the condition (financial or
other), business, operations, income, net
17
worth or properties of the Company; and (iii) the Company shall not pay or
declare any dividend or other distribution on its Common Stock or its other
securities or redeem or repurchase any of its Common Stock or other securities.
(aa) Except as disclosed in or contemplated by the Registration
Statement and Prospectus, the Company, for a period of 24 months following
the Closing Date, shall not redeem any of its securities, and shall not pay
any dividends or make any other cash distribution in respect of its
securities in excess of the amount of the Company's current or retained
earnings derived after the Closing Date without obtaining the Underwriter's
prior written consent, which consent shall not be unreasonably withheld.
(bb) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurance 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.
(cc) On or before the effective date of the Registration Statement,
the Company shall cause to be duly executed legally binding and enforceable
agreements pursuant to which (i) each of the Company's officers and
directors, has agreed not to, directly or indirectly, offer to sell, sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise encumber any of their shares of Common Stock or other securities
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein for a period of not less than 12
months from the date hereof, (ii) all other persons owning the Company's
Common Stock (or Securities convertible into Common Stock) have agreed not
to, directly or indirectly, offer to sell, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate or otherwise encumber any of
their shares of Common Stock or other securities (either pursuant to Rule 144
of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of not less than 12 months. In addition, all
such persons shall also agree not to sell more than 25% of the shares per
quarter of the Common Stock owned by them during the period commencing on the
12th month to the 24th month. The Company will cause the Transfer Agent, as
defined below, to ▇▇▇▇ an appropriate legend on the face of stock
certificates representing all of such shares of Common Stock.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date and the
Over allotment Closing Date (to the extent not paid at the Closing Date) all
its expenses and fees (other than fees of Underwriter's Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation: (i) the fees
18
and expenses of accountants and counsel for the Company; (ii) all costs and
expenses incurred in connection with the preparation, duplication, mailing,
printing and filing of the Registration Statement and the Prospectus and any
amendments and supplements thereto and the printing, mailing and delivery of
this Agreement, the Selected Dealer Agreements, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriter in quantities as hereinabove stated; (iii) the printing, engraving,
issuance and delivery of the Securities and Underwriter's Warrant Shares
including any transfer or other taxes payable thereon; (iv) disbursements and
fees of Underwriter's counsel in connection with the qualification of the
Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, which Underwriter's counsel fees (exclusive of filing fees and
disbursements) shall equal $35,000 and of which $10,000 has previously been
paid; (v) advertising costs and expenses, including but not limited to costs and
expenses in connection with one information meeting held in New York, New York,
one tombstone advertisement, at least four bound volumes of the Offering
documents for the Underwriter and its counsel and prospectus memorabilia; (vi)
fees and expenses of the transfer agent; (vii) the fees payable to the NASD; and
(viii) the fees and expenses incurred in connection with the listing of the
Securities on the Nasdaq SmallCap Market and Boston Stock Exchange. All fees and
expenses payable to the Underwriter hereunder shall be payable at the Closing
Date or Over allotment Closing Date, as applicable; provided, however, the
company shall pay such fees and costs in advance of the Closing Date if
requested by the Underwriter. The Underwriter shall be responsible for all of
its own costs of counsel.
(b) If this Agreement is terminated by the Underwriter in accordance
with the provisions of Section 6, Section 10(a) or Section 11, the Company
shall reimburse and indemnify the Underwriter for up to $50,000 out-of-pocket
actual expenses reasonably incurred in connection with the transactions
contemplated hereby including the fees and disbursements of counsel for the
Underwriter of which the Underwriter acknowledges $20,000 has been paid prior
to the date hereof. To the extent that the actual expenses incurred by the
Underwriter are less than $20,000, any excess shall be repaid to the Company.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to the
Underwriter a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Firm
Securities, $20,000 of which has been paid to date to the Underwriter . The
Company will pay the remainder of the non-accountable expense allowance on
the Closing Date by certified or bank cashier's check or, at the election of
the Underwriter , by deduction from the proceeds of the offering contemplated
herein. In the event the Underwriter elect to exercise the over-allotment
option described in Section 2(b) hereof, the Company further agrees to pay to
the Underwriter on the Over allotment Closing Date (by certified or bank
cashier's check or, at the Underwriter's election, by deduction from the
proceeds of the offering) a non-accountable expense
19
allowance equal to three percent (3%) of the gross proceeds received by the
Company from the sale of the Over allotment Securities.
6. Conditions of the Underwriter's Obligations. The obligations of
the Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date
and each Over allotment Closing Date, if any, as if they had been made on and
as of the Closing Date or each Over allotment Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Over allotment Closing
Date, if any, of the statements of officers of the Company made pursuant to
the provisions hereof; and the performance by the Company on and as of the
Closing Date and each Over allotment Closing Date, if any, of each of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriter, and, at
Closing Date and each Over allotment Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
shall be pending or contemplated to the knowledge of the Company 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
Underwriter's counsel. If the Company has elected to rely upon Rule 430A of
the Rules and Regulations, the price of the Securities and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) of the Rules and Regulations within the
prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Underwriter of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's opinion, and the opinion of its
counsel is material or omits to state a fact which, in the Underwriter's
opinion, is material and is required to be stated therein or is necessary to
make the statements therein not misleading, or that the Prospectus, or any
supplement thereto, contains an untrue statement of fact which, in the
Underwriter's reasonable opinion, or the opinion of its counsel is material,
or omits to state a fact which, in the Underwriter's reasonable opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) At the Closing Date and the Over allotment Closing Date, the
Underwriter shall have received the favorable opinion of Eckert, Seamans,
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC, counsel to the Company, dated the Closing Date, or Over
allotment Closing Date,
20
as the case may be, addressed to the Underwriter and in form and substance
satisfactory to Underwriter's counsel, to the effect that:
(i)(A) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware with
full corporate power and authority to own or lease its properties and to
carry on its business as set forth in the Registration Statement and
Prospectus; (B) the Company is duly qualified as a foreign corporation in all
jurisdictions in which by reason of maintaining an office in such
jurisdiction or by owning or leasing real property in such jurisdiction it is
required to be so qualified except where the failure to be so qualified would
have no material adverse effect upon the business, properties, results of
operations, conditions (financial or otherwise) affairs or properties of the
Company (a "Material Adverse Effect"); and (C) to the best of counsel's
knowledge, the Company has not received any notice of proceedings relating to
the revocation or modification of any such license or qualification which
revocation or modification would have a Material Adverse Effect upon the
Company.
(ii) The Registration Statement, each Preliminary Prospectus that has
been circulated and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements, schedules and other
financial and statistical data included therein, as to which no opinion need
be rendered) comply as to form in all material respects with the requirements
of the Act and Regulations and the conditions for use of a registration
statement on Form SB-2 have been satisfied by the Company.
(iii) Except as described in the Prospectus, the Company does not own
an interest of a character required to be disclosed in the Registration
Statement in any corporation, partnership, joint venture, trust or other
business entity;
(iv) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus as of the date indicated
therein, under the caption "Capitalization". The Securities, Underwriter's
Warrant and the Underwriter's Warrant Shares conform or upon issuance will
conform in all material respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and all shares of capital stock are fully paid and non-assessable; the
holders thereof are not, except by reason of their own conduct or acts,
subject to personal liability by reason of being such holders, and none of
such securities were issued in violation of the preemptive rights of any
holder of any security of the Company. The Securities to be sold by the
Company hereunder, the Underwriter's Warrant to be sold by the Company under
the Underwriter's Warrant Agreement and Underwriter's Warrant Shares have
been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and non-assessable
and conform or upon issuance will conform to the description thereof
contained in the Prospectus; are not, subject to any preemptive or other
similar rights of any stockholder of the Company; that, to such counsel's
knowledge, the holders of the Securities and Underwriter's Warrant Shares
shall not be personally
21
liable for the payment of the Company's debts solely by reason of being such
holders except as they may be liable by reason of their own conduct or acts; and
that the certificates representing the Securities, Underwriter's Warrant and
Underwriter's Warrant Shares are in due and proper legal form. Upon delivery of
the Securities to the Underwriter against payment therefor as provided for in
this Agreement, the Underwriter (assuming they are bona fide purchasers within
the meaning of the Uniform Commercial Code) will acquire good title to the
Securities, free and clear of all liens, encumbrances, equities, security
interests and claims.
(v) The Registration Statement has been declared effective under the
Act, and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and, 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 or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A) there are no
material contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto, and (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto regarding such material contracts or other
documents to which the Company is a party or by which it is bound, are
accurate in all material respects and fairly represent the information
required to be shown by Form SB-2 and the Rules and Regulations;
(vii) This Agreement, the Underwriter's Warrant Agreement and the
Financial Consulting Agreement have each been duly and validly authorized,
executed and delivered by the Company, and assuming that each is a valid and
binding agreement of the Underwriter , as the case may be, constitutes a
legally valid and binding agreement of the Company, enforceable as against
the Company in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
or affecting enforcement of creditors rights and the application of equitable
principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law or pursuant to
public policy).
(viii) Neither the execution or delivery by the Company of this
Agreement, the Underwriter's Warrant Agreement or the Financial Consulting
Agreement, nor its performance hereunder or thereunder, nor its consummation
of the transactions contemplated herein or therein, nor the conduct of its
business as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, nor the issuance of the Securities
pursuant to this Agreement, conflicts with or will conflict with or results
or will result in any material breach or violation of any of the terms or
provisions of, or constitutes or will constitute a material default under, or
result in the creation imposition of any material lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever upon, any property or assets (tangible or intangible)
of the Company except to the extent such event will not have a Material
22
Adverse Effect pursuant to the terms of, (A) the Certificate of Incorporation or
By-Laws of the Company, (B) any material indenture, mortgage, deed of trust,
voting trust agreement, stockholders agreement, note, loan or credit agreement
or any other agreement or instrument that is material to the Company to which
the Company is a party or by which it is bound or to which its properties or
assets (tangible or intangible) are subject, or any indebtedness, or (C) any
statute, judgment, decree, order, rule or regulation applicable to the Company
or any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, having jurisdiction over the Company or any of its
respective activities or properties.
(ix) No consent, approval, authorization or order, and no filing
with, any court, regulatory body, government agency or other body (other than
such as may be required under state securities laws or the NASD, as to which
no opinion need be rendered) is required in connection with the issuance by
the Company of the Securities pursuant to the Prospectus and the Registration
Statement, the performance of this Agreement, the Underwriter's Warrant
Agreement and the Financial Consulting Agreement by the Company, and the
taking of any action by the Company contemplated hereby or thereby, which has
not been obtained;
(x) Except as described in the Prospectus, the Company is not in
breach of, or in default under, any material term or provision of any
indenture, mortgage, installment sale agreement, deed of trust, lease, voting
trust agreement, stockholders' agreement, note, loan or credit agreement or
any other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which any of the property or
assets (tangible or intangible) of the Company is subject or affected; and
the Company is not in violation of any material term or provision of its
Certificate of Incorporation or By-Laws or in violation of any material
franchise, license, permit, judgment, decree, order, statute, rule or
regulation material to the Company business;
(xi) The statements in the Prospectus under the captions "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF SECURITIES STOCK," and "SHARES ELIGIBLE FOR
FUTURE SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations
or legal conclusions, are correct in all material respects;
(xii) To the best of such counsel's knowledge after due inquiry, no
person, corporation, trust, partnership, association or other entity holding
securities of the Company has the contractual right to include and/or
register any securities of the Company in the Registration Statement, require
the Company to file any registration statement or, if filed, to include any
security in such registration statement;
(xiii) the Securities are eligible for listing on the Nasdaq SmallCap
Market; and
23
(xiv) Jeremy's Microbatch Ice Creams LLC has become a wholly owned
subsidairy of the Company upon the terms described in the Prospectus and the
former members of Jeremy's Microbatch Ice creams LLC has received not more
than 1,800,000 shares of Common Stock of the Company in exchange for all the
membership interests.
In addition, such counsel shall state that in connection with the
preparation of the Registration Statement and the Prospectus such counsel has
participated in conferences with officers and other representatives of the
Company, Underwriters of the independent public accountants for the Company
and Underwriters of the Underwriter at which the contents of the Registration
Statement, the Prospectus and related matters were discussed and, although
such counsel is not passing upon, has not verified, and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus and made no
independent check or verification thereof, on the basis of the foregoing, no
facts have come to the attention of such counsel which lead them to believe
that either the Registration Statement or any amendment thereto at the time
such Registration Statement or amendment became effective or the Prospectus
as of the date of such opinion 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 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 financial statements and
schedules and other financial and statistical data included in the
Registration Statement or Prospectus or with respect to statements or
omissions made therein in reliance upon information furnished in writing to
the Company on behalf of the Underwriter expressly for use in the
Registration Statement or the Prospectus).
In rendering such opinion, such counsel may rely, (A) as to matters
involving the application of laws other than the laws of the United States,
the corporate laws of Delaware and New Jersey and jurisdictions in which they
are admitted, to the extent such counsel 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 Underwriter's counsel) of other
counsel reasonably acceptable to Underwriter's counsel, familiar with the
applicable laws of such other jurisdictions, and (B) as to matters of fact,
to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the
Company; provided, that copies of any such statements or certificates shall
be delivered to Underwriter's counsel if requested. The opinion of such
counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion, the
Underwriter and they are justified in relying thereon.
(d) At each Over allotment Closing Date, if any, the Underwriter
shall have received the favorable opinion of counsel to the Company, each
dated the Over allotment Closing Date, addressed to the Underwriter and in
form and substance satisfactory to Underwriter's counsel confirming as of the
Over allotment Closing Date the statements made by such firm, in their
opinion, delivered on the Closing Date.
24
(e) On or prior to each of the Closing Date and the Over allotment
Closing Date, Underwriter's Counsel shall have been furnished such documents,
certificates and other legal opinions (including, without limitation, legal
opinions related to patent, trademark or Food and Drug matters) as they may
reasonably require and request for the purpose of enabling them to review or
pass upon the matters referred to in subsection (c) of this Section 6, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(f) Prior to the Closing Date and each Over allotment Closing Date,
if any: (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects or the business activities of the Company, whether or not in the
ordinary course of business, from the latest dates as of which such condition
is set forth in the Registration Statement and Prospectus; (ii) there shall
have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition
of the Company is set forth in the Registration Statement and Prospectus
which is materially adverse to the Company; (iii) the Company shall not be in
material default under any provision of any instrument relating to any
outstanding indebtedness for money borrowed, except as described in the
Prospectus; (iv) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement
and Prospectus; (v) no action, suit or proceeding, at law or in equity, shall
have been pending or to its knowledge threatened against the Company, or
affecting any of its properties or businesses before or by any court or
federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition or income
of the Company, except as set forth in the Registration Statement and
Prospectus; and (vi) no stop order shall have been issued under the Act and
no proceedings therefor shall have been initiated, threatened or contemplated
by the Commission.
(g) At the Closing Date and each Over allotment Closing Date, if any,
the Underwriter shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Over allotment
Closing Date, as the case may be, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are, in all material respects, true and correct, as if made on and
as of the Closing Date or the Over allotment Closing Date, as the case may
be, and the Company has complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its part to be
performed or satisfied at or prior to such Closing Date or Over allotment
Closing Date, as the case may be;
(ii) 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, to the best of each of such person's knowledge,
are contemplated or to their knowledge threatened under the Act;
25
(iii) The Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and information
required to be included therein, and none of the Registration Statement, the
Prospectus nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto included any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading except to the
extent any such material fact may be corrected in the Final Prospectus; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and except as
otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Over allotment Closing Date, as the case
may be, other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent; (B) the Company has not
paid or declared any dividends or other distributions on its capital stock;
(C) the Company has not entered into any material transactions not in the
ordinary course of business; (D) there has not been any change in the capital
stock or any increase in long-term debt or any increase in the short-term
borrowings (other than any increase in the short-term borrowings in the
ordinary course of business) of the Company; (E) the Company has not
sustained any material loss or damage to its property or assets, whether or
not insured; (F) there is no litigation which is pending or threatened
against the Company which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or affiliates shall
have taken, and the Company, its officers and affiliates will not take,
directly or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in the stabilization or manipulation of the
price of the Company's securities to facilitate the sale or resale of the
Shares.
References to the Registration Statement and the Prospectus in this
subsection (S) are to such documents as amended and supplemented at the date
of such certificate.
(h) By the Effective Date, the Underwriter shall have received
clearance from NASD as to the amount of compensation allowable or payable to
the Underwriter , as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriter hall have
received a letter, dated such date, addressed to the Underwriter 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 the
Underwriter, from BDO ▇▇▇▇▇▇▇ LLP.
26
(A) confirming that they are independent public accountants with
respect to the Company within the meaning of the Act and the applicable Rules
and Regulations;
(B) stating that it is their opinion that the combined financial
statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriter may rely upon the opinion of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP with respect to the financial statements and supporting
schedules included in the Registration Statement;
(C) stating that, on the basis of a limited review which included a
reading of the latest available unaudited interim combined financial
statements of the Company (with an indication of the date of the latest
available unaudited interim combined financial statements), a reading of the
latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company, consultations
with officers and other employees of the Company responsible for financial
and accounting matters and other specified procedures and inquiries, nothing
has come to their attention that would lead them to believe that (A) the
unaudited combined financial statements and supporting schedules of the
Company included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the Act
and the Rules and Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited combined financial statements of the
Company included in the Registration Statement, or (B) at a specified date
not more than five (5) days prior to the effective date of the Registration
Statement, there has been any change in the capital stock or long-term debt
of the Company, or any decrease in the stockholders' equity or net current
assets or net assets of the Company as compared with amounts shown in the
financial statements included in the Registration Statement, other than as
set forth in or contemplated by the Registration Statement, or, if there was
any change or decrease, setting forth the amount of such change or decrease,
and (C) during the period from September 30, 1999 to a specified date not
more than five (5) days prior to the effective date of the Registration
Statement, there was any decrease in net revenues, net earnings or increase
in net earnings per common share of the Company, in each case as compared
with the corresponding period beginning September 30, 1999 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;
(D) setting forth, at a date not later than five (5) days prior to
the effective date of the Registration Statement, the amount of liabilities
of the Company (including a breakdown of commercial paper and notes payable
to banks);
(E) stating that they have compared specific dollar amounts, numbers
of Securities, 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
27
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;
(F) stating that they have not during the immediately preceding five
(5) year period brought to the attention of the Company's management any
"weakness", as defined in Statement of Auditing Standard No. 60 "Communication
of Internal Control Structure Related Matters Noted in an Audit, "in the
Company's internal controls;
(G) stating that they have in addition carried out certain specified
procedures, not constituting an audit, with respect to certain pro forma
financial information which is included in the Registration Statement and the
Prospectus and that nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the
applicable accounting requirements of Rule ll-02 of Regulation S-X or that
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of that information; and
(H) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriter may reasonably request.
At the Closing Date and each Over allotment Closing Date, the
Underwriter shall have received from BDO ▇▇▇▇▇▇▇ LLP, a letter, dated as of
the Closing Date, or Over allotment Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished
pursuant to Subsection (i) of this Section, except that the specified date
referred to shall be a date not more than five days prior to Closing Date
and, if the Company has elected to rely on Rule 430A of the Rules and
Regulations, to the further effect that they have carried out procedures as
specified in clause (iii) of subsection (i) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriter and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause
(iii).
(k) On each of Closing Date and Over allotment Closing Date, if any,
there shall have been duly tendered to the Underwriter for their accounts the
appropriate number of Securities against payment therefore.
(l) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the
Over allotment Closing Date, if any, and no proceedings for that purpose
shall have been instituted or to its knowledge or that of the Company shall
be contemplated.
28
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Over allotment
Closing Date, as the case may be, is not so fulfilled, the Underwriter may
terminate this Agreement or, if the Underwriter o elects, it may waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless the
Underwriter, and each person, if any, who controls the Underwriter
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions in respect thereof),
whatsoever (including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which such Underwriter or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law
or otherwise or under the laws of foreign countries arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained (i) in any Preliminary Prospectus (except that the indemnification
contained in this paragraph with respect to any preliminary prospectus shall
not inure to the benefit of the Underwriter or to the benefit of any person
controlling the Underwriter on account of any loss, claim, damage, liability
or expense arising from the sale of the Firm Securities by the Underwriter to
any person if a copy of the Prospectus, as amended or supplemented, shall not
have been delivered or sent to such person within the time required by the
Act, and the untrue statement or alleged untrue statement or omission or
alleged omission of a material fact contained in such Preliminary Prospectus
was corrected in the Prospectus, as amended and supplemented, and such
correction would have eliminated the loss, claim, damage, liability or
expense), the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments
or any new registration statement and prospectus in which is included
Securities of the Company issued or issuable upon exercise of the
Underwriter's Warrant; or (iii) in any application or other document or
written communication (in this Section 7 collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, the Nasdaq Stock Market, Inc. or any other securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless in any case above such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of
such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment thereof or supplement
thereto, in any post-effective amendment, new registration statement or
prospectus or in any application, as the case may be.
29
The indemnity agreement in this subsection (a) shall be in addition
to any liability which the Company may have at common law or otherwise.
(b) The Underwriter agrees, to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act to the same extent as the foregoing indemnity from the Company
to the Underwriter (i) with respect to statements or omissions, or alleged
statements or omissions if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto in any post-effective amendment, new registration statement or
prospectus, or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
the Underwriter by the Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof
or supplement thereto or in any post-effective amendment, new registration
statement or prospectus, or in any such application, directly related to the
transactions effected by the Underwriter in connection with this Offering;
provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
such application, and (ii) for any claim, loss, damages or liability for
violation or alleged violations of any federal or state securities laws in
the offer or sale of the Securities; provided, further, that the liability of
the Underwriter to the Company shall be limited to the product of the
Underwriter's discount or commission for the Shares multiplied by the number
of Shares sold by the Underwriter hereunder. The Company acknowledges that
the statements with respect to the public offering of the Firm Securities set
forth under the heading "Underwriting" and the stabilization legend and the
last paragraph of the cover page in the Prospectus have been furnished by the
Underwriter expressly for use therein and any information furnished by or on
behalf of the Underwriter filed in any jurisdiction in order to qualify the
Securities under state securities laws or filed with the Commission, the NASD
or any securities exchange constitute the only information furnished in
writing by or on behalf of the Underwriter for inclusion in the Prospectus
and the Underwriter hereby confirm that such statements and information are
true and correct and shall be on each Closing Date and Over allotment Closing
Date.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against
one or more indemnifying parties under this Section 7, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
it from any liability which it may have under this Section 7 except to the
extent that it has been prejudiced in any material respect by such failure or
from any liability which it may have otherwise). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party
or parties of the commencement thereof, the indemnifying party or parties
will be entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified
30
party promptly after receiving the aforesaid notice from such indemnified party,
the indemnifying party may assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnifying party or parties shall have reasonably concluded that
there may be defenses available to it or them that are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel shall be borne by
the indemnifying parties. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided however, that such consent was not
unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, 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 the express provisions of this Section 7 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of any indemnified party, then each indemnifying party
shall contribute to the amount paid as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) (A) in such
proportion as is appropriate to reflect the relative benefits received by
each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Securities or (B) if
the allocation provided by clause (A) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of each
of the contributing parties, on the one hand, and the party to be indemnified
on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriter are the indemnified party the
relative benefits received by the Company on the one hand, and the
Underwriter , on the other, shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities (before deducting
expenses) bear to the total underwriting discounts and commissions received
by the Underwriter hereunder, in each case as set forth in the table on the
cover page of the Prospectus. Relative fault
31
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at
the Closing Date and the Over allotment Closing Date, as the case may be, and
such representations, warranties and agreements of the Company and the
indemnity agreements contained in Section 7 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Underwriter , the Company, or any controlling person, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriter.
9. Effective Date. This Agreement shall become effective at 9:30
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter , in its discretion, shall release the
Securities for the sale to the public, provided, however that the provisions
of Sections 5, 7 and 10 of this Agreement shall at all times be effective.
For purposes of this Section 9, the
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Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Underwriter of telegrams to securities
dealers releasing such Securities for offering or the release by the Underwriter
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. Termination
(a) The Underwriter shall have the right to terminate this Agreement:
(i) if any calamitous domestic or international event or act or occurrence
has materially disrupted, or in the Underwriter's commercially reasonable
opinion will in the immediate future materially disrupt general securities
markets in the United States; or (ii) if trading on the New York Stock
Exchange, the American Stock Exchange, or in the over-the-counter market
shall have been suspended or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iii) if
the United States shall have become involved in a war or major hostilities;
or (iv) if a banking moratorium has been declared by a New York State or
federal authority; or (v) if a moratorium in foreign exchange trading has
been declared; or if the Company shall have sustained a material loss,
whether or not insured, by reason of fire, flood, accident or other calamity;
or (vi) if there shall have been such material adverse change in the
conditions or prospects of the Company, involving a change not contemplated
by the Registration Statement, or (vii) if there shall have been such
material adverse change in general economic, political or financial
conditions as in the Underwriter's reasonable judgment would make it
inadvisable or impracticable to proceed with the offering, sale or delivery
of the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
(c) In addition to the foregoing, in the event that BlueStem Capital
Partners II L.P. (or its affiliates) fail to purchase 200,000 shares in the
Offering at the initial public offering price, then the Underwriter shall
have the right to terminate the Offering and this Agreement.
11. Default by the Company. If the Company shall fail at the Closing
Date or any Over allotment Closing Date, as applicable, to sell and deliver
the number of Securities which it is obligated to sell hereunder on such
date, then this Agreement shall terminate (or, if such default shall occur
with respect to any Option Securities to be purchased on an Over allotment
Closing Date, the Underwriter s may at the Underwriter's option, by notice
from the Underwriter to the Company, terminate the Underwriter's obligations
to purchase Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5 and
Section 7 hereof. No action taken pursuant to this Section shall relieve the
Company from liability, if any, in respect of such default.
12. Venue; Submission to Jurisdiction. The Company (a) agrees that
any legal suit, action or proceeding arising out of or relating to this
Agreement shall be instituted
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exclusively in ______________, or in the United States District Court
for the District of Philadelphia PA , (b) waives any objection which
the Company may have now or hereafter to the venue of any such suit, action
or proceeding, and (c) irrevocably consents to the jurisdiction of
the ______________ and the United States District Court for the District of
Philadelphia PA in any such suit, action or procedure. Each of the Company
and the Underwriter further agrees to accept and acknowledge service of any
and all process which may be served in any suit, action or proceeding in the
United States District Court for the District of Philadelphia PA, and agrees
that service of process upon the Company mailed by certified mail to the
Company's address shall be deemed in every respect effective service of
process upon the company in any such suit, action or proceeding. In the event
of litigation between the parties arising hereunder, the prevailing party
shall be entitled to costs and reasonable attorney's fees.
13. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Underwriter shall be directed to First
Montauk Securities Corp., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq., with a copy to ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to the
Company at ____________________, with a copy to _______________________________,
Attention: ___________, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal Underwriters and assigns, and their respective
heirs and legal Underwriters 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. No
purchaser of Securities from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
15. Applicable Law/Construction. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of
Delaware without giving effect to the choice of law or conflict of laws
principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
17. Waiver. The waiver by either party of the breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach.
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18. Assignment. Except as otherwise provided within this Agreement,
neither party hereto may transfer or assign this Agreement without prior
written consent of the other party.
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19. Titles and Captions. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not
be deemed part of the context nor affect the interpretation of this
Agreement.
20. Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the Person or Persons may require.
21. Entire Agreement. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of
this Agreement.
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
among us.
Very truly yours,
JEREMY'S MICROBATCH ICE CREAM, INC.
By:
------------------------------
Name:
Title: President
Confirmed and accepted as of the date first above written.
FIRST MONTAUK SECURITIES CORP.
By:
-------------------------
Name:
Title: President
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