1,200,000 Shares of Common Stock
of
JEREMY'S MICROBATCH ICE CREAM, INC.
UNDERWRITING AGREEMENT
Red Bank, New Jersey
_________, 1999
First Montauk Securities Corp.
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
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 $.___
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,9 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-_____) 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 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
2
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.
(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
3
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.
(g) [Accounting Firm] 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
4
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 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
5
or By-Laws 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 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,
6
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 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
7
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. subject to official notice of
issuance.
(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
8
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.
(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.
9
(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 $___ 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 ___,
1999 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 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
10
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 twenty-five percent (125%) 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.
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
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.
11
(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 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
12
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 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;
13
(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 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
14
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 shall
use its best efforts to cause one (1) individual selected by the Underwriter to
be elected to the Board of Directors of the Company (the "Board"), if requested
by the Underwriter and provided such individual is reasonably acceptable to and
approved by the Company. The Underwriter's nominee, if elected, shall receive
the same compensation as the other non-employee members of the Board.
Alternatively, 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 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 shall, if a member of the Board, be a member of the
Audit Committee of the Board. 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.
15
(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.
(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 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.
16
(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 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.
17
(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 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. 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
18
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 $30,000 has been paid prior to the date
hereof.
(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, $40,000
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 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
19
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 ______________________
_______________________, counsel to the Company, dated the Closing Date, or Over
allotment Closing Date, 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;
20
(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 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
21
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 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
22
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.
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
23
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.
(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
24
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;
(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.
25
(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 [Accounting Firm].
(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 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
____________ 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;
26
(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 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 [Accounting Firm], 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).
27
(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.
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
28
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.
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
29
(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 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
30
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 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
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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 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.
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.
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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 exclusively in ___________, or in the ___________, (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
____________ 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
____________ for the ____________, 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 New Jersey
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.
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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