EXHIBIT 1.1
1,041,044 Units
(Each Unit consisting of one share of Common Stock, par value $.01 per
share, and one Class A Redeemable Common Stock Purchase Warrant, each
exercisable to purchase one share of Common Stock)
SCNV ACQUISITION CORP.
UNDERWRITING AGREEMENT
New York, New York
________ ___, 1998
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
SCNV Acquisition Corp., a Delaware corporation (the "Company"), proposes to
issue and sell to you (the "Underwriter") an aggregate of 1,041,044 Units (each
Unit consisting of one share of Common Stock, par value $.01 per share ("Common
Stock"), and one Class A Redeemable Common Stock Purchase Warrant ("Warrants")
to purchase one share of Common Stock at $7.50 per share for a period of four
(4) years commencing__________ __, 1999, subject to redemption in certain
instances. In addition, the Company proposes to grant to the Underwriter the
option referred to in Section 2(b) to purchase all or any part of an aggregate
of 156,156 additional Units.
Unless the context otherwise requires, the aggregate of 1,041,044 shares
of Common Stock and Warrants to be sold by the Company, together with all or any
part of the 156,156 Units which
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the Underwriter has the option to purchase, and the shares of Common Stock and
the Warrants comprising such Units, are herein called the "Units." The Common
Stock to be outstanding after giving effect to the sale of the Units are herein
called the "Shares." The Shares and Warrants included in the Units (including
the Units which the Underwriter has the option to purchase pursuant to paragraph
2(b), are herein collectively called the "Securities."
You have advised the Company that you desire to purchase the Units. The
Company confirms the agreements made by it with respect to the purchase of the
Units by the Underwriter as follows:
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with you that:
(a) A registration statement (File No. 333-43955) on Form SB-2
relating to the public offering of the Units, including a form of
prospectus subject to completion, copies of which have heretofore been
delivered to you, has been prepared in conformity with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and has been filed with the
Commission under the Act and one or more amendments to such registration
statement may have been so filed. After the execution of this Agreement,
the Company will file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by the Commission
to be effective under the Act, a prospectus in the form most recently
included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and
approved by you prior to the execution of this Agreement, or (ii) if such
registration statement, as it may have been amended, has not been declared
by the Commission to be effective under the Act, an amendment to such
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by you prior to the execution
of this Agreement. As used in this Agreement, unless the context otherwise
requires, the term "Company" shall mean SCNV Acquisition Corp., Solmecs,
N.V. ("Solmecs") and their respective subsidiaries; the term "Registration
Statement" means such registration statement, as
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amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Preliminary Prospectus"
means each prospectus subject to completion filed with such registration
statement or any amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement or any amendment
thereto at the time it was or is declared effective); and the term
"Prospectus" means the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act, or, if no prospectus is required to be filed
pursuant to said Rule 424(b), such term means the prospectus included in
the Registration Statement; except that if such registration statement or
prospectus is amended or such prospectus is supplemented, after the
effective date of such registration statement, the terms "Registration
Statement" and "Prospectus" shall include such registration statement and
prospectus as so amended, and the term "Prospectus" shall include the
prospectus as so supplemented, or both, as the case may be.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus. At the time the Registration
Statement becomes effective and at all times subsequent thereto up to and
on the First Closing Date (as hereinafter defined) or the Option Closing
Date, as the case may be, (i) the Registration Statement and Prospectus
will in all respects conform to the requirements of the Act and the Rules
and Regulations; and (ii) neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
statements therein not misleading; provided, however, that the Company
makes no representations, warranties or agreements as to information
contained in or omitted from the Registration Statement or Prospectus in
reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of the Underwriter specifically for use in the
preparation thereof. It is understood that the statements set forth in the
Prospectus on page 2 with respect to stabilization, the paragraph under the
heading "Underwriting" relating to concessions to certain dealers, and the
identity of counsel to the Underwriter under the heading "Legal Matters"
constitute for purposes of this Section and Section 6(b) the only
information furnished in writing by or on behalf of the Underwriter for
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inclusion in the Registration Statement and Prospectus, as the case may be.
(c) Each of the Company, Solmecs, Solmecs (Israel) Ltd. and Heatex
Ltd. have been duly incorporated and are validly existing as corporations
in good standing under the laws of their respective jurisdictions of
incorporation with full corporate power and authority to own its properties
and conduct its business as described in the Prospectus and is duly
qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of its business or
the character or location of its properties requires such qualification,
except where the failure to so qualify will not materially adversely affect
its business, properties or financial condition.
(d) The authorized, issued and outstanding capital stock of the
Company as of the date of the Prospectus is as set forth in the Prospectus
under "Capitalization"; the shares of issued and outstanding capital stock
of the Company set forth thereunder have been duly authorized, validly
issued and are fully paid and nonassessable; except as set forth in the
Prospectus, no options, warrants, or other rights to purchase, agreements
or other obligations to issue, or agreements or other rights to convert any
obligation into, any shares of capital stock of the Company have been
granted or entered into by the Company; and the capital stock conforms to
all statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Units and the Shares are duly authorized, and when issued and
delivered pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights of any
security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated in this
Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any shares of Common
Stock, except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms, except as
enforceability may be
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limited by bankruptcy, insolvency or other laws affecting the right of
creditors generally or by general equitable principles, and holders thereof
will be entitled to the benefits provided by the warrant agreement pursuant
to which such Warrants are to be issued (the "Warrant Agreement"), which
will be substantially in the form filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the
Warrants have been reserved for issuance upon the exercise of the Warrants
and when issued in accordance with the terms of the Warrants and Warrant
Agreement, will be duly and validly authorized, validly issued, fully paid
and non-assessable, and free of preemptive rights and no personal liability
will attach to the ownership thereof. The Warrant Agreement has been duly
authorized and, when executed and delivered pursuant to this Agreement,
will have been duly executed and delivered and will constitute the valid
and legally binding obligation of the Company enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally or by
general equitable principles.
The Shares and the Warrants contained in the Underwriter's Options (as
defined in the Registration Statement) have been duly authorized and, when
duly issued and delivered, such Shares and Warrants will constitute valid
and legally binding obligations of the Company enforceable in accordance
with their terms and entitled to the benefits provided by the Underwriter's
Options, except as enforceability may be limited by bankruptcy, insolvency
or other laws affecting the rights of creditors generally or by general
equitable principles and the indemnification contained in paragraph 7 of
the Underwriter's Options may be unenforceable. The shares of Common Stock
included in the Underwriter's Options (and the shares of Common Stock
issuable upon exercise of the Warrants included therein) when issued and
sold, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
(f) This Agreement and the Underwriter's Options have been duly and
validly authorized, executed, and delivered by the Company. The Company has
full power and authority to authorize, issue, and sell the Units to be sold
by it hereunder on the terms and conditions set forth herein, and no
consent, approval, authorization or other order of any governmental
authority is
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+required in connection with such authorization, execution and delivery or
in connection with the authorization, issuance, and sale of the Units or
the Underwriter's Options, except such as may be required under the Act,
state securities laws or by the National Association of Securities Dealers,
Inc. (The "NASD").
(g) Except as described in the Prospectus, or which would not have a
material adverse effect on the condition (financial or otherwise), business
prospects, net worth or properties of the Company taken as a whole (a
"Material Adverse Effect"), neither the Company, Solmecs or the
Subsidiaries is in violation, breach, or default of or under, and
consummation of the transactions herein contemplated and the fulfillment of
the terms of this Agreement will not conflict with, or result in a breach
or violation of, any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge, or
encumbrance upon any of the property or assets of either of them pursuant
to the terms of, any material indenture, mortgage, deed of trust, loan
agreement, or other agreement or instrument to which either or them is a
party or by which either of them may be bound or to which any of their
properties or assets is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation or the
by-laws of either of them, as amended, or any statute or any order, rule or
regulation applicable to the Company of any court or of any regulatory
authority or other governmental body having jurisdiction over either of
them.
(h) Subject to the qualifications stated in the Prospectus, each of
the Company, Solmecs and the Subsidiaries have good and marketable title to
all properties and assets described in the Prospectus as owned by them,
free and clear of all liens, charges, encumbrances or restrictions, except
such as are not materially significant or important in relation to their
business; all of the material leases and subleases under which either of
them are the lessor or sublessor of properties or assets or under which
either of them holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, none of them are in default in any material
respect with respect to any of the terms or provisions of any of such
leases or subleases, and, to the best knowledge of the Company, no claim
has been asserted by anyone adverse to rights of either of them as lessor,
sublessor, lessee,
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or sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the right of either of them to continued
possession of the leased or subleased premises or assets under any such
lease or sublease except as described or referred to in the Prospectus; and
all of them own or lease all such properties described in the Prospectus as
are necessary to their operations as now conducted and, except as otherwise
stated in the Prospectus, as proposed to be conducted as set forth in the
Prospectus.
(i) Each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and Luboshitz Kasierer & Co., who have
given their reports on certain financial statements filed with the
Commission as a part of the Registration Statement, are with respect to the
Company, independent public accountants within the meaning of the Act and
the Rules and Regulations.
(j) The financial statements, and schedules together with related
notes, set forth in the Prospectus or the Registration Statement present
fairly the financial position and results of operations and changes in cash
flow position of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which
they apply. Said statements and schedules and related notes have been
prepared in accordance with generally accepted accounting principles
applied on a basis which is consistent during the periods involved except
as disclosed in the Prospectus and Registration Statement. The information
set forth under the caption "Selected Financial Data", "Capitalization" and
"Dilution" in the Prospectus fairly present, on the basis stated in the
Prospectus, the information included therein.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and except as otherwise
disclosed or contemplated therein, neither the Company, Solmecs or the
Subsidiaries has incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which would have a
Material Adverse Effect, and there has not been any change in the capital
stock of, or any incurrence of long-term debt by, either of them or any
issuance of options, warrants or other rights to purchase the capital stock
of either of them or any material adverse change or any development
involving, so far as the Company can now reasonably foresee a prospective
adverse change in the condition
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(financial or other), net worth, results of operations, business, key
personnel or properties of them which would have a Material Adverse Effect.
(l) Except as set forth in the Prospectus, there is not now pending
or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company, Solmecs or the Subsidiaries is a party
before or by any court or governmental agency or body, which might result
in a Material Adverse Effect on the Company, nor are there any actions,
suits or proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion or race; and no labor
disputes involving the employees of the Company, Solmecs and the
Subsidiaries exist or to the knowledge of the Company are threatened which
might be expected to have a Material Adverse Effect.
(m) Except as disclosed in the Prospectus, the Company, Solmecs and
the Subsidiaries has filed all necessary federal, state, and foreign income
and franchise tax returns required to be filed as of the date hereof
(taking into account all extensions of time to file) and has paid all taxes
shown as due thereon; and there is no tax deficiency which has been
asserted against the Company.
(n) Except as disclosed in the Prospectus, the Company, Solmecs and
the Subsidiaries have sufficient licenses, permits, and other governmental
authorizations currently necessary for the conduct of its business or the
ownership of its properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate rights
to use all material patents, patent applications, trademarks, service
marks, trade-names, trademark registrations, service ▇▇▇▇ registrations,
copyrights, and licenses necessary for the conduct of such business and had
not received any notice of conflict with the asserted rights of others in
respect thereof. To the best knowledge of the Company, none of the
activities or business of the Company, Solmecs and the Subsidiaries are in
violation of, or cause the Company, Solmecs and the Subsidiaries to
violate, any law, rule, regulation, or order of Israel, the United States,
any state, county, or locality, or of any agency or body of the United
States or of any state, county or locality, or of any agency or body of
8
Israel, the violation of which would have a Material Adverse Effect.
(o) The Company has not, directly or indirectly, at any time (i) made
any contributions to any candidate for political office, or failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other
than payments or contributions required or allowed by applicable law. The
Company's internal accounting controls and procedures are sufficient to
cause the Company to comply in all material respects with the Foreign
Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (as hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than
income taxes, imposed by any jurisdiction) if any, which are required to be
paid in connection with the sale and transfer of the Units hereunder will
have been fully paid or provided for by the Company and all laws imposing
such taxes will have been complied with in all material respects.
(q) All contracts and other documents of the Company which are, under
the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not entered into any agreement pursuant to which
any person is entitled either directly or indirectly to compensation from
the Company for services as a finder in connection with the proposed public
offering.
(s) Except as disclosed in the Prospectus, no officer, director, or
stockholder of the Company or its subsidiaries has any NASD affiliation.
(t) No other firm, corporation or person has any rights to underwrite
an offering of any of the Company's securities.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the
9
shares of Common Stock to facilitate the sale or resale of the Units
hereby.
(v) The Company has no subsidiaries. On the Effective Date, Solmecs
will merge with and into the Company. Solmecs has no subsidiaries other
than Solmecs (Israel) Ltd. and Heatex Ltd., both Israeli companies (the
"Subsidiaries"). The Company does not own, directly or indirectly, any
share capital or other equity ownership or proprietary interests in any
other corporation, association, trust, partnership, joint venture or other
entity. Except as disclosed in the Prospectus, Solmecs owns all of the
shares of the Subsidiaries free and clear of all liens, security interests
and encumbrances.
(w) The Company is not, and upon receipt of the proceeds from the sale
of the Units will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
(x) The Company has not distributed and will not distribute prior to
the First Closing Date any offering material in connection with the
offering and sale of the Units other than the Preliminary Prospectus,
Prospectus, the Registration Statement or the other materials permitted by
the Act, if any.
(y) There are no business relationships or related-party transactions
of the nature described in Item 404 of Regulation S-K involving the
Company, Solmecs and the Subsidiaries and any person directed in such Item
that are required to be disclosed in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) and that have
not been so disclosed therein.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, and upon the
basis of the representations, warranties, and agreements contained herein, the
Company agrees to issue and sell to the Underwriter, and the Underwriter agrees
to buy from the Company at $5.175 per Unit, at the place and time hereinafter
specified, 1,041,044 Units (the "First Units").
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Delivery of the First Units against payment therefor shall take place at
the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
(or at such other place as may be designated by agreement between the
Underwriter and the Company) at 10:00 a.m., New York time, ___________ , 1998,
or at such later time and date as the Underwriter may designate in writing to
the Company at least two business days prior to such purchase, but not later
than ___________ , 1998, such time and date of payment and delivery for the
First Units being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties and agreements contained
herein, the Company hereby grants an option to the Underwriter to purchase all
or any part of an aggregate of an additional 156,156 Units at the same price per
Unit as the Underwriter shall pay for the First Units being sold pursuant to the
provisions of subsection (a) of this Section 2 (such additional Units being
referred to herein as the "Option Units"). This option may be exercised within
45 days after the effective date of the Registration Statement upon written
notice by the Underwriter to the Company advising as to the amount of Option
Units as to which the option is being exercised, the names and denominations in
which the certificates for such Option Units are to be registered and the time
and date when such certificates are to be delivered. Such time and date shall be
determined by the Underwriter but shall not be earlier than four nor later than
ten full business days after the exercise of said option (but in no event more
than 55 days after the First Closing Date), nor in any event prior to the First
Closing Date, and such time and date is referred to herein as the "Option
Closing Date." Delivery of the Option Units against payment therefor shall take
place at the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ (or at such other place as may be designated by agreement between the
Underwriter and the Company). The Option granted hereunder may be exercised only
to cover over-allotments in the sale by the Underwriter of First Units referred
to in subsection (a) above. No Option Units shall be delivered unless all First
Units shall have been delivered to the Underwriter as provided herein.
(c) The Company will make the certificates for the securities comprising
the Units to be purchased by the Underwriter
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hereunder available to the Underwriter for inspection at least two full business
days prior to the First Closing Date or the Option Closing Date, as the case may
be,(which are collectively referred to herein as the "Closing Dates"). The
certificates shall be in such names and denominations as the Underwriter may
request, at least three full business days prior to the Closing Dates. Delivery
of the certificates at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Units to be purchased by
the Underwriter hereunder will be delivered by the Company to the Underwriter
for the account of the Underwriter against payment of the respective purchase
prices therefor by the Underwriter, by wire transfer in immediately available
funds, payable to the Company.
In addition, in the event the Underwriter exercises the option to purchase
from the Company all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to or
upon the order of the Company by certified or bank cashier's checks payable in
immediately available funds at the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (or at such other place as may be designated by
agreement between the Underwriter and the Company), at the time and date of
delivery of such Units as required by the provisions of subsection (b) above,
against receipt of the certificates for such Units by the Underwriter for the
Underwriter's account registered in such names and in such denominations as the
Underwriter may reasonably request.
It is understood that the Underwriter proposes to offer the Units to be
purchased hereunder to the public upon the terms and conditions set forth in the
Registration Statement, after the Registration Statement is declared effective
by the Securities and Exchange Commission (the "SEC").
3. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to be declared effective. If required, the
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Company will file the Prospectus and any amendment or supplement thereto
with the Commission in the manner and within the time period required by
Rule 424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become effective, the Company will so advise the
Underwriter and will not at any time, whether before or after the Effective
Date, file any amendment to the Registration Statement or supplement to the
Prospectus of which the Underwriter shall not previously have been advised
and furnished with a copy or to which the Underwriter or its counsel shall
have reasonably objected in writing or which is not in compliance with the
Act and the Rules and Regulations. At any time prior to the later of (A)
the completion by the Underwriter of the distribution of the Units
contemplated hereby (but in no event more than nine months after the date
on which the Registration Statement shall have been declared effective) and
(B) 25 days after the date on which the Registration Statement shall have
been declared effective, the Company will prepare and file with the
Commission, promptly upon the Underwriter's request, any amendments or
supplements to the Registration Statement or Prospectus which, in the
opinion of counsel to the Company and the Underwriter, may be reasonably
necessary or advisable in connection with the distribution of the Units.
As soon as the Company is advised thereof, the Company will advise the
Underwriter, and provide the Underwriter with copies of any written advice,
of the receipt of any comments of the Commission, of the effectiveness of
any post-effective amendment to the Registration Statement, of the filing
of any supplement to the Prospectus or any amended Prospectus, of any
request made by the Commission for an amendment of the Registration
Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any
state or regulatory body of any stop order or other order or threat thereof
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Units for offering in any
jurisdiction, or of the institution of any proceedings for any of such
purposes, and will use its best efforts to prevent the issuance of any such
order, and, if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to the Underwriter copies of
each Preliminary Prospectus, and the Company has
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consented and hereby consents to the use of such copies for the purposes
permitted by the Act. The Company authorizes the Underwriter and dealers to
use the Prospectus in connection with the sale of the Units for such period
as in the opinion of counsel to the Underwriter and the Company the use
thereof is required to comply with the applicable provisions of the Act and
the Rules and Regulations. In case of the happening, at any time within
such period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or dealer, of any event of which
the Company has knowledge and which materially affects the Company or the
securities of the Company, or which in the opinion of counsel for the
Company and counsel for the Underwriter should be set forth in an amendment
of the Registration Statement or a supplement to the Prospectus in order to
make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be
delivered to a purchaser of the Units or in case it shall be necessary to
amend or supplement the Prospectus to comply with law or with the Rules and
Regulations, the Company will notify the Underwriter promptly and forthwith
prepare and furnish to the Underwriter copies of such amended Prospectus or
of such supplement to be attached to the Prospectus, in such quantities as
the Underwriter may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a
material fact or omit to state any material facts necessary in order to
make the statements in the Prospectus, in the light of the circumstances
under which they are made, not misleading. The preparation and furnishing
of any such amendment or supplement to the Registration Statement or
amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriter, except that in case the Underwriter is
required, in connection with the sale of the Units to deliver a Prospectus
nine months or more after the effective date of the Registration Statement,
the Company will upon request of and at the expense of the Underwriter,
amend or supplement the Registration Statement and Prospectus and furnish
the Underwriter with reasonable quantities of prospectuses complying with
Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and Regulations and
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder in connection with the offering and issuance of the
Units.
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(b) The Company will furnish such information as may be required and
will otherwise cooperate and use its best efforts to qualify to register
the Units for sale under the securities or "Blue Sky" laws of such
jurisdictions as the Underwriter may reasonably designate and will make
such applications and furnish such information as may be required for that
purpose and to comply with such laws, provided the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or
to execute a general consent of service of process in any jurisdiction in
any action other than one arising out of the offering or sale of the Units.
The Company will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualification in effect
for so long a period as the counsel to the Company and the Underwriter deem
reasonably necessary, but not for a period of less than five (5) years.
(c) If the sale of the Units provided for herein is not consummated as
a result of the Company's actions or failure to take such actions as the
Underwriter reasonably believes are reasonably required to complete the
transaction, the Company shall pay all costs and expenses incurred by it
which are incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in
Section 8, including the actual accountable out-of-pocket expenses of the
Underwriter (including the reasonable fees and expenses of counsel to the
Underwriter), which shall not exceed $100,000. If the sale of the Units
provided herein is not consummated and the reasons therefore are reasonably
related to a Material Adverse Effect on the Company, the Company shall pay
the Underwriter promptly its actual out-of-pocket expenses not to exceed
$100,000.
(d) The Company will use its best efforts (i) to cause a registration
statement under the Exchange Act to be declared effective concurrently with
the completion of this offering and will notify you in writing immediately
upon the effectiveness of such registration statement, and (ii) to obtain
and keep current a listing in the Standard & Poors Manual for a period of
five (5) years from the Effective Date. The Company shall use its best
efforts to obtain such lisitng on the Effective Date (by using the most
expeditious listing offered by Standard & Poors).
(e) For so long as the Company is a reporting company under either
Section 12(g) or 15(d) of the Exchange Act, the
15
Company, at its expense, will furnish to its stockholders an annual report
(including financial statements audited by independent public accountants),
in reasonable detail and at its expense, will furnish to the Underwriter
during the period ending five (5) years from the date hereof, (i) as soon
as practicable after the end of each fiscal year, but no earlier than the
filing of such information with the Commission, a balance sheet of the
Company and any of its subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and cash flow of the Company
and any subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as practicable after the end of each of the first
three fiscal quarters of each fiscal year, but no earlier than the filing
of such information with the Commission, consolidated summary financial
information of the Company for such quarter in reasonable detail; (iii) as
soon as they are publicly available, a copy of all reports (financial or
other) mailed to security holders; (iv) as soon as they are available, a
copy of all non-confidential reports and financial statements furnished to
or filed with the Commission or any securities exchange or automated
quotation system on which any class of securities of the Company is listed;
and (v) such other information as you may from time to time reasonably
request. In addition, the Company shall deliver to the Underwriter for a
three (3) year period following the effective date, copies of all transfer
sheets relating to the Company's securities.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will deliver to the Underwriter at or before the First
Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed
copies of the Registration Statement, including such financial statements
but without exhibits, and of all amendments thereto, as the Underwriter may
reasonably request. The Company will deliver to or upon the Underwriter's
order, from time to time until the effective date of the Registration
Statement, as many copies of any Preliminary
16
Prospectus filed with the Commission prior to the effective date of the
Registration Statement as the Underwriter may reasonably request. The
Company will deliver to the Underwriter on or promptly after the effective
date of the Registration Statement and thereafter for so long as a
Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriter may from time to time reasonably request.
(h) The Company will deliver to the Underwriter as soon as it is
practicable copies of all reports filed with the Commission under the
Exchange Act.
(i) The Company will apply the net proceeds from the sale of the Units
substantially for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to
the sale of the Units and the application of the proceeds therefrom as may
be required pursuant to Rule 463 under the Act.
(j) The Company will promptly prepare and file with the Commission any
amendments or supplements to the Registration Statement, Preliminary
Prospectus or Prospectus and take any other action, which in the opinion of
counsel to the Underwriter and counsel to the Company, may be reasonably
necessary or advisable in connection with the distribution of the Units,
and will use its best efforts to cause the same to become effective as
promptly as possible.
(k) The Company will reserve and keep available that maximum number of
its authorized but unissued securities which are issuable upon exercise of
the Warrants and Underwriter's Options and warrants thereunder outstanding
from time to time.
(l) For a period of twenty-four (24) months from the Effective Date,
no officers or directors, nor any shareholder of the Company's securities
prior to the offering, as well as all holders of restricted securities of
the Company, will, directly or indirectly, offer, sell (including any short
sale), grant any option for the sale of, transfer or gift (except for
estate planning or charitable transfers or other privates sales, provided
the transferees agree to be bound by the same restrictions on transfer),
acquire any option to dispose of, or otherwise dispose
17
of any shares of capital stock without the prior written consent of the
Underwriter, other than as set forth in the Registration Statement. In
order to enforce this covenant, the Company shall impose stop-transfer
instructions with respect to the shares owned by such persons prior to the
offering until the end of such period (subject to any exceptions to such
limitation on transferability set forth in the Registration Statement). In
addition, all such persons shall waive any of their registration rights
with respect to all such securities for such twenty-four (24) month period.
In addition, the Company agrees not to file any other registration
statement (excluding a registration statement on Form S-8 or successor form
so long as the shares of Common Stock offered thereby are also subject to
this paragraph 3(l)) to register any securities of the Company for such
twenty-four (24) month period, and will not grant any future registration
rights without the prior written consent of the Underwriter for the same
twenty-four (24) month periods. If necessary to comply with any applicable
Blue-sky Law, the shares held by such shareholders will be escrowed, as
required by such Blue-Sky Laws. In addition, the Company shall not issue
any shares of its capital stock (or securities convertible into capital
stock) for a twenty four (24) month period without ▇▇▇▇▇▇▇▇▇'▇ consent,
following the Effective Date other than (i) pursuant to the Warrants (ii)
options to purchase shares of Common Stock under employee stock option
plans in accordance with the succeeding sentence, so long as the vesting
provisions of such options do not result in greater than 200,000 shares of
Common Stock vesting in such 24-month period, and(iii) pursuant to
recapitalizations, acquisitions, mergers and other combinations (in which
case ▇▇▇▇▇▇▇▇▇'▇ consent shall not be unreasonably withheld). The Company
may grant options to purchase up to 200,000 shares of Common Stock under
employee stock option plans to the Company's employees, officers, directors
or other consultants or advisors during the twenty-four (24) month period
following the Effective Date without the prior written consent of the
Underwriter. The grant of additional options during such period will
require the Underwriter's prior written consent. With respect to such
options to purchase 200,000 shares, the Company may not grant options at
exercise prices which are less than the Market Price at the date of the
grant without the prior written consent of the Underwriter.
For purposes of this Agreement, Market Price shall mean (i) the
average closing bid price for any ten (10) consecutive trading days within
a period of thirty (30) consecutive trading days ending
18
within five (5) days prior to the date of issuance of the Common Stock as
reported by the Nasdaq Stock Market or the NASD Electronic Bulletin Board,
or (ii) the last reported sale price, for ten (10) consecutive business
days ending within five (5) days of the date of issuance on the primary
exchange on which the Common Stock is traded, if the Common Stock is traded
on a national securities exchange.
(m) Upon completion of this offering, the Company will make all
filings required, including registration under the Exchange Act to obtain
the listing of the Units, Common Stock and Class A Warrants in the NASD
Electronic Bulletin Board, and will use its best efforts to effect and
maintain such listing for at least five years from the date of this
Agreement to the extent that the Company has at least 300 record holders of
Common Stock.
(n) Except for the transactions contemplated by this Agreement, the
Company represents that it has not taken and agrees that it will not take,
directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result in the stabilization
or manipulation of the price of the Units, Shares, or the Warrants or to
facilitate the sale or resale of the Securities.
(o) On the First Closing Date and simultaneously with the delivery of
the Units, the Company shall execute and deliver to the Underwriter the
Underwriter's Options. The Underwriter's Options will be substantially in
the form filed as an Exhibit to the Registration Statement.
(p) Intentionally omitted.
(q) Upon the Closing Dates, the Company will have in force a key
person life insurance policy on the life of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, in the amount
of $1,000,000.00 and will maintain such insurance during the three year
period commencing with the First Closing Date.
(r) So long as any Warrants are outstanding and the exercise price of
the Warrants is less than the market price of the Common Stock, the Company
shall use its best efforts to cause post-effective amendments, if required
by the Act, to the Registration Statement to become effective in compliance
with the
19
Act and without any lapse of time between the effectiveness of any such
post-effective amendments and cause a copy of each Prospectus, as then
amended, to be delivered to each holder of record of a Warrant and to
furnish to the Underwriter and each dealer as many copies of each such
Prospectus as such Underwriter or dealer may reasonably request. The
Company shall not call for redemption any of the Warrants unless a
registration statement covering the securities underlying the Warrants has
been declared effective by the Commission and remains current at least
until the date fixed for redemption.
(s) For a period of five (5) years from the Effective Date, the
Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's
financial statements for each of the first three (3) fiscal quarters prior
to the announcement of quarterly financial information and the filing of
the Company's 10-Q quarterly report, provided that the Company shall not be
required to file a report of such accountants relating to such review with
the Commission.
(t) The Underwriter shall have the right to request the Company to use
its best efforts to nominate one (1) nominee of the Underwriter for
election to the Board of Directors for three (3) years following the
Effective Date, and in each case the Company will use its best efforts to
cause such nominee to be elected to the Board of Directors. Until such time
as the Underwriter exercises its right to require the Company to use its
best efforts to cause a nominee of the Underwriter to be elected to the
Board of Directors and until such time as such nominee begins to serve on
the Board of Directors, the Company agrees to allow a representative
designated by the Underwriter from time to time to receive timely, written
notice of all Board of Directors meetings and notice of all telephonic
Board meetings and the right to attend all Board meetings and participate
in all telephonic Board meetings. The Underwriter shall also have the right
to obtain copies of the minutes from all Board of Directors meetings for
three (3) years following the Effective Date of the Registration Statement,
whether or not a representative of the Underwriter attends or participates
in any such Board meeting. The Company agrees to reimburse the Underwriter
immediately upon the Underwriter's request therefor of any reasonable
travel and lodging expenses directly incurred by the Underwriter in
connection with
20
its representative attending Company Board meetings on the same basis for
other Board members. In addition, the Company shall compensate such
representative as it does all other outside directors of the Company.
(u) [Intentionally Omitted-FCA]
(v) The Company agrees to pay the Underwriter a Warrant Solicitation
fee of 5.0% of the exercise price of any of the Warrants exercised
beginning one (1) year after the Effective Date if (a) the Market Price of
the Company's Common Stock on the date the Warrant is exercised in greater
than the exercise price of the Warrant, (b) the exercise of the Warrant is
solicited by the Underwriter and the Underwriter is designated in writing
by the holder of such Warrant as the soliciting broker, (c) the Warrant is
not held in a discretionary account, (d) disclosure of the compensation
arrangement is made upon the sale and exercise of the Warrants, (e)
soliciting the exercise is not in violation of Regulation M under the
Exchange Act, and (f) solicitation of the exercise is in compliance with
the NASD Notice to Members 81-38 (September 22, 1981).
(w) For a period of three years from the Effective Date, at the
request of the Underwriter, the Company shall provide promptly, at the
expense of the Company, copies of the Company's daily transfer sheets
furnished to it by its transfer agent and copies of the securities position
listings provided to it by the Depository Trust Company.
(x) Intentionally Omitted.
(y) On or prior to the date hereof, the Company shall have entered
into an employment agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ on terms and conditions
satisfactory to the Underwriter.
4. Conditions of Underwriters' Obligation. The obligations of the
Underwriter to purchase and pay for the Units which it has agreed to purchase
hereunder are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder,
and to the following conditions:
21
(a) The Registration Statement shall have become effective and you
shall have received notice thereof not later than 10:00 a.m., New York
time, on the day following the date of this Agreement, or at such later
time or on such later date as to which the Underwriter may agree in
writing; on or prior to the Closing Dates no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that or a similar purpose shall have been instituted or
shall be pending or, to the Underwriter's knowledge or to the knowledge of
the Company, shall be contemplated by the Commission; any request on the
part of the Commission for additional information shall have been complied
with to the satisfaction of the Commission; and no stop order shall be in
effect denying or suspending effectiveness of such qualification nor shall
any stop order proceedings with respect thereto be instituted or pending or
threatened. If required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act.
(b) (A) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP,
counsel for the Company, in form and substance satisfactory to counsel for
the Underwriter, to the effect that:
(i) Solmecs has merged with and into the Company as disclosed in
the Prospectus. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with all requisite corporate power and authority to own
its properties and conduct its business as described in the
Registration Statement and Prospectus and is duly qualified or
licensed to do business as a foreign corporation in good standing in
each other jurisdiction in which the ownership or leasing of its
properties or conduct of its business requires such qualification
except where the failure to qualify or be licensed will not have a
Material Adverse Effect;
(ii) the authorized capitalization of the Company as of the date
of the prospectus is as set forth under "Capitalization" in the
Prospectus; all shares of the Company's outstanding capital stock have
been duly authorized, validly issued, fully paid and non-assessable
and conform in all material respects to the description thereof
contained in the Prospectus; to such counsel's knowledge the
outstanding shares of capital stock of
22
the Company have not been issued in violation of the preemptive rights
of any shareholder and the shareholders of the Company do not have any
preemptive rights or other rights to subscribe for or to purchase, nor
are there any restrictions upon the voting or transfer of any of the
capital stock except as provided in the Prospectus; the Common Stock,
the Warrants, the Underwriter's Options, and the Warrant Agreement
conform in all material respects to the respective descriptions
thereof contained in the Prospectus; the Shares have been, and the
shares of Common Stock to be issued upon exercise of the Warrants and
the Underwriter's Options, upon issuance in accordance with the terms
of such Warrants, the Warrant Agreement and Underwriter's Options will
have been duly authorized and, when issued and delivered in accordance
with their respective terms and applicable Delaware law, will be duly
and validly issued, fully paid, non-assessable, free of preemptive
rights and no personal liability will attach to the ownership thereof;
a sufficient number of shares of Common Stock has been reserved for
issuance upon exercise of the Warrants and Underwriter's Options and
to the best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any registration rights
other than (i) those which have been waived or satisfied for or
relating to the registration of any shares of Common Stock, (ii) those
contained in the Underwriter's Options or (iii) as described in the
Prospectus.
(iii) this Agreement, the Underwriter's Options, and the Warrant
Agreement have been duly and validly authorized, executed, and
delivered by the Company;
(iv) the certificates evidencing the shares of Common Stock
comply with the Delaware General Corporation Law; the Warrants will be
exercisable for shares of Common Stock in accordance with the terms of
the Warrants and the Warrant Agreement and at the prices therein
provided for;
(v) except as otherwise disclosed in the Registration Statement,
such counsel knows of no pending or threatened legal or governmental
proceedings to which the Company is a party which would materially
adversely affect the business, property, financial condition, or
operations of the Company; or which question the validity of the
Securities, this Agreement, the Warrant Agreement, or the
Underwriter's Options, or of any action
23
taken or to be taken by the Company pursuant to this Agreement, the
Warrant Agreement, or the Underwriter's Options; to such counsel's
knowledge there are no governmental proceedings or regulations
required to be described or referred to in the Registration Statement
which are not so described or referred to;
(vi) the execution and delivery of this Agreement, the
Underwriter's Options, or the Warrant Agreement and the incurrence of
the obligations herein and therein set forth and the consummation of
the transactions herein or therein contemplated, will not result in a
breach or violation of, or constitute a default under the certificate
or articles of incorporation or by-laws of the Company, or to the best
knowledge of counsel, in the performance or observance of any material
obligations, agreement, covenant, or condition contained in any bond,
debenture, note, or other evidence of indebtedness or in any material
contract, indenture, mortgage, loan agreement, lease, joint venture,
or other agreement or instrument to which the Company is a party or by
which they or any of their properties is bound or in violation of any
order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality, or court, domestic or
foreign, the result of which would have a Material Adverse Effect;
(vii) the Registration Statement has become effective under the
Act, and to the best of such counsel's knowledge, (a) no stop order
suspending the effectiveness of the Registration Statement is in
effect, and (b) no proceedings for that purpose have been instituted
or are pending before, or threatened by, the Commission; the
Registration Statement and the Prospectus as of the Effective Date
comply as to form in all material respects with the applicable
requirements of the Act and the Rules and Regulations;
(viii) in the course of preparation of the Registration Statement
and the Prospectus such counsel has participated in conferences with
the President of the Company with respect to the Registration
Statement and Prospectus and such discussions did not disclose to such
counsel any information which gives such counsel reason to believe
that the Registration Statement or any amendment thereto at the time
it became effective contained any untrue statement of a material fact
required to be stated therein or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not
24
misleading or that the Prospectus or any supplement thereto contains
any untrue statement of a material fact or omits to state a material
fact necessary in order to make statements therein, in light of the
circumstances under which they were made, not misleading (except, in
the case of both the Registration Statement and any amendment thereto
and the Prospectus and any supplement thereto, for the financial
statements, notes thereto and other financial information (including
without limitation, the pro forma financial information) and schedules
contained therein, as to which such counsel need express no opinion);
(ix) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts,
licenses, and other agreements to which the Company is a party are
accurate and fairly present in all material respects the information
required to be shown, and such counsel is familiar with all contracts,
licenses and other agreements referred to in the Registration
Statement and the Prospectus and any such amendment or supplement or
filed as exhibits to the Registration Statement, and such counsel does
not know of any contracts, licenses or agreements to which the Company
is a party of a character required to be summarized or described
therein or to be filed as exhibits thereto which are not so
summarized, described or filed and such counsel does not know of any
defaults under such contracts, licenses or agreements that are not
otherwise disclosed therein;
(x) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale, or
delivery of the Units by the Company, in connection with the
execution, delivery, and performance of this Agreement by the Company
or in connection with the taking of any action contemplated herein, or
the issuance of the Underwriter's Options or the Securities underlying
the Underwriter's Options, other than registrations or qualifications
of the Units under applicable state or foreign securities or Blue Sky
laws and registration under the Act and the NASD; and
(xi) the Units, Common Stock and Warrants have been duly
authorized for quotation on the NASD Electronic Bulletin Board.
25
(xii) Except as disclosed in the Registration Statement, to the
best knowledge of such counsel, the Company has sufficient licenses,
permits, and other governmental authorizations currently necessary for
the conduct of its business or the ownership of its properties as
described in the Prospectus and is in all material respects complying
therewith. To the best knowledge of such counsel, the business of the
Company is not in violation of, or will not cause the Company to
violate any law, rule, regulation, or order of the United States, any
state, county, or locality, or of any agency or body of the United
States, or of any state, county, or locality, the violation of which
would have a Material Adverse Effect and are in compliance with all
rules and regulations pertaining to the business of the Company.
(xiii) the statements in the Registration Statement under the
caption "Certain U.S. Income Tax Considerations Regarding Shares
Acquired by U.S. Taxpayers" have been reviewed by such counsel and
insofar as such statements summarize or describe statements of United
States tax law or legal conclusions thereunder, have been reviewed by
such counsel and constitute an accurate description of the legal
matters stated therein in all material respects;
(xiv) to such counsel's knowledge, there are no business
relationships or related-party transactions of the nature described in
Item 404 of Regulation S-K involving the Company, Solmecs or the
subsidiaries, and any person described in such Item that are required
to be disclosed in the Prospectus and which have not been so
disclosed; and
(xv) the Company is not in violation of or default under, nor
will the execution and delivery of this Agreement, the Underwriter's
Purchase Option, or the Warrant Agreement, and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, result in a breach or
violation of any material order, rule, regulation, writ, injunction or
decree (known to such counsel with respect to orders, writs,
injunctions or decrees) of any United States or Delaware government,
governmental instrumentality or court except where such violations or
defaults would not have a Material Adverse Effect.
26
(B) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of ▇▇▇▇▇ ▇▇▇▇▇ & Co.,
counsel for the Company, in form satisfactory to counsel for the
Underwriter, to the effect that:
(i) the Subsidiaries have been duly incorporated and are validly
existing as corporations in good standing under the laws of the State
of Israel, with all requisite corporate power and authority to own its
properties and conduct its business as described in the Registration
Statement and Prospectus. The Subsidiaries are wholly-owned by the
Company, free and clear of any and all liens, security interests and
encumberances;
(ii) to such counsel's knowledge the outstanding shares of share
capital of the Subsidiaries have not been issued in violation of the
preemptive rights of any shareholder, nor are there any restrictions
upon the voting or transfer of any of the share capital except as
provided in the Prospectus;
(iii) except as otherwise disclosed in the Registration
Statement, such counsel knows of no pending or threatened Israeli
legal or governmental proceedings to which the Company is a party
which would materially adversely affect the business, property,
financial condition, or operations of the Company, Solmecs or the
Subsidiaries; or which question the validity of the Securities, this
Agreement, the Warrant Agreement, or the Underwriter's Purchase
Option, or of any action taken or to be taken by the Company pursuant
to this Agreement, the Warrant Agreement, or the Underwriter's
Purchase Option; and no such proceedings are known to such counsel to
be contemplated against the Company; to such counsel's knowledge there
are no such Israeli governmental proceedings or regulations required
to be described or referred to in the Registration Statement which are
not so described or referred to;
(iv) to the best knowledge of such counsel, neither the Company,
Solmecs or the Subsidiaries is in violation of or default under nor
will the execution and delivery of this Agreement, the Underwriter's
Purchase Option, the Warrant Agreement and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, will not result in a
breach or violation of, or constitute a default under the Certificate
of Incorporation/By-laws
27
or Memorandum of Association / Articles of Association of the Company
or Solmecs or the Subsidiaries, as the case may be, or to the best
knowledge of counsel, in the performance or observance of any material
obligations, agreement, covenant, or condition contained in any bond,
debenture, note, or other evidence of indebtedness or in any material
contract, indenture, mortgage, loan agreement, lease, joint venture,
or other agreement or instrument to which any of them is a party or by
which they or any of their properties is bound or in violation of any
Israeli order, rule, regulation, writ, injunction, or decree of any
Israeli governmental instrumentality, or court, the result of which
would have a Material Adverse Effect;
(v) in the course of preparation of the Registration Statement
and the Prospectus such counsel has participated in conferences with
the President of the Company with respect to the contents of the
Registration Statement and Prospectus and (without taking any further
action to verify independently the statements made in the Registration
Statement and the Prospectus and, except as stated in the foregoing
opionion, without assuming responsibility for the accruacy,
completeness or fairness of such statements) such discussions did not
disclose to such counsel any information which gives such counsel
reason to believe that the Registration Statement or any amendment
thereto at the time it became effective contained any untrue statement
of a material fact required to be stated therein or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any
supplement thereto contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make statements
therein, in light of the circumstances under which they were made, not
misleading (except, in the case of both the Registration Statement and
any amendment thereto and the Prospectus and any supplement thereto,
for the financial statements, notes thereto and other financial
information (including without limitation, the pro forma financial
information) and schedules contained therein, as to which such counsel
need express no opinion);
(vi) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and
other agreements to which the Company, Solmecs, or the Subsidiaries is
a party are, to such counsel's knowledge,
28
accurate and fairly present in all material respects the information
required to be shown, and such counsel is familiar with all contracts
and other agreements referred to in the Registration Statement and the
Prospectus and any such amendment or supplement or filed as exhibits
to the Registration Statement, and such counsel does not know of any
contracts or agreements to which the Company, Solmecs, or the
Subsidiaries is a party of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed and such counsel does not know of any
material defaults under such contracts or agreements that are not
otherwise disclosed therein;
(vii) no authorization, approval, consent, or license of any
Israeli governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale, or
delivery of the Units by the Company, in connection with the
execution, delivery, and performance of this Agreement by the Company
or in connection with the taking of any action contemplated herein, or
the issuance of the Underwriter's Purchase Option or the Securities
underlying the Underwriter's Purchase Option, other than registrations
or qualifications of the Units under applicable state or foreign
securities or Blue Sky laws, registration under the Act and approval
by the NASD of the fairness of the underwriting arrangments (as to
which such counsel need express no opinion) and such permits and
approvals required under Israeli law which shall have been obtained on
or before the Closing;
(viii) except as disclosed in the Registration Statement, to the
best knowledge of such counsel, the Company, Solmecs and the
Subsidiaries have sufficient licenses, permits, and other governmental
authorizations currently necessary under Israeli law for the conduct
of its business or the ownership of its properties as described in the
Prospectus, such licenses, permits and other governmental
authorizations obtained are in full force and effect, and the Company
is in all material respects complying therewith except where the
failure to have any such licenses, permits or governmental
authorization would not have a Material Adverse Effect. To the best
knowledge of such counsel, and except as disclosed in the Registration
Statement, the business of the Company is not in violation of any
Israeli law, rule or regulation, the violation of which would have a
Material Adverse Effect and are
29
in compliance in all material respects with all material rules and
regulations pertaining to the business of the Company;
(ix) to the best of such counsel's knowledge, except as disclosed
in the Prospectus, neither the filing of the Registration Statement
nor the offering or sale of the Units as contemplated by this
Agreement gives rise to any registration rights or other rights, other
than those which have been waived or satisfied for or relating to the
registration of any Ordinary Shares;
(x) the Company has obtained all consents, approvals,
authorizations, exemptions or other orders from, and has made all
registrations or filings with, any Israeli court, regulatory body,
administrative agency or other governmental body, official or agency
as is required by Israeli law for the execution, delivery and
performance of the Underwriting Agreement and the consummation of the
transactions contemplated thereby (including, but not limited to, the
issuance and sale of Units as contemplated by the Underwriting
Agreement); to the best of our knowledge, no proceedings to rescind or
modify such consents, approvals, authorizations, exemptions or orders
have been instituted or are pending or contemplated by any Israeli
authority;
(xi) the statements in the Registration Statement under the
captions "Risk Factors -- Currency Exchange Risks Associated with
International Sales and Israeli Operations", "Risks Relating to
Conducting Business Operations in Israel", "Risk Relating to Service
and Enforcement of Legal Process" and "Conditions in Israel" have been
reviewed by such counsel and insofar as they refer to descriptions of
statements of Israeli law, descriptions of Israeli statutes, rules or
regulations or legal conclusions, are correct in all material
respects.
Such opinions shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinions, such
counsel may rely upon certificates of any officer of the Company or
public officials as to matters of fact.
(C) At the First Closing Date, you shall have received the
opinion of ____________________ , special patent counsel, in form and
substance satisfactory to you, identifying any patent searches
conducted with respect to the patents and patent applications of
30
the Company, Solmecs, and the Subsidiaries and providing that the
description in the Registration Statement with respect to the status of
such patents and patent applications is accurate, that the Company (or
Solmecs or the Subsidiaries, as the case may be) own the entire right,
title and interest in and to such patents and patent applications as
described in the Prospectus free and clear of any liens or encumbrances and
rights thereto or therein by third parties and have not received any notice
of conflict with the asserted rights of others in respect thereof, that no
third party has asserted any rights to any of such patents and patent
applications, no interference has been declared or provoked with respect to
any of such patents and patent applications, there have been no
interventorship challenges with respect to any of such patents and patent
applications, and that the statements in the Prospectus under the captions
" _________________________ ,________________ and _______________ are true
and correct. To the best of such counsel's knowledge, the patents, patent
applications products, services or processes do not infringe on any patent
rights held by third parties and no third parties have infringed on the
patents, patent applications, products, services or processes of the
Company, Solmecs or the Subsidiaries. The patents and patent applications
which have been duly filed in the Israel patent office and in the United
States Patent and Trademark Office have been fully maintained and are in
full force and effect.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
counsel to the Underwriter.
(d) The Underwriter shall have received a letter prior to the
effective date of the Registration Statement and again on and as of the
First Closing Date from each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and Luboshitz Kasierer
& Co., independent public accountants for the Company, substantially in the
form reasonably acceptable to the Underwriter.
(e) At the Closing Dates, (i) the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects with the same effect as if made on and as of the Closing
Dates taking into account for the Option Closing Date the effect of the
transactions contemplated hereby and the Company shall have performed in
all material respects as reasonably determined by the Underwriter all of
its obligations hereunder and satisfied in all material respects as
reasonably determined by the Underwriter all the conditions on its part to
be satisfied at or prior to such Closing Dates; (ii) the Registration
Statement and the Prospectus and any amendments or supplements thereto
shall contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and shall in all
material respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to
state
31
any material fact required to be stated therein or necessary to make the
statements therein not misleading; (iii) there shall have been, since the
respective dates as of which information is given, no material adverse
change, or to the Company's knowledge, any development involving a
prospective material adverse change, in the business, properties, condition
(financial or otherwise), results of operations, capital stock, long-term
or short-term debt, or general affairs of the Company, Solmecs or the
Subsidiaries from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration
Statement, and the Company, Solmecs or the Subsidiaries shall not have
incurred any material liabilities or entered into any material agreement
not in the ordinary course of business other than as referred to in the
Registration Statement and Prospectus; (iv) except as set forth in the
Prospectus, no action, suit, or proceeding at law or in equity shall be
pending or threatened against the Company, Solmecs or the Subsidiaries
which would be required to be set forth in the Registration Statement, and
no proceedings shall be pending or threatened against the Company, Solmecs
or the Subsidiaries before or by any commission, board, or administrative
agency in the United States, Israel or elsewhere, wherein an unfavorable
decision, ruling, or finding would materially and adversely affect the
business, property, condition (financial or otherwise), results of
operations, or general affairs of the Company and (v) the Underwriter shall
have received, at the First Closing Date, a certificate signed by each of
the President and the principal operating officer of the Company, dated as
of the First Closing Date, evidencing compliance with the provisions of
this subsection (e).
(f) Intentionally Omitted.
(g) Upon exercise of the option provided for in Section 2(b) hereof,
the obligations of the Underwriter to purchase and pay for the Option Units
will be subject (as of the date hereof and of the Option Closing Date) to
the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of the Company, shall be
32
contemplated by the Commission, and any reasonable request on the part
of the Commission for additional information shall have been complied
with to the satisfaction of the Commission.
(ii) At the Option Closing Date there shall have been delivered
to you the signed opinions of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇▇ ▇▇▇▇▇ & Co.
and _____________ , respectively, dated as of the Option Closing Date,
in form and substance reasonably satisfactory to ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, counsel to the Underwriter, which opinions shall be
substantially the same in scope and substance as the opinions
furnished to you at the initial Closing Date pursuant to Sections 4(b)
hereof, except that such opinions, where appropriate, shall cover the
Option Units.
(iii) At the Option Closing Date there shall have been delivered
to you a certificate of the President and the principal operating
officer of the Company, dated the Option Closing Date, in form and
substance reasonably satisfactory to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
counsel to the Underwriter, substantially the same in scope and
substance as the certificate furnished to you at the First Closing
Date pursuant to Section 4(e) hereof.
(iv) At the Option Closing Date there shall have been delivered
to you a letter in form and substance satisfactory to you from each of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and Luboshitz Kasierer & Co. dated the Option
Closing Date and addressed to the Underwriter confirming the
information in their letter referred to in Section 4(d) hereof and
stating that nothing has come to their attention during the period
from the ending date of their review referred to in said letter to a
date not more than five business days prior to the Option Closing
Date, which would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date
in connection with the sale and issuance of the Option Units shall be
reasonably satisfactory in form and substance to you, and you and
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel to the Underwriter, shall have
been furnished with all such documents, certificates, and opinions as
you may reasonably request in connection with this transaction in
order to evidence the accuracy and completeness of any of the
representations, warranties or
33
statements of the Company or its compliance with any of the covenants
or conditions contained herein.
(h) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to either of the
Closing Dates, for members of the NASD to execute transactions (as
principal or agent) in the Units, Common Stock or the Warrants and no
proceedings for the taking of such action shall have been instituted or
shall be pending, or, to the knowledge of the Underwriter or the Company,
shall be contemplated by the Commission or the NASD. The Company represents
that at the date hereof it has no knowledge that any such action is in fact
contemplated by the Commission or the NASD.
(i) If any of the conditions herein provided for in this Section shall
not have been fulfilled in all material respects as of the date indicated,
this Agreement and all obligations of the Underwriter under this Agreement
may be canceled at, or at any time prior to, either of the Closing Dates by
the Underwriter notifying the Company of such cancellation in writing or by
telegram at or prior to the applicable Closing Date. Any such cancellation
shall be without liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company. The obligation of the
Company to sell and deliver the Units is subject to the following conditions:
(a) The Registration Statement shall have become effective not later
than 10:00 a.m. New York time, on the day following the date of this
Agreement, or on such later date as the Company and the Underwriter may
agree in writing.
(b) At the Closing Dates, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
(c) On the Effective Date, Solmecs shall merge with and into the
Company.
If the conditions to the obligations of the Company provided for in this
Section have been fulfilled on the First Closing Date but are not fulfilled
after the First Closing Date and
34
prior to the Option Closing Date, then only the obligation of the Company to
sell and deliver the Units on exercise of the option provided for in Section
2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees (i) to indemnify and hold harmless the Underwriter
and each person, if any, who controls the Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act against any losses,
claims, damages, or liabilities, joint or several (which shall, for all purposes
of this Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees), to which such
Underwriter or such controlling person may become subject, under the Act or
otherwise, and (ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages, or liabilities; insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
relate to and arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any Blue Sky application or other document executed by
the Company specifically for that purpose containing written information
specifically furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Units under the securities
laws thereof (any such application, document or information being hereinafter
called a "Blue Sky Application"), or arise out of or are based upon the omission
or alleged omission to state in the Registration Statement, any Preliminary
Prospectus, Prospectus, or any amendment or supplement thereto, or in any Blue
Sky Application, a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
will not be required to indemnify the Underwriter and any controlling person or
be liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission is made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the
35
Underwriter specifically for use in the preparation of the Registration
Statement or any such amendment or supplement thereof or any such Blue Sky
Application or any such Preliminary Prospectus or the Prospectus or any such
amendment or supplement thereto, provided, further that the indemnity with
respect to any Preliminary Prospectus shall not be applicable on account of any
losses, claims, damages, liabilities, or litigation arising from the sale of
Units to any person if the misstatement or omission was corrected in the
Prospectus but a copy of the Prospectus was not delivered to such person by the
Underwriter in accordance with this Agreement at or prior to the written
confirmation of the sale to such person. This indemnity will be in addition to
any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company, each of
its directors, each nominee (if any) for director named in the Prospectus, each
of its officers who have signed the Registration Statement and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any losses, claims, damages, or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and reasonable attorneys'
fees) to which the Company or any such director, nominee, officer, or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or any Blue Sky Application
in reliance upon and in conformity with written information furnished to the
Company by the Underwriter specifically for use in the preparation thereof and
for any violation by the Underwriter in the sale of such Units of any applicable
state or federal law or any rule, regulation or instruction thereunder relating
to violations based on unauthorized statements by Underwriter or its
36
representative, provided that such violation is not based upon any violation of
such law, rule, or regulation or instruction by the party claiming
indemnification or inaccurate or misleading information furnished by the Company
or its representatives, including information furnished to the Underwriter as
contemplated herein. This indemnity agreement will be in addition to any
liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section unless the omission so to notify prejudices the indemnifying party.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that the reasonable fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or (ii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and in the reasonable judgment of
the counsel to the indemnified party, there is a conflict of interest between
the indemnifying party and the indemnified party
37
in the conduct of the defense (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of such
indemnified party, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for the indemnified party,
which firm shall be designated in writing by the indemnified party). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party. If it is
ultimately determined that indemnification is not permitted, then an indemnified
party will return all monies advanced to the indemnifying party with interest
thereon.
7. Contribution. In order to provide for just and equitable contribution
under the Act in any case in which the indemnification provided in Section 6
hereof is requested 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 Section 6 provide for indemnification in such case,
then the Company and the Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) (after
contribution from others) such proportional amount of such losses, claims,
damages, or liabilities represented by the percentage that the underwriting
discount per Unit appearing on the cover page of the Prospectus plus all other
compensation paid to the Underwriter bears to the public offering price
appearing thereon and the Company shall be responsible for the remaining
portion, provided, however, that if such allocation is not permitted by
applicable law, then allocated in such proportion as is appropriate to reflect
relative benefits but also the relative fault of the Company and the Underwriter
and controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be determined
by reference
38
to, among other things, whether in the case of an untrue statement of a material
fact or the omission to state a material fact, such statement or omission
relates to information supplied by the Company or the Underwriter and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriter to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages or by any other method of allocation that does not take
account of the equitable considerations referred to in this Section 7. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 1(f) of
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. As used in this paragraph, the word "Company"
includes any officer, director, or person who controls the Company within the
meaning of Section 15 of the Act. If the full amount of the contribution
specified in this paragraph is not permitted by law, then the Underwriter and
each person who controls the Underwriter shall be entitled to contribution from
the Company, its officers, directors, and controlling persons, and the Company,
its officers, directors, and controlling persons shall be entitled to
contribution from the Underwriter to the full extent permitted by law. The
foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the Act other
than the Company and the Underwriter. No contribution shall be requested with
regard to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of the
Units by the Underwriter is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company including,
but not limited to, the fees and expenses of counsel to the Company and of the
Company's accountants; the costs and expenses incident to the preparation,
printing, filing, and distribution under the Act of the Registration Statement
(including the financial statements therein and all amendments and exhibits
thereto), Preliminary Prospectus,
39
and the Prospectus, as amended or supplemented, the fee of the NASD in
connection with the filing required by the NASD relating to the offering of the
Units contemplated hereby; all expenses, including reasonable fees and
disbursements of counsel to the Underwriter, in connection with the
qualification of the Units under the state securities or Blue Sky laws which the
Underwriter shall designate (which legal fees (not including filing fees or
expenses) shall be $35,000); the cost of printing and furnishing to the
Underwriter copies of the Registration Statement, each Preliminary Prospectus,
if applicable, the Prospectus, this Agreement, and the Blue Sky Memorandum, any
fees relating to the listing of the Units, Common Stock, and Warrants on Nasdaq
or any other securities exchange; the cost of printing the certificates
representing the securities comprising the Units; the fees of the transfer agent
and warrant agent, reasonable and traditional advertising costs, meetings and
presentation costs; and costs of bound volumes (3 sets for the Underwriter) and
prospectus memorabilia (12 sets for the Underwriter). The Company shall pay any
and all taxes (including any transfer, franchise, capital stock, or other tax
imposed by any jurisdiction) on sales of the Units hereunder. The Company will
also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus as called for
in Section 3(a) of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at the First
Closing Date pay to the Underwriter a non-accountable expense allowance of
$179,580. In the event the over-allotment option is exercised, the Company shall
pay to the Underwriter at the Option Closing Date an additional amount in the
aggregate equal to 3.0% of the gross proceeds received upon exercise of the
over-allotment option. In the event the transactions contemplated hereby are not
consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant,
representation, or warranty contained herein or because any other condition to
the Underwriter's obligations hereunder required to be fulfilled by the Company
is not fulfilled) the Company shall not be liable for any expenses of the
Underwriter, including the Underwriter's legal fees (but shall be required to
pay Blue Sky counsel fees and expenses). In the event the transactions
contemplated hereby are not consummated by reason of the Company's actions or
failure to take such actions as the Underwriter reasonably believes are
40
reasonably required to complete the transaction contemplated herein, the Company
shall be liable, in addition to the expenses itemized in Section 8(a) above, for
the actual accountable out-of-pocket expenses of the Underwriter (including
reasonable legal fees and expenses of counsel to the Underwriter) which shall
not exceed $100,000 (less any amount previously paid or payable pursuant to the
next sentence). In the event the transactions contemplated hereby are not
consummated due to a Material Adverse Effect or to adverse market conditions,
the Company shall be liable for the actual out-of-pocket expenses of the
Underwriter, including reasonable legal fees, not to exceed in the aggregate
$100,000.
(c) Except as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter, against any losses, claims, damages, or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys' fees), to which the Underwriter or person may become subject insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. Intentionally Omitted.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13, 14, and 15
hereof, may be terminated at any time prior to the Closing Date, by the
Underwriter if in the Underwriter's judgment it is impracticable to offer for
sale or to enforce contracts made by the Underwriter for the resale of the Units
agreed to be purchased hereunder by reason of (i) the Company having sustained a
material loss, whether or not insured, by reason of fire, earthquake, flood,
accident, or other calamity, or from any labor dispute or court or government
action, order, or decree, (ii) trading in securities on Nasdaq having been
suspended or
41
limited, (iii) material governmental restrictions having been imposed on trading
in securities generally (not in force and effect on the date hereof), (iv) a
banking moratorium having been declared by federal or New York state
authorities, (v) an outbreak of major international hostilities involving the
United States or other substantial national or international calamity having
occurred, (vi) a pending or threatened legal or governmental proceeding or
action relating generally to the Company's business, or a notification having
been received by the Company of the threat of any such proceeding or action,
which would materially adversely affect the Company; (vii) except as
contemplated by the Prospectus, the Company is merged with or consolidated into
or acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs or if Solmecs is not merged with and into the Company ; (viii)
the adoption of a federal law, rule or regulation which, in the reasonable
belief of the Underwriter, would have a material adverse impact on the business
or financial condition of the Company, (ix) any material adverse change in the
financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement, or (x) any material adverse change
having occurred, since the respective dates of which information is given in the
Registration Statement and Prospectus, in the earnings, business prospects, or
general condition of the Company, financial or otherwise, whether or not arising
in the ordinary course of business.
(b) If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, the
Company shall be promptly notified by the Underwriter, by telephone or telegram,
confirmed by letter.
11. Underwriter's Options. At or before the First Closing Date, the Company
will sell the Underwriter or its designees for a consideration of $.001 per
option and upon the terms and conditions set forth in the form of the
Underwriter's Options annexed as an exhibit to the Registration Statement,
Underwriter's Options to purchase 104,104 Units. In the event of conflict in the
terms of this Agreement and the Underwriter's Options with respect to language
relating to the Underwriter's Options, the language of the Underwriter's Options
shall control.
42
12. Covenants of the Underwriter. You covenant and agree with the Company
as follows:
(a) Compliance with Laws. In connection with the offer and sale of
Units, you shall comply with any applicable requirements of the Act, the
Exchange Act, the NASD and the applicable state securities or "Blue Sky"
laws, and the rules and regulations thereunder.
(b) Accuracy of Information. No information supplied by you for use in
the Registration Statement, Preliminary Prospectus, Prospectus or Blue Sky
Application will contain any untrue statements of a material fact or omit
to state any material fact necessary to make such information not
misleading.
(c) No Additional Information. You will not give any information or
make any representation in connection with the offering of the Units other
than that contained in the Prospectus.
(d) Sale of Units. You shall solicit, directly or through Selected
Dealers, purchasers of the Units only in the jurisdictions in which you
have been advised by the Company that such solicitation can be made, and in
which you or the soliciting Selected Dealer, as the case may be, are
qualified to so act.
13. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company and the Underwriter and the undertakings set forth in
or made pursuant to this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the Underwriter, the
Company, or any of its officers or directors or any controlling person and will
survive delivery of and payment of the Units and the termination of this
Agreement.
14. Notice. Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed, delivered, or telecopied
and confirmed to them at ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇., ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, with a copy sent to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., or if sent
to the Company, will be mailed, delivered, or telecopied and confirmed to it at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.▇. ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ 84965, Attention:
43
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ with a copy sent to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. Notice shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication.
15. Parties in Interest. The Agreement herein set forth is made solely for
the benefit of the Underwriter, the Company, any person controlling the Company
or the Underwriter, and directors of the Company, nominees for directors (if
any) named in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors, assigns
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser, as
such purchaser, from the Underwriter of the Units.
16. Applicable Law. This Agreement will be governed by, and construed in
accordance with, of the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
17. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto and delivered to the other parties (including by fax, followed by
original copies by overnight mail).
18. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings, and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in writing, signed by the
Underwriter and the Company.
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If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it will become a binding
agreement between the Company and the Underwriter in accordance with its terms.
Very truly yours,
SCNV ACQUISITION CORP.
By: ____________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, INC.
By: __________________________
Name:
Title:
45