Exhibit 1.1
1,000,000 Shares of Common Stock
and 4,000,000 Redeemable Warrants
IMATEC, LTD.
UNDERWRITING AGREEMENT
Iselin, New Jersey
, 1996
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A.S. GOLDMEN & CO., INC.
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▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Imatec, Ltd., a Delaware corporation (the "Company"), confirms
its agreement with A.S. Goldmen & Co., Inc. (the "Underwriter"), with respect to
the sale by the Company and the purchase by the Underwriter of 1,000,000 shares
(the "Shares") of the Company's common stock, par value $.0001 per share (the
"Common Stock") and 4,000,000 redeemable warrants (the Redeemable Warrants),
each exercisable to purchase one (1) additional share of Common Stock. The
Shares and Redeemable Warrants will be separately tradeable upon issuance and
are hereinafter referred to as the "Firm Securities". Each Redeemable Warrant is
exercisable commencing ________________, 1996 [the effective date of the
Registration Statement] until _____________, 1999 [36 months from the effective
date of the Registration Statement], unless previously redeemed by the Company,
on thirty (30) days written notice, at an initial exercise price equal to $6.50
per share, subject to adjustment. With the consent of the Underwriter, the
Redeemable Warrants may be redeemed by the Company at a redemption price of ten
cents ($.10) per Redeemable Warrant at any time commencing ______________, 1997
[9 months after the effective date of the Registration Statement] provided that
the average closing bid price of the Common Stock equals or exceeds $7.50 per
share for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth (5th) trading day prior to the date
of the notice of redemption. Upon the Underwriter's request, as provided in
Section 2(b) of this Agreement, the Company shall also issue and sell to the
Underwriter up to an additional 150,000 shares of Common Stock and/or up to an
additional 600,000 Redeemable Warrants for the purpose of covering
over-allotments, if any. Such 150,000 Shares and/or 600,000 Redeemable Warrants
are hereinafter collectively referred to as the "Option Securities." The Company
also proposes to issue and sell to the Underwriter or its designees warrants
(the "Underwriter's Warrants"), pursuant to an underwriter's warrant agreement
(the "Underwriter's
Warrant Agreement"), for the purchase of up to an additional 100,000 shares of
Common Stock and/or up to an additional 400,000 Redeemable Warrants. The shares
of Common Stock and the Redeemable Warrants issuable upon exercise of the
Underwriter's Warrants are hereinafter collectively referred to as the
"Underwriter's Securities." The shares of Common Stock issuable upon exercise of
the Redeemable Warrants (including the Redeemable Warrants issuable upon
exercise of the Underwriter's Warrants) are hereinafter referred to as the
"Warrant Shares." The Firm Securities, the Option Securities, the Underwriter's
Warrants, the Underwriter's Securities, and the Warrant Shares are hereinafter
collectively referred to as the "Securities" and are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and covenants and agrees with, the Underwriter as of
the date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form SB- 2 (Registration No. ________), including any related
preliminary prospectus or prospectuses (each a "Preliminary Prospectus"), for
the registration of the Securities, under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations of the Commission under the Act. The Company will not file
any other amendment to such registration statement which the Underwriter shall
have objected to in writing after having been furnished with a copy thereof.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time it becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein (including, but not
limited to, those documents or that information incorporated by reference
therein) and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430A of the rules and regulations under the
Act), is hereinafter called the "Registration Statement," and the form of
prospectus in the form first filed with the Commission pursuant to Rule 424(b)
of the rules and regulations under the Act is hereinafter called the
"Prospectus." For purposes hereof, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or threatened. Each Preliminary Prospectus and the Registration
Statement, at the time of filing thereof, conformed with the requirements of the
Act and the Rules and Regulations, and none of the Preliminary Prospectus nor
the Registration Statement, at the time of filing thereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
this representation and warranty does not apply to statements made or statements
omitted in reliance
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upon and in conformity with written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in the Preliminary Prospectus or the Registration Statement.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing
Date, if any, and during such longer period as the Prospectus may be required to
be delivered in connection with sales by the Underwriter or a dealer, the
Registration Statement and the Prospectus will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; and, at and through such dates, neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for use in the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto.
(d) The Company does not own an interest in any corporation,
partnership, trust, joint venture or other business entity. The Company has been
duly organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation. The Company is duly qualified
and licensed and in good standing as a foreign corporation in each jurisdiction
in which its ownership or leasing of any properties or the character of its
operations require such qualification or licensing. The Company has all
requisite power and authority (corporate and other), and has obtained any and
all necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus; the Company is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and with all federal, state,
local and foreign laws, rules and regulations to which it is subject; and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs,
prospects, stockholders' equity, value, operations, properties, business or
results of operations of the Company. The disclosure in the Registration
Statement concerning the effects of federal, state, local and foreign laws,
rules and regulations on the Company's business as currently conducted and as
contemplated are correct in all respects and do not omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing
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Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement, the Underwriter's Warrant Agreement and
the Warrant Agreement (as defined in Section 1(gg) of this Agreement) and as
described in the Prospectus. The Securities and all other securities issued or
issuable by the Company on or prior to the Closing Date and each Option Closing
Date, if any, conform or, when issued and paid for, will conform, in all
respects to the descriptions thereof contained in the Registration Statement and
the Prospectus. All issued and outstanding securities of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; the
holders thereof have no rights of rescission with respect thereto and are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holder of
any security of the Company or any similar contractual right granted by the
Company. The Securities to be sold by the Company hereunder and pursuant to the
Underwriter's Warrant Agreement and the Warrant Agreement are not and will not
be subject to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in accordance with
the terms hereof and thereof, will be validly issued, fully paid and
non-assessable and conform to the descriptions thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities, when delivered by the Company, will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof and the Underwriter's Warrant Agreement of the Securities to be sold by
the Company hereunder and thereunder to the Underwriter, the Underwriter will
acquire good and marketable title to such Securities, free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever asserted against the Company or any
affiliate (within the meaning of the Rules and Regulations) of the Company.
(f) The financial statements of the Company and the notes
thereto included in the Registration Statement, each Preliminary Prospectus and
the Prospectus fairly present the financial position, income, changes in
stockholders' equity and the results of operations of the Company at the
respective dates and for the respective periods to which they apply and the pro
forma financial information included in the Registration Statement and the
Prospectus presents fairly on a basis consistent with that of the audited
financial statements included therein, what the Company's pro forma
capitalization would have been for the respective dates to which they apply
after giving effect to the adjustments described therein. Such financial
statements have been prepared in conformity with generally accepted accounting
principles and the Rules and Regulations, consistently applied throughout the
periods involved. There has been no adverse change or development involving a
material prospective change in the condition, financial or otherwise, or in the
earnings, business affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company, whether or not
arising in the ordinary course of business, since the date of the financial
statements included in the Registration Statement and the Prospectus; and the
outstanding debt, the property, both tangible and intangible, and the business
of the Company conform in all respects to the descriptions thereof contained in
the Registration Statement and the Prospectus. The financial information set
forth in the Prospectus under the headings "Capitalization," "Selected Financial
Data" and "Plan of
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Operations" fairly presents, on the basis stated in the Prospectus, the
information set forth therein and such financial information has been derived
from or compiled on a basis consistent with that of the audited financial
statements included in the Prospectus.
(g) The Company (i) has paid all federal, state, local and
foreign taxes for which it is liable, including, but not limited to, withholding
taxes and amounts payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986, as amended (the "Code"), and has furnished all information returns
it is required to furnish pursuant to the Code, (ii) has established adequate
reserves for such taxes which are not due and payable, and (iii) does not have
any tax deficiency or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriter in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriter of the
Securities from the Company, (iii) the consummation by the Company of any of its
obligations under this Agreement or the Underwriter's Warrant Agreement, or (iv)
resales of the Securities in connection with the distribution contemplated
hereby.
(i) The Company maintains insurance policies, including, but
not limited to, general liability, property, personal and product liability
insurance, and surety bonds which insure the Company and its employees against
such losses and risks generally insured against by comparable businesses. The
Company (i) has not failed to give notice or present any insurance claim with
respect to any insurable matter under the appropriate insurance policy or surety
bond in a due and timely manner, (ii) does not have any disputes or claims
against any underwriter of such insurance policies or surety bonds, nor has the
Company failed to pay any premiums due and payable thereunder, or (iii) has not
failed to comply with all conditions contained in such insurance policies and
surety bonds. There are no facts or circumstances under any such insurance
policy or surety bond which would relieve any insurer of its obligation to
satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those pertaining to environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the Company
which (i) questions the validity of the capital stock of the Company, this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement (as defined in Section 1(ee) of this Agreement) or of any
action taken or to be taken by the Company pursuant to or in connection with
this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or
the Consulting Agreement, (ii) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are summarized in
the Registration Statement are accurately summarized in all respects), or (iii)
might materially and adversely affect the condition, financial or otherwise, or
the earnings, business affairs, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the Company.
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(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, to enter into this Agreement,
the Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement and to consummate the transactions provided for in such agreements;
and each of this Agreement, the Underwriter's Warrant Agreement, the Warrant
Agreement and the Consulting Agreement have each been duty and properly
authorized, executed and delivered by the Company. Each of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles in any motion, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law). None of the
Company's issue and sale of the Securities, execution or delivery of this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement and the Prospectus and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of (i) the certificate of incorporation or by-laws of the Company,
(ii) any license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit agreement or
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by which it
is or may be bound or to which its properties or assets (tangible or intangible)
are or may be subject, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
its activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any arbitrator, court, regulatory body, administrative agency,
government agency or other body, domestic or foreign, is required for the
issuance of the Securities pursuant to the Prospectus and the Registration
Statement, this Agreement, the Underwriter's Warrant Agreement and the Warrant
Agreement, the performance of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement and the Consulting Agreement and the
transactions contemplated hereby and thereby, except such as have been obtained
under the Act, state securities laws and the rules of the National Association
of Securities Dealers, Inc. (the "NASD") in connection with the Underwriter's
purchase and distribution of the Securities.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the
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Company, and constitute legal, valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights and the
application of equitable principles in any motion, legal or equitable, and
except as obligations to indemnify or contribute to losses may be limited by
applicable law). The descriptions in the Registration Statement of agreements,
contracts and other documents are accurate and fairly present the information
required to be shown with respect thereto by Form SB-2; and there are no
agreements, contracts or other documents which are required by the Act to be
described in the Registration Statement or filed as exhibits to the Registration
Statement which are not described or filed as required; and the exhibits which
have been filed are complete and correct copies of the documents of which they
purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution on or in respect of any class of its capital stock; and,
subsequent to such dates, and except as may otherwise be disclosed in the
Prospectus, there has not been any change in the capital stock, debt (long or
short term) or liabilities of the Company or any material change in the
condition, financial or otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
lease, deed of trust, voting trust agreement, shareholders' agreement, note,
loan or credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company is or may be bound or to which the
property or assets (tangible or intangible) of the Company is or may be subject.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and the Company is in
compliance with all federal, state, local and foreign laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
the Company by the United States Department of Labor or any other governmental
agency responsible for the enforcement of any federal, state, local or foreign
laws, rules and regulations relating to employment. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving the Company, or any
predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company exists or is imminent.
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(q) The Company does not maintain, sponsor or contribute to
any program or arrangement that is an "employee pension benefit plan," an
"employee welfare benefit plan" or a "multiemployer plan," as such terms are
defined in Sections 3(2), 3(l) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("FMSA Plans"). The
Company does not maintain or contribute, now or at any time previously, to a
defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction" within
the meaning of Section 406 of ERISA or Section 4975 of the Code which could
subject the Company to any tax penalty on prohibited transactions and which has
not adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the Code and ERISA as
they relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multiemployer plan."
(r) Neither the Company, nor any of its employees, directors,
stockholders or affiliates (within the meaning of the Rules and Regulations),
has taken or will take, directly or indirectly, any action designed to or which
has constituted or which might be expected to cause or result in, under the
Exchange Act or otherwise, the stabilization or manipulation of the price of any
security of the Company, whether to facilitate the sale or resale of the
Securities or otherwise.
(s) None of the trademarks, trade names, service marks,
service names, copyrights, patents and patent applications, and none of the
licenses and rights to the foregoing, presently owned or held by the Company are
in dispute or are in conflict with the right of any other person or entity. The
Company (i) owns or has the right to use, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or other restrictions
or equities of any kind whatsoever, all trademarks, trade names, service marks,
service names, copyrights, patents and patent applications, and licenses and
rights with respect to the foregoing and all technology, used in the conduct of
its business as now conducted or proposed to be conducted without infringing
upon or otherwise acting adversely to the right or claimed right of any person,
corporation or other entity under or with respect to any of the foregoing and
(ii) is not obligated or under any liability whatsoever to make any payments by
way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any trademark, trade name, service ▇▇▇▇, service name, copyright,
patent or patent application. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental or other proceeding,
domestic or foreign, pending or threatened (or circumstances that may give rise
to the same) against the Company which challenges the exclusive rights of the
Company with respect to any trademarks, trade names, service marks, service
names, copyrights, patents, patent applications or licenses or rights to the
foregoing used in the conduct of its business, or which challenge the right of
the Company to use any technology presently used or contemplated to be used in
the conduct of its business.
(t) The Company owns and has the unrestricted right to use all
trade secrets, know-how (including all unpatented and/or unpatentable
proprietary or confidential information,
8
systems or procedures), inventions, technology, designs, processes, works of
authorship, computer programs and technical data and information that are
material to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, free and clear of and
without violating any right, lien, or claim of others, including, without
limitation, former employers of its employees; provided, however, that the
possibility exists that other persons or entities, completely independent of the
Company or its employees or agents, could have developed trade secrets or items
of technical information similar or identical to those of the Company. The
Company is not aware of any such development of similar or identical trade
secrets or technical information by others.
(u) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, other than liens for taxes not
yet due and payable.
(v) Most ▇▇▇▇▇▇▇▇ & Company, LLP, whose report is filed with
the Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
(w) Each holder of securities of the Company and each director
and officer of the Company has executed an agreement pursuant to which he, she
or it has agreed, for a period of eighteen (18) months following the effective
date of the Registration Statement, not to, directly or indirectly, offer, offer
to sell, sell, grant an option for the purchase or sale of, transfer, assign,
pledge, hypothecate or otherwise encumber (whether pursuant to Rule 144 of the
Rules and Regulations or otherwise) any securities issued or issuable by the
Company, whether or not owned by or registered in the name of such persons, or
dispose of any interest therein, without the prior written consent of the
Company and the Underwriter (collectively, the "Lock-Up Agreements"); provided,
however, that the foregoing restriction does not apply to certain of the holders
set forth on Schedule 1(w) attached hereto, as indicated on such Schedule. The
Company will cause its transfer agent to ▇▇▇▇ an appropriate legend on the face
of stock certificates representing all of such securities and to place "stop
transfer" orders on the Company's stock ledgers. A list of those persons and
entities who have signed Lock-Up Agreements is also set forth in Schedule 1(w).
(x) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuances
that may affect the Underwriter's compensation, as determined by the NASD,
(y) The Securities have been approved for quotation on The
Nasdaq SmallCap Market ("Nasdaq").
(z) Neither the Company nor any of its directors, officers,
stockholders, employees, agents or any other person acting on behalf of the
Company has, directly or
9
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or any
official or employee of any governmental agency or instrumentality of any
government (domestic or foreign) or instrumentality of any government (domestic
or foreign) or any political party or candidate for office (domestic or foreign)
or any other person who was, is or may be in a position to help or hinder the
business of the Company (or assist the Company in connection with any actual or
proposed transaction) which (i) might subject the Company or any other such
person to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign), (ii) if not given in the past,
might have had a material and adverse effect on the condition, financial or
otherwise, or the earnings, business affairs, prospects, stockholders' equity,
value, operations, properties, business or results of operations of the Company,
or (iii) if not continued in the future, might materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs,
prospects, stockholders' equity, value, operations, properties, business or
results of operations of the Company. The Company's internal accounting controls
are sufficient to cause the Company to comply with the Foreign Corrupt Practices
Act of 1977, as amended.
(aa) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, and no affiliate or associate (as these
terms are defined in the Rules and Regulations) of any of the foregoing persons
or entities, has or has had, either directly or indirectly, (i) an interest in
any person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficial interest in any contract or agreement to which the Company is
a party or by which the Company may be bound. Except as set forth in the
Prospectus under "Certain Transactions," there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company and
any officer, director or any person listed in the "Principal Stockholders"
section of the Prospectus. or any affiliate or associate of any of the foregoing
persons or entities.
(bb) The minute books of the Company have been made available
to the Underwriter, contain a complete summary of all meetings and actions of
the directors and stockholders of the Company since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
(cc) Except and to the extent described in the Prospectus, no
holder of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company has the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement. No person or entity holds any anti-dilution
rights with respect to any securities of the Company.
(dd) The Company has (i) entered into an employment agreement
with ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ in the form filed as Exhibit 10.2 to the Registration
Statement, and (ii) purchased key-man life insurance on the life of ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ in the amount of $1,000,000, which policy names the Company as the sole
beneficiary thereof.
10
(ee) The Company has entered into a financial advisory and
consulting agreement, substantially in the form filed as Exhibit 10.1 to the
Registration Statement (the "Consulting Agreement") with the Underwriter. The
Consulting Agreement has been duly and validly authorized by the Company and,
assuming due execution by the parties thereto other than the Company,
constitutes a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting the enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as obligations to indemnify or contribute to
losses may be limited by applicable law).
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to Underwriter's Counsel (as defined in Section
4(d) herein), shall be deemed a representation and warranty by the Company to
the Underwriter as to the matters covered thereby.
(gg) The Company has entered into a warrant agreement,
substantially in the form filed as Exhibit 4.2 to the Registration Statement
(the "Warrant Agreement"), with Continental Stock Transfer & Trust Company, in
form and substance satisfactory to the Underwriter, with respect to the
Redeemable Warrants which provides, among other things, for the payment of
commissions contemplated by Section 4(y) hereof. The Warrant Agreement has been
duly and validly authorized by the Company and, assuming due execution by the
parties thereto other than the Company, constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in accordance with its
terms (except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable, and
except as obligations to indemnify or contribute to losses may be limited by
applicable law).
(hh) The Company has filed a Form 8-A with the Commission
providing for the registration under the Exchange Act of the Securities and such
Form 8-A has been declared effective by the Commission.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriter, and the Underwriter
agrees to purchase from the Company, the Firm Securities at a price equal to
$____ per share of Common Stock [90% of the initial public offering price], and
$____ per Redeemable Warrant [90% of the initial public offering price].
(b) In addition, on the basis of the representations,
warranties, covenants and agreement, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase all or any part of the Option Securities at a price
equal $______ per share of Common Stock [90% of the initial offering price] and
$________ per Redeemable Warrant [90% of the initial public offering price]. The
11
option granted hereby will expire forty five (45) days after (i) the date the
Registration Statement becomes effective, if the Company has elected not to rely
on Rule 430A under the Rules and Regulations, or (ii) the date of this Agreement
if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Firm Securities upon notice by the Underwriter
to the Company setting forth the number of Option Securities as to which the
Underwriter is then exercising the option and the time and date of payment and
delivery for any such Option Securities. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Underwriter, but shall not be
later than seven (7) full business days after the exercise of said option, nor
in any event prior to the Closing Date, unless otherwise agreed upon by the
Underwriter and the Company. Nothing herein contained shall obligate the
Underwriter to exercise the option granted hereby. No Option Securities shall be
delivered unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Underwriter at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, or at
such other place as shall be agreed upon by the Underwriter and the Company.
Such delivery and payment shall be made at 10:00 a.m. (New York City time) on
______, 1996 or at such other time and date as shall be agreed upon by the
Underwriter and the Company but not less than three (3) nor more than seven (7)
full business days after the effective date of the Registration Statement (such
time and date of payment and delivery being herein called the "Closing Date").
In addition, in the event that any or all of the Option Securities are purchased
by the Underwriter, payment of the purchase price for, and delivery of
certificates for, such Option Securities shall be made at the above mentioned
office of the Underwriter or at such other place as shall be agreed upon by the
Underwriter and the Company. Delivery of the certificates for the Firm
Securities and the Option Securities, if any, shall be made to the Underwriter
against payment by the Underwriter of the purchase price for the Firm Securities
and the Option Securities, if any, to the order of the Company by New York
Clearing House funds. Certificates for the Firm Securities and the Option
Securities, if any, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered in such
names as the Underwriter may request in writing at least two (2) business days
prior to the Closing Date or the relevant Option Closing Date, as the case may
be. The certificates for the Firm Securities and the Option Securities, if any,
shall be made available to the Underwriter at such offices or such other place
as the Underwriter may designate for inspection, checking and packaging no later
than 9:30 a.m. on the last business day prior to the Closing Date or the
relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to
the Underwriter or its designees the Underwriter's Warrants for an aggregate
purchase price of twenty dollars ($20.00), which warrants shall entitle the
holders thereof to purchase an aggregate of an additional 100,000 shares of
Common Stock and/or an additional 400,000 Redeemable Warrants. The Underwriter's
Warrants shall be exercisable for a period of four (4) years commencing one (1)
year from the effective date of the Registration Statement at a price equaling
one hundred and sixty percent (160%) of the initial public offering price of the
shares of Common Stock and
12
the Redeemable Warrants. The Underwriter's Warrant Agreement and the form of the
certificates for the Underwriter's Warrant shall be substantially in the form
filed as Exhibit 1.2 to the Registration Statement. Payment for the
Underwriter's Warrants shall be made on the Closing Date.
3. Public Offering of the shares of Common Stock and the
Redeemable Warrants. As soon after the Registration Statement becomes effective
as the Underwriter deems advisable, the Underwriter shall make a public offering
of the Firm Securities and such of the Option Securities as the Underwriter may
determine (other than to residents of or in any jurisdiction in which
qualification of the shares of Common Stock and the Redeemable Warrants is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Underwriter may from time to time increase or
decrease the public offering price after distribution of the shares of Common
Stock and the Redeemable Warrants has been completed to such extent as the
Underwriter, in its sole discretion, deems advisable. The Underwriter may enter
into one or more agreements as the Underwriter, in its sole discretion, deems
advisable with one or more broker-dealers who shall act as dealers in connection
with such public offering.
4. Covenants and Agreements of the Company. The Company
covenants and agrees with the Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or the Exchange Act before termination of the offering of the
Securities to the public by the Underwriter of which the Underwriter shall not
previously have been advised and furnished with a copy, or to which the
Underwriter shall have objected or which is not in compliance with the Act, the
Exchange Act and the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the same in
writing, (i) when the Registration Statement, as amended, becomes effective,
when any post-effective amendment to the Registration Statement becomes
effective and, if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding the outcome of which may
result in the suspension of the effectiveness of the Registration Statement or
any order preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto, or the institution of any
proceedings for that purpose, (iii) of the issuance by the Commission or by any
state securities commission of any proceedings for the suspension of the
qualification of any of the Securities for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that purpose,
(iv) of the receipt of any comments from the Commission, and (v) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information. If the
Commission
13
or any state securities regulatory authority shall enter a stop order or suspend
such qualification at any time, the Company will make every effort to obtain
promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriter) with the Commission, or transmit the
Prospectus by a means reasonably calculated to result in filing the same with
the Commission, pursuant to Rule 424(b)(1) of the Rules and Regulations (or, if
applicable and if consented to by the Underwriter, pursuant to Rule 424(b)(4) of
the Rules and Regulations) within the time period specified in Rule 424(b)(1)
(or, if applicable and if consented to by the Underwriter, Rule 424(b)(4)).
(d) The Company will give the Underwriter notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
in connection with the offering of any of the Securities which differs from the
corresponding prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b) of the Rules and Regulations), and will
furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such amendment or supplement to which the Underwriter
or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, its counsel ("Underwriter's Counsel"),
shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Underwriter may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution contemplated hereby, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Underwriter agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act, the Exchange Act and the Rules
and Regulations so far as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If, at any time when a
prospectus relating to the Securities is required to be delivered under the Act,
any event shall have occurred as a result of which, in the opinion of counsel
for the Company or Underwriter's Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading, or if it is necessary at any time to amend or supplement the
prospectus to comply with the Act, the
14
Company will notify the Underwriter promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriter's Counsel, and the Company will furnish to the Underwriter copies of
such amendment or supplement as soon as available and in such quantities as the
Underwriter may request.
(g) As soon as practicable, but in any event not later than
forty five (45) days after the end of the 12-month period beginning on the day
after the end of the fiscal quarter of the Company during which the effective
date of the Registration Statement occurs (ninety (90) days in the event that
the end of such fiscal quarter is the end of the Company's fiscal year), the
Company shall make generally available to its security holders, in the manner
specified in Rule 158(b) of the Rules and Regulations, and to the Underwriter,
an earnings statement which will be in the detail required by, and will
otherwise comply with, the provisions of Section 11(a) of the Act and Rule
158(a) of the Rules and Regulations, which statement need not be audited unless
required by the Act, covering a period of at least twelve (12) consecutive
months after the effective date of the Registration Statement.
(h) During a period of seven years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings and will deliver to the Underwriter:
i) concurrently with furnishing such quarterly
reports to its stockholders statements of income of the
Company for such quarter in the form furnished to the
Company's stockholder and certified by the Company's principal
financial or accounting officer;
ii) concurrently with furnishing such annual reports
to its stockholders, a balance sheet of the Company as at the
end of the preceding fiscal year, together with statements of
operations, stockholders' equity and cash flows of the Company
for such fiscal year, accompanied by a copy of the report
thereon of the Company's independent certified public
accountants;
iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with
the Commission, the NASD or any securities exchange;
v) every press release and every material news item
or article of interest to the financial community in respect
of the Company or its affairs which was released or prepared
by or on behalf of the Company; and
15
vi) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its
business which the Underwriter may request.
During such seven-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a transfer and warrant agent
and, if necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for the Common
Stock and the Redeemable Warrants.
(j) The Company will furnish to the Underwriter, without
charge and at such place as the Underwriter may designate, copies of each
Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (one of which will be signed and will include
all financial statements and exhibits), the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the Registration Statement, in each case as soon as available and in such
quantities as the Underwriter may request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Underwriter with originally-executed
copies of duly executed, legally binding and enforceable Lock-Up Agreements
which are in form and substance satisfactory to the Underwriter. On or before
the Closing Date, the Company shall deliver instructions to its transfer agent
authorizing such transfer agent to place appropriate legends on the certificates
representing the securities of the Company subject to the Lock-Up Agreements and
to place appropriate stop transfer orders on the Company's ledgers.
(l) The Company agrees that, for a period of thirty six (36)
months commencing with the effective date of the Registration Statement, and
except as contemplated by this Agreement, it will not, without the prior written
consent of the Underwriter, issue, sell, contract or offer to sell, grant an
option for the purchase or sale of, assign, transfer, pledge, distribute or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
option, right or warrant with respect to any shares of Common Stock or any type
of capital stock having voting or dividend rights on a parity with or superior
to the Common Stock, except for options to purchase up to an aggregate of
500,000 shares of Common Stock which have been or may be granted pursuant to the
Company's stock option plan.
(m) Neither the Company nor any of its officers, directors,
stockholders or affiliates (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to stabilize or
manipulate the price of any securities of the Company, or which might in the
future reasonably be expected to cause or result in the stabilization or
manipulation of the price of any such securities.
16
(n) The Company shall apply the net proceeds from the sale of
the Securities offered to the public in the manner set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.
(o) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, any Form SR
required by Rule 463 under the Act) from time to time under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents will comply as to form and substance with the applicable requirements
under the Act, the Exchange Act and the Rules and Regulations.
(p) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date hereof, the Closing Date or the relevant Option Closing
Date, as the case may be) which have been read by the Company's independent
public accountants, as stated in their letters to be furnished pursuant to
Section 6(i) hereof.
(q) The Company shall cause the Securities to be quoted on
Nasdaq and, for a period of seven (7) years from the date hereof, use its best
efforts to maintain the Nasdaq quotation of the Securities to the extent
outstanding.
(r) For a period of five (5) years from the Closing Date, the
Company shall furnish or cause to be furnished to the Underwriter and at the
Company's sole expense, (i) daily consolidated transfer sheets relating to the
Common Stock and the Redeemable Warrants and (ii) a list of holders of all of
the Company's securities.
(s) For a period of five (5) years from the Closing Date, the
Company shall, at the Company's sole expense, (i) promptly provide the
Underwriter, upon any and all requests of the Underwriter, with a "blue sky
trading survey" for secondary sales of the Company's securities, prepared by
counsel to the Company, and (ii) take all necessary and appropriate actions to
further qualify the Company's securities in all jurisdictions of the United
States in order to permit secondary sales of such securities pursuant to the
"blue sky" laws of those jurisdictions, provided that such jurisdictions do not
require the Company to qualify as a foreign corporation.
(t) As soon as practicable, but in no event more than five (5)
business days before the effective date of the Registration Statement, the
Company agrees to file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities. As soon as practicable,
but in no event more than thirty (30) days after the effective date of the
Registration Statement, the Company agrees to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
▇▇▇▇▇'▇ OTC Manual and to continue such inclusion for a period of not less than
seven (7) years.
17
(u) Without the prior written consent of the Underwriter, the
Company hereby agrees that it will not, for a period of thirty six (36) months
from the effective date of the Registration Statement, (i) adopt, propose to
adopt or otherwise permit to exist any employee, officer, director, consultant
or compensation plan or arrangement permitting the grant, issue, sale or entry
into any agreement to grant, issue or sell any option, warrant or other contract
right (x) at an exercise price that is less than the greater of the initial
public offering price of the shares of Common Stock set forth herein and the
fair market value per share of Common Stock on the date of grant or sale or (y)
to any of its executive officers or directors or to any holder of five percent
(5%) or more of the Common Stock or any holder of five percent (5%) or more of
the Common Stock as the result of the exercise or conversion of equivalent
securities, including, but not limited to options, warrants or other contract
rights and securities convertible, directly or indirectly, into shares of Common
Stock (it being acknowledged that clause (y) does not apply to options to
purchase up to an aggregate of five hundred thousand (500,000) shares of Common
Stock which have been or may be granted pursuant to the Company's stock option
plan); (ii) permit the maximum number of shares of Common Stock or other
securities of the Company purchasable at any time pursuant to options, warrants
or other contract rights to exceed five hundred thousand (500,000) shares of
Common Stock; (iii) permit the payment for such securities with any form of
consideration other than cash; or (iv) permit the existence of stock
appreciation rights, phantom options or similar arrangements.
(v) Until the completion of the distribution of the Firm
Securities and, if applicable, the Option Securities to the public, the Company
shall not, without the prior written consent of the Underwriter, issue, directly
or indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations.
(w) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the Underwriter's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form S-1 (or other appropriate form) for the
registration under the Act of the Underwriter's Securities.
(x) For a period of five (5) years after the effective date of
the Registration Statement, the Company shall cause one (1) individual selected
by the Underwriter to be elected to the board of directors of the Company, if
requested by the Underwriter. In the event that the Underwriter shall not have
designated such individual at the time of any meeting of the Company's board of
directors or in the event that such individual has not been elected or is
unavailable to serve, the Company shall notify the Underwriter of each meeting
of its board of directors and, in such event, an individual selected by the
Underwriter shall be permitted to attend all meetings of the Company's board of
directors as a non-voting advisor and to receive all notices and other
correspondence and communications sent by the Company to the members of its
board of directors. Such board member or non-voting advisor shall receive no
more or less compensation than is paid to other non-officer directors of the
Company for attendance at meetings of the Company's board of directors and such
board member or non-voting advisor shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings, including, but not
limited to, food, lodging and transportation. The Company hereby
18
agrees to indemnify and hold such director or non-voting advisor harmless, to
the maximum extent permitted by law, against any and all actions, suits,
proceedings, inquiries, arbitrations, investigations, litigation, governmental
or other proceedings, domestic or foreign, and awards and judgments arising out
of such individual's service as a director or non-voting advisor and, in the
event that the Company maintains a liability insurance policy affording coverage
for the acts of its officers and directors, and/or in the event that the Company
has entered into an indemnification agreement with any of its officers or
directors, the Company agrees to include such director or non-voting advisor as
an insured under such insurance policy and/or to enter into an indemnification
agreement with such director or non-voting advisor which is at least as
favorable to such individual as any indemnification agreement that the Company
has entered into with any of its officers or directors. The rights and benefits
of such indemnification and the benefits of such insurance shall, to the maximum
extent possible, extend to the Underwriter insofar as it may be or may be
alleged to be responsible for such director or non-voting advisor. The Company
agrees to provide its outside directors with compensation as deemed appropriate
and customary for similar companies.
(y) Commencing one (1) year from the date hereof, the Company
shall pay the Underwriter a commission equal to four percent (4%) of the
exercise price of the Redeemable Warrants, payable upon exercise thereof on the
terms set forth in the Warrant Agreement. The Company agrees not to solicit the
exercise of the Redeemable Warrants other than through the Underwriter.
(z) For a period of twenty four (24) months after the
effective date of the Registration Statement, the Company shall not restate,
amend or alter any term of any written employment, consulting or similar
agreement entered into between the Company and any officer, director or key
employee as of the effective date of the Registration Statement in a manner
which is more favorable to such officer, director or key employee, without the
prior written consent of the Underwriter. For a period of twenty four (24)
months from the effective date of the Registration Statement, neither the
Company nor any future subsidiary shall enter into an employment, consulting or
similar agreement with any individual with whom the Company has entered into an
employment, consulting or similar agreement as of the effective date of the
Registration Statement, without the prior written consent of the Underwriter.
(aa) For a period of five (5) years from the effective date of
the Registration Statement, the Company shall obtain and maintain such insurance
policies, including, but not limited to, general liability and property
insurance, and surety bonds which will insure or protect the Company and its
employees against such losses and risks generally insured or protected against
by comparable businesses.
(bb) For a period of five (5) years from the date hereof, the
Company will retain Most ▇▇▇▇▇▇▇▇ & Company, LLP (or another accounting firm
acceptable to the Underwriter) as its independent certified public accountants
and, during such period, the Company will promptly submit to the Underwriter
copies of all accountant's management reports and similar correspondence between
the Company's accountants and the Company.
5. Payment of Expenses.
19
(a) The Company hereby agrees to pay (such payment to be made,
at the discretion of the Underwriter, on the Closing Date and any Option Closing
Date (to the extent not paid on the Closing Date or a previous Option Closing
Date)) all expenses and fees (other than fees of Underwriter's Counsel) incident
to the performance of the obligations of the Company under this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing, (including mailing and
handling charges) filing, delivery and mailing (including the payment of
postage, overnight delivery or courier charges with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing (including the payment of postage, overnight
delivery or courier charges with respect thereto) and delivery of this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement, the
Consulting Agreement and agreements with selected dealers, and related
documents, including the cost of all copies thereof and of each Preliminary
Prospectus and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriter and such dealers as the Underwriter may
request, in such quantities as the Underwriter may request, (iii) the printing,
engraving, issuance and delivery of the Securities, (iv) the qualification of
the Securities under state or foreign securities or "blue sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of counsel in connection therewith,
(v) advertising costs and expenses, including, but not limited to costs and
expenses in connection with bound volumes and prospectus memorabilia and
"tombstone" advertisement expenses, (vi) fees and expenses of a transfer and
warrant agent and registrar for the Securities, (vii) applications for
assignments of a rating of the Securities by qualified rating agencies, (viii)
the fees payable to the Commission and the NASD, and (ix) the fees and expenses
incurred in connection with the listing of the Securities on Nasdaq and any
other exchange.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, Section 10(a) or Section 11 hereof,
the Company shall reimburse and indemnify the Underwriter for all of its actual
out-of-pocket expenses, including the fees and disbursements of Underwriter's
Counsel, less any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to Section 5(a) hereof, it will pay to the Underwriter
on the Closing Date by certified or bank cashier's check, or, at the election of
the Underwriter, by deduction from the proceeds of the offering of the Firm
Securities, a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Firm Securities,
twenty five thousand dollars ($25,000) of which has been paid to date by the
Company. In the event the Underwriter elects to exercise the overallotment
option described in Section 2(b) hereof, the Company further agrees to pay to
the Underwriter on each Option Closing Date, by certified or bank cashier's
check, or, at the Underwriter's election, by deduction from the proceeds of the
Option Securities purchased on such Option Closing Date,
20
a non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of such Option Securities.
6. Conditions of the Underwriter's Obligations. The
obligations of the Underwriter hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date and each Option Closing
Date, as the case may be; the accuracy on and as of the Closing Date and each
Option Closing Date, if any, of the statements of officers of the Company made
pursuant to the provisions hereof; the performance by the Company on and as of
the Closing Date and each Option Closing Date, if any, of its covenants and
obligations hereunder; and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 p.m., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Underwriter, and,
at the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriter's Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the shares of
Common Stock and any price-related information previously omitted from the
effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the Rules
and Regulations within the prescribed time period, and prior to the Closing Date
the Company shall have provided evidence satisfactory to the Underwriter of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's reasonable opinion, is material,
or omits to state a fact which, in the Underwriter's reasonable opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances in which they were made not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Underwriter's reasonable opinion, is
material, or omits to state a fact which, in the Underwriter's reasonable
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall
have received from Underwriter's Counsel such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and such other related matters as the
Underwriter may request and Underwriter's Counsel shall have received such
papers and information as they may request in order to enable them to pass upon
such matters.
21
(d) At the time this Agreement is executed, the Underwriter
shall have received the favorable opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇ & Brandeis, LLP,
counsel to the Company, dated the Closing Date, addressed to the Underwriter, in
form and substance satisfactory to Underwriter's Counsel, to the effect that:
i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, (B) is duly
qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) has all
requisite power and authority (corporate and other) and has
obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and
from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its
properties and conduct its business as described in the
Prospectus; to such counsel's knowledge, the Company is and
has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates,
franchises and permits obtained by it from governmental or
regulatory officials and agencies and all federal, state,
local and foreign laws, rules and regulations to which it is
subject; and, to such counsel's knowledge, the Company has not
received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order,
license, certificate, franchise or permit which, singly or in
the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings, business
affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company.
The disclosure in the Registration Statement concerning the
effects of federal, state, local and foreign laws, rules and
regulations on the Company's business as currently conducted
and as contemplated are correct in all material respects and
do not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading;
ii) the Company does not own an interest in any
corporation, partnership, trust, joint venture, or other
business entity;
iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus
under "Capitalization" and the Company is not a party to or
bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement and
as described in the Prospectus. The Securities and all other
securities issued or issuable by the Company conform, or when
issued and paid for, will conform, in all respects to the
descriptions thereof contained in the Registration Statement
and the Prospectus. All issued and
22
outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of
rescission with respect thereto and are not subject to
personal liability by reason of being such holders; and none
of such securities were issued in violation, of the preemptive
rights of any holders of any security of the Company or any
similar contractual right granted by the Company. The
Securities to be sold by the Company hereunder and under the
Underwriter's Warrant Agreement and the Warrant Agreement are
not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms
hereof and thereof, will be validly issued, fully paid and
non-assessable and conform to the descriptions thereof
contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate
action required to be taken for the authorization, issue and
sale of the Securities has been duly and validly taken; and
the certificates representing the Securities are in due and
proper form. The Underwriter's Warrants constitute valid and
binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the
issuance and delivery pursuant to this Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement of
the Securities to be sold by the Company hereunder and
thereunder, the Underwriter will acquire good and marketable
title to such Securities, free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever asserted against
the Company or any affiliate (within the meaning of the Rules
and Regulations) of the Company. No transfer tax is payable by
or on behalf of the Underwriter in connection with (A) the
issuance by the Company of the Securities, (B) the purchase by
the Underwriter of the Securities from the Company, (C) the
consummation by the Company of any of its obligations under
this Agreement, the Underwriter's Warrant Agreement or the
Warrant Agreement, or (D) resales of the Securities in
connection with the distribution contemplated hereby;
iv) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has
been timely made in the appropriate form under Rule 430A, and
no stop order suspending the use of the Preliminary
Prospectus, the Registration Statement or the Prospectus or
any part of any thereof or suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending, threatened
or contemplated under the Act;
v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments
or supplements thereto (other than the financial statements
and schedules and other financial and statistical data
included therein, as to which no opinion need be rendered)
comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations;
23
vi) to such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act
to be described in the Registration Statement and the
Prospectus and filed as exhibits to the Registration Statement
(or required to be filed under the Exchange Act if upon such
filing they would be incorporated, in whole or in part, by
reference therein) other than those described in the
Registration Statement and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are
correct copies of the documents of which they purport to be
copies; (B) the descriptions in the Registration Statement and
the Prospectus and any supplement or amendment thereto of
agreements, contracts and other documents to which the Company
is a party or by which it is bound are accurate and fairly
represent the information required to be shown by Form SB-2;
(C) there is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental
proceeding (including, without limitation, those pertaining to
environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give
rise to the same), or involving the properties or business of,
the Company which (I) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement
are accurately summarized in all respects), or (II) questions
the validity of the capital stock of the Company or of this
Agreement, the Underwriter's Warrant Agreement, the Warrant
Agreement or the Consulting Agreement or of any action taken
or to be taken by the Company pursuant to or in connection
with any of the foregoing; (D) no statute or regulation or
legal or governmental proceeding required to be described in
the Prospectus is not described as required; and (E) there is
no action, suit or proceeding pending or threatened against or
affecting the Company before any court, arbitrator or
governmental body, agency or official (or any basis thereof
known to such counsel) in which there is a reasonable
possibility of an adverse decision which may result in a
material adverse change in the condition, financial or
otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operation, properties, business
or results of operations of the Company, which could adversely
affect the present or prospective ability of the Company to
perform its obligations under this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement or which in any manner draws into
question the validity or enforceability of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement;
vii) the Company has full legal right, power and
authority to enter into each of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement and to consummate the transactions
provided for herein and therein; and each of this Agreement,
the Underwriter's Warrant Agreement, the Warrant Agreement and
the Consulting Agreement has been duly authorized, executed
and delivered by the Company. Each of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement, assuming due authorization, execution
and delivery
24
by each other party thereto, constitutes a legal, valid and
binding agreement of the Company, enforceable against the
Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of
general application relating to or affecting the enforcement
of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as
obligations to indemnify or contribute to losses may be
limited by applicable law). None of the Company's execution or
delivery of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement and the Consulting Agreement,
its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, or the
conduct of its business as described in the Registration
Statement and the Prospectus and any amendments or supplements
thereto, conflicts with or will conflict with or results or
will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default
under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever upon,
any property or assets (tangible or intangible) of the Company
pursuant to the terms of (A) the certificate of incorporation
or bylaws of the Company, (B) any license, contract,
indenture, mortgage, lease, deed of trust, voting trust
agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which it is
or may be bound or to which its properties or assets (tangible
or intangible) are or may be subject, (C) any statute
applicable to the Company or (D) any judgment, decree, order,
rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction
over the Company or any of its activities or properties;
viii) no consent, approval, authorization or order
of, and no filing with, any arbitrator, court, regulatory
body, administrative agency, government agency or other body,
domestic or foreign (other than such as may be required under
"blue sky" laws and the rules of the NASD, as to which no
opinion need be rendered), is required in connection with the
issuance of the Securities pursuant to the Prospectus, the
Registration Statement, this Agreement, the Underwriter's
Warrant Agreement and the Warrant Agreement, or the
performance of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement and the Consulting Agreement
and the transactions contemplated hereby and thereby;
ix) the properties and business of the Company
conform to the description thereof contained in the
Registration Statement and the Prospectus; and the Company has
good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property
stated in the Prospectus to be owned or leased by it, in each
case free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other
25
restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not
yet due and payable;
x) the Company is not in breach of, or in default
under, any term or provision of any license, contract,
indenture, mortgage, lease, deed of trust, voting trust
agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which it is
or may be bound or to which its property or assets (tangible
or intangible) are or may be subject; and the Company is not
in violation of any term or provision of (A) its certificate
of incorporation or by-laws, (B) any authorization, approval,
order, license, certificate, franchise or permit of any
governmental or regulatory official or body, or (C) any
judgement, decree, order, statute, rule or regulation to which
it is subject;
xi) the statements in the Prospectus under
"Prospectus Summary," "Business," "Management," "Principal
Stockholders," "Certain Transactions," "Shares Eligible For
Future Sale," and "Description of Securities" have been
reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules
or regulations or legal conclusions, are correct in all
material respects;
xii) the Securities have been accepted for quotation
on Nasdaq;
xiii) the Company owns or has the right to use, free
and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all trademarks, trade names,
service marks, service names, trade names, copyrights, patents
and patent applications, and licenses and rights with respect
to the foregoing, used in the conduct of its business as now
conducted or proposed to be conducted without infringing upon
or otherwise acting adversely to the right or claimed right of
any person, corporation or other entity under or with respect
to the foregoing; and there is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or
governmental or other proceeding, domestic or foreign, pending
or threatened (or circumstances that may give rise to the
same) against the Company which challenges the exclusive
rights of the Company with respect to any trademarks, trade
names, service marks, service names, copyrights, patents or
patent applications, or licenses or rights to the foregoing,
used in the conduct of the its business;
xiv) the persons listed under the captions "Principal
Stockholders" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in Rule 13d-3 under the
Exchange Act) of the securities set forth opposite their
respective names thereunder as and to the extent set forth
therein;
26
xv) to such counsel's knowledge, neither the Company
nor any of its directors, officers, stockholders, employees,
agents or any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business)
to any customer, supplier, employee or agent of a customer or
supplier, or any official or employee of any governmental
agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is or may be in
a position to help or hinder the business of the Company (or
assist it in connection with any actual or proposed
transaction) which (A) might subject the Company or any such
person to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign),
(B) if not given in the past, might have had a material and
adverse effect on the condition, financial or otherwise, or
the earnings, business affairs, prospects, stockholders'
equity, value, operations, properties, business or results of
operations of the Company, or (C) if not continued in the
future, might materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs,
prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company;
xvi) except as disclosed in the Prospectus, no
person, corporation, trust, partnership, association or other
entity has the right to include and/or register any securities
of the Company in the Registration Statement, require the
Company to file any registration statement or, if filed, to
include any security in such registration statement;
xvii) there are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for
services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or financial
consulting arrangement or any other arrangements, agreements,
understandings, payments or issuances that may affect the
Underwriter's compensation, as determined by the NASD;
xviii) the minute books of the Company contain a
complete summary of all meetings and actions of the directors
and stockholders of the Company since the time of its
incorporation and reflect all transactions referred to in such
minutes accurately in all material respects;
xix) assuming due execution by the parties thereto,
the Lock-Up Agreements are legal, valid and binding
obligations of the parties thereto, enforceable against such
parties and any subsequent holder of the securities subject
thereto in accordance with their terms; and
xx) the Company (A) does not maintain, sponsor or
contribute to any ERISA Plans, (B) does not maintain or
contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C)
has
27
never completely or partially withdrawn from a "multiemployer
plan," as defined in Section 3(37) of ERISA.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus and related matters and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement or the Prospectus, on the
basis of the foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or amendment became
effective, or the Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, as of the date of the Preliminary Prospectus and the
Prospectus, and as of the date of such opinion, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading (it being understood that
such counsel need express no opinion with respect to the financial statements
and schedules and other financial and statistical data included in the
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
supplements or amendments thereto).
In rendering such opinion, such counsel may rely (a) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriter's
Counsel) of other counsel acceptable to Underwriter's Counsel, familiar with the
applicable laws; and (b) as to matters of fact, to the extent they deem proper,
on certificates and written statements of responsible officers of the Company
and certificates or other written statements of officers of departments of
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriter's Counsel, if requested. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991) or any comparable state accord. The opinion
of such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Underwriter and
they are justified in relying thereon.
(e) At the Closing Date, the Underwriter shall have received
the favorable opinion of Wyatt, Gerber, ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., patent counsel to
the Company, dated the Closing Date, addressed to the Underwriter, in form and
substance satisfactory to Underwriter's Counsel, to the effect that:
28
i) To the best of our knowledge, after due inquiry, except as
described in the Prospectus, the Company owns or has the right
to use, free and clear of all liens, encumbrances, pledges,
security interests, defects or other restrictions or equities
of any kind whatsoever,
(a) all patents and patent applications (including,
without limitation, the Patents),
(b) all trademarks and service marks (including,
without limitation, the Trademarks),
(c) all copyrights (including, without limitation,
the Copyrighted Material),
(d) all service and trade names, and
(e) all intellectual property licenses (including,
without limitation, the Licenses),
(f) all technology,
used in, contemplated to be use in or required for, the
conduct of the Company's business.
ii) To the best of our knowledge, after due inquiry, none of
the prior employers of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ have any rights, by
ownership, license, shop right or otherwise, in any of ▇▇.
▇▇▇▇▇▇'▇ patents, patent applications, trade secrets, know-how
or technology used or contemplated to be used by the Company.
iii) To the best of our knowledge, after due inquiry, each of
the Company and the Subsidiary possesses all material
intellectual property licenses or rights used in, or required
for, the conduct of its respective business (including, the
Licenses and without limitation, any such licenses or rights
described in the Prospectus as being owned, possessed or
licensed by the Company or any Subsidiary, as the case may
be), such licenses and rights are in full force and effect,
and the Company's and the Subsidiary's products, methods and
services do not infringe any unlicensed intellectual property
of any third parties.
iv) To the best of our knowledge, after due inquiry, there is
no claim, action, or opposition pending, threatened or
potential, which affects or could affect the rights of any of
the Company or the Subsidiary with respect to any trademarks,
service marks, copyrights, service names, trade names,
patents, patent applications or licenses used in, or required
for, the conduct of the Company's or the Subsidiary's
business, and all trademarks, service marks, copyrights,
service names, tradenames and patents, owned or licensed to
the Company or the Subsidiary, are valid.
29
v) To the best of our knowledge, after due inquiry, there is
no intellectual property based claim or action, pending,
threatened or potential, which affects or could affect the
rights of any of the Company or the Subsidiary with respect to
any products, services, processes or licenses, including,
without limitation, the Licenses used in the conduct of the
Company's or the Subsidiary's business.
vi) To the best of our knowledge, after due inquiry, except as
described in the Prospectus, none of the Company nor the
Subsidiary is under any obligation to pay royalties or fees to
any third party with respect to any material, technology or
intellectual properties developed, employed, licensed or used
by the Company or the Subsidiary.
vii) To the best of our knowledge, after due inquiry, the
statements in the Prospectus under the headings, "Risk Factors
- Intellectual Property Rights" and "Business - Intellectual
Property," are accurate in all material respects, fairly
represent the information disclosed therein and do not omit to
state any fact necessary to make the statements made therein
complete and accurate.
viii) To the best of our knowledge, after due inquiry, the
statements in the Registration Statement and Prospectus do not
contain any untrue statement of a material fact with respect
to the intellectual property position of any of the Company or
the Subsidiary, or omit to state any material fact relating to
the intellectual property position of any of the Company or
the Subsidiary which is required to be stated in the
Registration Statement and the Prospectus or is necessary to
make the statements therein not misleading.
At the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received the favorable opinion of each of ▇▇▇▇▇▇▇▇, ▇▇▇▇
& Brandeis, LLP and Wyatt, Gerber, ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., counsel to the
Company, dated the Closing Date or the relevant Option Closing Date, addressed
to the Underwriter and in form and substance satisfactory to Underwriter's
Counsel confirming, as of the Option Closing Date, the statements made by each
of ▇▇▇▇▇▇▇▇, ▇▇▇▇ & Brandeis, LLP and Wyatt, Gerber, ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., in
their opinions delivered at the time this Agreement is executed.
(f) On or prior to each of the Closing Date and each Option
Closing Date, if any, Underwriter's Counsel shall have been furnished with such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
Section 6(c) hereof, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company herein contained.
(g) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change or
development involving a prospective adverse change in the condition, financial
or otherwise, or the earnings, business affairs, stockholders' equity, value,
operations, properties, business or results of operations of the Company,
whether or not in the ordinary course of business, from the latest dates as of
which
30
such matters are set forth in the Registration Statement and the Prospectus;
(ii) there shall have been no transaction, not in the ordinary course of
business, entered into by the Company from the latest date as of which the
financial condition of the Company is set forth in the Registration Statement
and the Prospectus; (iii) the Company shall not be in default under any
provision of any instrument relating to any outstanding indebtedness; (iv) the
Company shall not have issued any securities (other than the Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class and there shall not have been any change in the capital
stock, debt (long or short term) or liabilities or obligations of the Company
(contingent or otherwise) from the latest dates as of which such matters are set
forth in the Registration Statement and the Prospectus; (v) no material amount
of the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and the Prospectus; (vi) no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental or
other proceeding, domestic or foreign, shall be pending or threatened (or
circumstances giving rise to same) against the Company or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, stockholders' equity,
value, operations, properties, business or results of operations of the Company,
except as set forth in the Registration Statement and Prospectus; and (vii) no
stop order shall have been issued under the Act with respect to the Registration
Statement and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date,
if any, the Underwriter shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or the relevant Option
Closing Date, as the case may be, to the effect that each of such persons has
carefully examined the Registration Statement, the Prospectus and this
Agreement, and that:
i) The representations and warranties regarding the
Company in this Agreement are true and correct, as if made on
and as of the Closing Date or the Option Closing Date, as the
case may be, and the Company has complied with all agreements
and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the case may
be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued,
and no proceedings for that purpose have been instituted or
are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto
contain all statements and information required to be included
therein, and none of the Registration Statement, the
Prospectus or any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein
31
or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and
neither the Preliminary Prospectus nor any supplement thereto
included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and
iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (A) the Company has not incurred any material
liabilities or obligations, direct or contingent; (B) the
Company has not paid or declared any dividends or other
distributions on its capital stock; (C) the Company has not
entered into any transactions not in the ordinary course of
business; (D) there has not been any change in the capital
stock or long-term debt or any increase in the short-term
borrowings (other than any increase in short-term borrowings
in the ordinary course of business) of the Company; (E) the
Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (F) there is no
litigation which is pending or threatened (or circumstances
giving rise to same) against the Company or any affiliate
(within the meaning of the Rules and Regulations) of the
Company which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (G)
there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this Section 6(g)
are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriter will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriter
shall have received a letter, dated such date, addressed to the Underwriter and
in form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriter and Underwriter's Counsel, from Most ▇▇▇▇▇▇▇▇ & Company, LLP:
i) confirming that they are independent certified
public accountants with respect to the Company within the
meaning of the Act and the Rules and Regulations;
ii) stating that it is their opinion that the
financial statements of the Company included in the
Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations and that the Underwriter may
rely upon the opinion of Most ▇▇▇▇▇▇▇▇ & Company, LLP with
respect to such financial statements and supporting schedules
included in the Registration Statement;
32
iii) stating that, on the basis of a limited review
which included a reading of the latest unaudited interim
financial statements of the Company, a reading of the latest
available minutes of the stockholders and board of directors
and the various committees of the board of directors of the
Company, consultations with officers and other employees of
the Company responsible for financial and accounting matters
and other specified procedures and inquiries, nothing has come
to their attention which would lead them to believe that (A)
the pro forma financial information contained in the
Registration Statement and Prospectus does not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or is
not fairly presented in conformity with generally accepted
accounting principles applied on a basis consistent with that
of the audited financial statements of the Company or the
unaudited pro forma financial information included in the
Registration Statement, (B) the unaudited financial statements
and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited financial statements of the Company
included in the Registration Statement, or (C) at a specified
date nor more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in
the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity or net current assets or
net assets of the Company as compared with amounts shown in
the September 30, 1995 balance sheet included in the
Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was
any change or decrease, setting forth the amount of such
change or decrease, and (D) during the period from September
30, 1995 to a specified date not more than five (5) days prior
to the effective date of the Registration Statement, there was
any decrease in net revenues, net earnings or net earnings per
share of Common Stock, in each case as compared with the
corresponding period beginning September 30, 1994, other than
as set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount
of such decrease;
iv) setting forth, at a date not later than five (5)
days prior to the effective date of the Registration
Statement, the amount of liabilities of the Company (including
a break-down of commercial paper and notes payable to banks);
v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus, in each
case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general
accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of
specified readings,
33
inquiries and other appropriate procedures (which procedures
do not constitute an audit in accordance with generally
accepted auditing standards) set forth in the letter and found
them to be in agreement,
vi) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriter may
request.
(k) At the Closing Date and each Option Closing Date, if any,
the Underwriter shall have received from ▇▇▇▇▇▇▇▇, ▇▇▇▇ & Brandeis, LLP a
letter, dated as of the Closing Date or the relevant Option Closing Date, as the
case may be, to the effect that (i) they reaffirm the statements made in the
letter furnished pursuant to Section 6(i) hereof, (ii) if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further effect
that they have carried out procedures as specified in clause (v) of Section 6(i)
hereof with respect to certain amounts, percentages and financial information as
specified by the Underwriter and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(l) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Underwriter the appropriate number of
Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to Section 4(e) hereof shall
have been issued on either the Closing Date or the Option Closing Date, if any,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
(n) On or before the effective date of the Registration
Statement, the Company shall have executed and delivered to the Underwriter the
Underwriter's Warrant Agreement, substantially in the form filed as Exhibit 1.2
to the Registration Statement. On or before the Closing Date, the Company shall
have executed and delivered to the Underwriter the Underwriter's Warrants in
such denominations and to such designees as shall have been provided to the
Company.
(o) On or before Closing Date, the Securities shall have been
duly approved for quotation on Nasdaq, subject to official notice of issuance.
(p) On or before Closing Date, there shall have been delivered
to the Underwriter all of the Lock-Up Agreements, in form and substance
satisfactory to Underwriter's Counsel.
(q) On or before the effective date of the Registration
Statement, the Company shall have executed and delivered to the Underwriter the
Consulting Agreement in substantially the form filed as Exhibit 10.1 to the
Registration Statement and the indemnification letter attached to the Consulting
Agreement. On or before the Closing Date, the Company shall have paid the
Underwriter $48,000, representing payment in full of all amounts due pursuant to
Section 7 of such Consulting Agreement.
34
(r) On or before the effective date of the Registration
Statement, the Company and American Stock Transfer and Trust Company shall have
executed and delivered to the Underwriter the Warrant Agreement, substantially
in the form filed as Exhibit 4.2 to the Registration Statement.
(s) At least two (2) full business days prior to the date
hereof, the Closing Date and each Option Closing Date, if any, the Company shall
have delivered to the Underwriter the unaudited interim financial statements
required to be so delivered pursuant to Section 4(p) of this Agreement.
If any condition to the Underwriter's obligations hereunder to
be fulfilled prior to or at the Closing Date or at any Option Closing Date, as
the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless the
Underwriter (for purposes of this Section 7, "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriter), and each person, if any, who controls the Underwriter
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions in respect thereof),
whatsoever (including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriter or such controlling person may become subject
under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
(A) any untrue statement or alleged untrue statement of a material fact
contained (i) in any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Securities; or (iii) in any application or other document
or written communication (in this Section 7, collectively referred to as
"applications") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, the NASD, Nasdaq or any securities exchange;
(B) the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in light of the circumstances in which they were
made); or (C) any breach of any representation, warranty, covenant or agreement
of the Company contained herein or in any certificate by or on behalf of the
Company or any of its officers delivered pursuant hereto, unless, in the case of
clause (A) or (B) above, such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be. The
35
indemnity agreement in this Section 7(a) shall be in addition to any liability
which the Company may have at common law or otherwise.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, to the same extent as the foregoing indemnity from the Company to
the Underwriter but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto or in any application made in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to the Underwriter by the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or the Prospectus directly
relating to the transactions effected by the Underwriter in connection with the
offering contemplated hereby. The Company acknowledges that the statements with
respect to the Underwriter and the public offering of the Securities set forth
under the heading "Underwriting" and the stabilization legend in the Prospectus
have been furnished by the Underwriter expressly for use therein and constitute
the only information furnished in writing by or on behalf of the Underwriter for
inclusion in any Preliminary Prospectus, the Registration Statement or the
Prospectus. The indemnity agreement in this Section 7(b) shall be in addition to
any liability which the Underwriter may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure to so notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 (except to the extent that it
has been prejudiced in any material respect by such failure) or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it or they may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, an indemnified party shall have the right to employ its own counsel
in any such case but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in connection
with the defense of such action at the expense of the indemnifying party, (ii)
the indemnifying parties shall not have employed counsel reasonably satisfactory
to such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to one
or all of the indemnifying parties (in which event the indemnifying parties
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional
36
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle, compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party. Anything in this Section 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent may not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified, on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (A) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
a contributing party and the Underwriter is the indemnified party, the relative
benefits received by the Company, on the one hand, and the Underwriter, on the
other, shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities (before deducting expenses) bear to the
total underwriting discounts received by the Underwriter hereunder, in each case
as set forth in the table on the cover page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Underwriter, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to in the first (1st) sentence of this Section 7(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this
37
Section 7(d), the Underwriter shall not be required to contribute any amount in
excess of the underwriting discount applicable to the Securities purchased by
the Underwriter hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7(d), each person, if any, who
controls the Company or the Underwriter within the meaning of the Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company or the Underwriter, as the case may be, subject in each case to this
Section 7(d). Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action against such party in respect to which a
claim for contribution may be made against another party or parties under this
Section 7(d), notify such party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have hereunder or otherwise than under this Section 7(d), or to the extent
that such party or parties were not adversely affected by such omission.
Notwithstanding anything in this Section 7 to the contrary, no party will be
liable for contribution with respect to the settlement of any action or claim
effected without its written consent. The contribution agreement set forth above
shall be in addition to any liabilities which any indemnifying party may have at
common law or otherwise.
8. Representations, Warranties, Covenants and Agreements to
Survive Delivery. All representations, warranties, covenants and agreements of
the Company contained in this Agreement, or contained in certificates of
officers of the Company submitted pursuant hereto, shall be deemed to be
representations, warranties, covenants and agreements at the Closing Date and
each Option Closing Date, if any, and such representations, warranties,
covenants and agreements of the Company, and the respective indemnity and
contribution agreements contained in Section 7 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Underwriter, the Company or any of their agents, and shall survive
the termination of this Agreement or the issuance and delivery of the Securities
to the Underwriter.
9. Effective Date. This Agreement shall become effective at
10:00 a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter, in its discretion, shall release the Securities
for sale to the public; provided, however, that the provisions of Sections 5, 7
and 10 of this Agreement shall at all times be effective. For purposes of this
Section 9, the Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such shares for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to Section 10(b) hereof, the Underwriter shall
have the right to terminate this Agreement: (i) if any domestic or international
event or act or occurrence has materially adversely disrupted, or in the
Underwriter's opinion will in the immediate future
38
materially adversely disrupt, the financial markets; or (ii) if any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
NASD, the Boston Stock Exchange, the Commission or any governmental authority
having jurisdiction over such matters; or (iv) if trading of any of the
securities of the Company shall have been suspended, or if any of the securities
of the Company shall have been delisted, on any exchange or in any
over-the-counter market; or (v) if the United States shall have become involved
in a war or major hostilities, or if there shall have been an escalation in an
existing war or major hostilities, or a national emergency shall have been
declared in the United States; or (vi) if a banking moratorium shall have been
declared by any state or federal authority; or (vii) if a moratorium in foreign
exchange trading shall have been declared; or (viii) if the Company shall have
sustained a material or substantial loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not such loss shall have been insured, will, in the Underwriter's opinion, make
it inadvisable to proceed with the delivery of the Securities; or (ix) if there
shall have been such a material adverse change in the conditions or prospects of
the Company, or if there shall have been such a material adverse change in the
general market, political or economic conditions, in the United States or
elsewhere, as in the Underwriter's judgment would make it inadvisable to proceed
with the offering, sale and/or delivery of the Securities; or (x) if ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ shall no longer serve the Company in her present capacities.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, 10(a) or 11 hereof or if this
Agreement shall not be carried out within the time specified herein, or within
any extension thereof granted by the Underwriter, by reason of any failure on
the part of the Company to perform any undertaking or satisfy any condition of
this Agreement to be performed or satisfied by it (including, without
limitation, pursuant to Section 6, Section 10(a) or Section 11 hereof), then the
Company shall promptly reimburse and indemnify the Underwriter for all of its
actual out-of-pocket expenses, including the fees and disbursements of
Underwriter's Counsel, less amounts previously paid pursuant to Section 5(c)
hereof. In addition, in any of such events the Company shall remain liable for
all "blue sky" counsel fees and expenses and "blue sky" filing fees.
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement (including, without limitation,
pursuant to Sections 6, 10 and 11 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be in
any way be affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. Default by the Company. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the Underwriter
may, at its option, by notice from the Underwriter to the Company, terminate the
Underwriter's obligation to purchase Option Securities from the Company on such
date) without any liability on the part of any non-defaulting party other than
pursuant to Section 5. Section 7 and Section 10 hereof. No action taken pursuant
to this Section 11 shall relieve the Company from liability, if any, in respect
of such default.
39
12. Notices. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at A.S. Goldmen & Co., Inc., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to
the Company at Imatec, Ltd., ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇,
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇, ▇▇▇▇ & Brandeis, LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq.
13. Parties. This Agreement shall inure solely to the benefit
of, and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from the Underwriter shall be deemed to be
a successor by reason merely of such purchase.
14. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to choice of law or conflict of laws principles.
15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
16. Entire Agreement; Amendments. This Agreement, the
Underwriter's Warrant Agreement and the Consulting Agreement constitute the
entire agreement of the parties hereto and supersede all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing signed by the
Underwriter and the Company.
40
If the foregoing correctly sets forth the understanding
between the Underwriter and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
IMATEC, LTD.
By: _________________________
Name: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Confirmed and accepted as of
the date first above written.
A.S. GOLDMEN & CO., INC.
By:______________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
SCHEDULE 1(w)
(See Section 1(w) of the Underwriting Agreement)
Number of Shares Number of Shares
Name of Securityholder: Subject to Lockup Agreement: Beneficially Owned:
----------------------- ---------------------------- -------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 979,210
▇▇▇▇▇ Ai 55,250
▇▇▇▇ ▇▇▇▇ 22,100
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 5,525
▇▇▇▇▇ ▇▇▇▇▇▇▇ 30,300
▇▇▇▇▇▇▇ ▇▇▇▇▇ 2,818
▇▇▇ ▇▇▇▇▇▇ 9,797
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 663,000
▇▇▇▇▇ ▇▇▇▇▇▇ 171,000
▇▇▇▇▇▇ ▇▇▇▇ 171,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 100,000
---------
TOTAL 2,210,000