GENETIC VECTORS INC.
1,400,000
SHARES OF
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
_________________, 2000
▇▇▇▇▇▇ Partners, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Genetic Vectors Inc., a Florida corporation (the "Company"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto, who are
acting severally and not jointly, (the "Underwriters"), one million four hundred
thousand shares of Common Stock of the Company (the "Securities"). The Company
hereby confirms the agreement made by it with respect to the purchase of the
Securities by the Underwriter, which Securities are more fully described in the
Registration Statement referred to below. ▇▇▇▇▇▇ Partners, Inc. is referred to
herein as the "Underwriter" or the "Representative."
You have advised the Company that the Underwriters desire to act on a firm
commitment basis to publicly offer and sell the Securities for the Company and
that you are authorized to execute this Agreement. The Company confirms the
agreement made by it with respect to the relationship with the Underwriters as
follows:
1. FILING OF REGISTRATION STATEMENT WITH S.E.C. AND DEFINITIONS. A
Registration Statement and Prospectus on Form SB-2 (File No. 333-_________) with
respect to the Securities has been carefully and accurately prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the published rules and regulations (the "Rules and
Regulations") thereunder or under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and has been filed with the Securities and Exchange
Commission (the "Commission") and such other states that the Underwriter deems
necessary in its discretion to so file to permit a public offering and trading
thereunder. Such registration statement, including the prospectus, Part II, and
all financial schedules and exhibits thereto, as amended at the time when it
shall become effective, is herein referred to as the "Registration Statement,"
and the prospectus included as part of the Registration Statement on file with
the Commission that discloses all the information that was omitted from the
prospectus on the effective date pursuant to Rule 430 A of the Rules and
Regulations with any changes contained in any prospectus filed with the
Commission by the Company with the Underwriters consent after the effective date
of the Registration Statement, is herein referred to as the "Final Prospectus."
The prospectus included as part of the Registration Statement of the Company and
in any amendments thereto prior to the effective date of the Registration
Statement is referred to herein as a "Preliminary Prospectus."
2. Discount, Delivery, and Sale of the Securities
(a) Subject to the terms and conditions of this Agreement, and on the
basis of the representations, warranties, and agreements herein contained, the
Company agrees to sell to, and the Underwriters agree to buy from the Company at
a purchase price of $00.00 per share before any underwriter expense allowances,
an aggregate of 1,400,000 shares of Common Stock on a firm commitment basis the
"Initial Securities".
It is understood that the Underwriters propose to offer the Securities
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective. The Underwriters may enter into one or more agreements as the
Underwriters in their sole discretion deem advisable with one or more
broker-dealers who shall act as dealers in connection with the offering.
(b) Delivery of the Securities against payment of the purchase price
therefor by certified or official bank check or checks or wire transfer in
next-day funds, payable to the order of the Company shall take place at the
offices of the clearing broker for the Underwriter at New York City, within
three (3) business days after the Securities are first traded (or such other
place as may be designated by agreement between you and the Company) at 11:00
A.M., New York time or such time and date as you and the Company may agree upon
in writing, such time and date of payment and delivery for the Securities being
herein called the "Initial Closing Date."
The Company will make the certificates for the shares of Common Stock
to be purchased by the Underwriters hereunder available to the Underwriter for
inspection and packaging at least two (2) full business days prior to the
Initial Closing Date. The certificates shall be in such names and denominations
as the Underwriter may request to the Company in writing at least two (2) full
business days prior to any Closing Date.
(c) In addition, subject to the terms and conditions of this Agreement
and on the basis of the representations, warranties and agreements herein
contained, the Company grants an option to the Underwriters to purchase up to an
additional 210,000 shares ("Option Securities") at the same terms as the
Underwriters shall pay for the Initial Securities being sold by the Company
pursuant to the provisions of Section 2(a) hereof. This option may be exercised
from time to time, for the purpose of covering overallotments, within forty-five
(45) days after (i) the effective date of the Registration Statement 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, upon written notice by the Underwriter
setting forth the number of Option Securities as to which the Underwriter is
exercising the option and the time and date at which such certificates are to be
delivered. Such time and date shall be determined by the Underwriter but shall
not be earlier than four (4) nor later than ten (10) full business days after
the date of the exercise of said option. Nothing herein shall obligate the
Underwriter to make any overallotment.
(d) Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered at the closing by the
Company to the Underwriters against payment of the purchase price by the
Underwriters by certified or bank cashier's checks or wire transfer in next day
funds payable to the order of the Company.
(e) The information set forth under "Underwriting" in any preliminary
prospectus and Prospectus relating to the Securities and the information set
forth in the last paragraph on the front cover page, under the last paragraph on
page 2 concerning stabilization and over-allotment by the Underwriters, and
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriter to the Company for inclusion therein,
and you represent and warrant to the Company that the statements made therein
are correct.
(f) On the Initial Closing Date, the Company shall issue and sell to
the Representative, warrants (the "Representative's Warrants") at a purchase
price of $.001 per Representative's Warrant, which shall entitle the holders
thereof to purchase an aggregate of 140,000 shares of Common Stock. The shares
of common stock issuable upon the exercise of the Representative's Warrants are
hereafter referred to as the "Representative's Securities" or "Representative's
Warrants." The Representative'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 forty-five percent (145%)
of the initial public offering price of the Securities. The form of
Representative's Warrant Certificate shall be substantially in the form filed as
an Exhibit to the Registration Statement. Payment for the Representative's
Warrant shall be made on the Initial Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to you as follows:
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(i) The Company has prepared and filed with the Commission a
registration statement, and an amendment or amendments thereto, on Form SB-2
(No.333- ), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities, the Representative's
Warrant (sometimes referred to herein collectively as the "Registered
Securities"), under 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. The Company will promptly file a
further amendment to said registration statement in the form heretofore
delivered to the Underwriter and will not file any other amendment thereto to
which the Underwriter shall have objected verbally or 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
the registration statement becomes effective (including the prospectus,
financial statements, any schedules, exhibits and all other documents filed as a
part thereof or that may be incorporated therein (including, but not limited to
those documents or information incorporated by reference therein) and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430(A) of the Rules and Regulations), is hereinafter called the
"Registration Statement," and the form of prospectus in the form first filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations, is
hereinafter called the "Prospectus."
(ii) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Prospectus or the
Registration Statement and no proceeding for an order suspending the
effectiveness of the Registration Statement or any of the Company's securities
has been instituted or is pending or threatened. Each such Prospectus and/or any
supplement thereto has conformed in all material respects with the requirements
of the Act and the Rules and Regulations and on its date did not include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading, in light of the circumstances
under which they were made and (i) the Prospectus and/or any supplement thereto
will contain all statements which are required to be stated therein by the Act
and Rules and Regulations, and (ii) the Prospectus and/or any supplement thereto
will not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances under which they were
made; provided, however, that no representations, warranties or agreements are
made hereunder as to information contained in or omitted from the Prospectus in
reliance upon, and in conformity with, the written information furnished to the
Company by you as set forth in Section 2(e) above.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation, with full power and authority (corporate and other) to own its
properties and conduct its businesses as described in the Prospectus and is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions in which the nature of its business or the character or location
of its properties requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the business, properties or
operations of the Company and the subsidiaries as a whole.
(iv) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, the Option Securities and the
Representative's Securities and to enter into this Agreement, the
Representative's Warrant dated as of the initial closing date to be exercised
and delivered by the Company to the Representative (the "Representative's
Warrant Agreement"), and to consummate the transactions provided for in such
agreements, and each of such agreements has been duly and properly authorized,
and on the Initial Closing Date will be duly and properly executed and delivered
by the Company. This Agreement constitutes and on the Initial Closing Date the
Representative's Warrant Agreement will then constitute valid and binding
agreements, enforceable in accordance with their respective terms (except as the
enforceability thereof may be limited by bankruptcy or other similar laws
affecting the rights of creditors generally or by general equitable principles
and except as the enforcement of indemnification provisions may be limited by
federal or state securities laws).
(v) Except as disclosed in the Prospectus, the Company is not
in violation of its respective certificate or articles of incorporation or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness or in any material contract,
indenture, mortgage, loan agreement, lease, joint venture, partnership or other
agreement or instrument to which the Company is a party or by which it may be
bound or is not in material violation of any law, order, rule, regulation, writ,
injunction or decree of any governmental instrumentality or court, domestic or
foreign; and the execution and delivery of this Agreement, the Representative's
Warrant Agreement; and the consummation of the transactions contemplated therein
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and in the Prospectus and compliance with the terms of each such agreement will
not conflict with, or result in a material breach of any of the terms,
conditions or provisions of, or constitute a material default under, or result
in the imposition of any material lien, charge or encumbrance upon any of the
property or assets of the Company pursuant to, any material bond, debenture,
note or other evidence of indebtedness or any material contract, indenture,
mortgage, loan agreement, lease, joint venture, partnership or other agreement
or instrument to which the Company is a party nor will such action result in the
material violation by the Company of any of the provisions of its respective
certificate or articles of incorporation or bylaws or any law, order, rule,
regulation, writ, injunction, decree of any government, governmental
instrumentality or court, domestic or foreign, except where such violation will
not have a material adverse effect on the financial condition of the Company.
(vi) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus and the Company will have the
adjusted capitalization set forth therein on the Initial Closing Date; all of
the shares of issued and outstanding capital stock of the Company set forth
therein have been duly authorized, validly issued and are fully paid and
nonassessable; the holders thereof do not have any rights of rescission with
respect therefor and are not subject to personal liability for any obligations
of the Company by reason of being stockholders under the laws of the State in
which the Company is incorporated; none of such outstanding capital stock is
subject to or was issued in violation of any preemptive or similar rights of any
stockholder of the Company; and such capital stock (including the Securities,
the Option Securities and the Representative's Securities) conforms in all
material respects to all statements relating thereto contained in the
Prospectus.
(vii) 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
or as described in the Prospectus. The Securities, the Option Securities and the
Representative's Securities 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, will be
validly issued, fully paid and non-assessable and will conform to the respective
descriptions thereof contained in the Prospectus; except for payment of the
applicable purchase price paid upon exercise of the options or warrants, as the
case may be 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, the Option Securities and the Representative's
Securities has been duly and validly taken; and the certificates representing
the Securities, the Option Securities and the Representative's Securities will
be in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities, the Option Securities and the Representative's
Securities to be sold by the Company hereunder, the Underwriter will acquire
good and marketable title to such Securities, Option Securities and
Representative's Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction of any kind
whatsoever other than restrictions as may be imposed under the securities laws.
(viii) The Company has good and marketable title to all
properties and assets described in the Prospectus as owned by it, free and clear
of all liens, charges, encumbrances or restrictions, except such as are
described or referred to in the Prospectus or which are not materially
significant or important in relation to its business or which have been incurred
in the ordinary course of business; except as described in the Prospectus all of
the leases and subleases under which the Company holds properties or assets as
lessee or sublessee as described in the Prospectus are in full force and effect,
and the Company is not in material default in respect of any of the terms or
provisions of any of such leases or subleases, and no claim has been asserted by
anyone adverse to the Company's rights as lessor, sublessor, lessee or sublessee
under any of the leases or subleases mentioned above or affecting or questioning
the Company's right to the continued possession of the leased or subleased
premises or assets under any such lease or sublease; and the Company owns or
leases all such properties as are necessary to its operations as now conducted
and as contemplated to be conducted, except as otherwise stated in the
Prospectus.
(ix) The financial statements, together with related notes,
set forth in the Prospectus fairly present the financial position and results of
operations of the Company at the respective dates and for the respective periods
to which they apply. Said statements and related notes have been prepared in
accordance with generally accepted accounting principles applied on a basis
which is consistent in all material respects during the periods involved but any
stub period has not been audited by an independent accounting firm. There has
been no material adverse change or material development involving a prospective
change in the condition, financial or otherwise, or in the prospects, value,
operation, properties, business or results of operations of the Company whether
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or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the Prospectus.
(x) Subsequent to the respective dates as of which information
is given in the Prospectus as it may be amended or supplemented, and except as
described in the Prospectus, the Company has not, directly or indirectly,
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business or entered into any transactions not in the ordinary
course of business, which are material to the business of the Company as a whole
and there has not been any change in the capital stock of, or any incurrence of
long term debts by, the Company or any issuance of options, warrants or rights
to purchase the capital stock of the Company or declaration or payment of any
dividend on the capital stock of the Company or any material adverse change in
the condition (financial or other), net worth or results of operations of the
Company as a whole and the Company has not become a party to, any material
litigation whether or not in the ordinary course of business.
(xi) To the knowledge of the Company, there is no pending or
threatened, action, suit or proceeding to which the Company is a party before or
by any court or governmental agency or body, which might result in any material
adverse change in the condition (financial or other), business or prospects of
the Company as a whole or might materially and adversely affect the properties
or assets of the Company as a whole nor are there any actions, suits or
proceedings against the Company related to environmental matters or related to
discrimination on the basis of age, sex, religion or race which might be
expected to materially and adversely affect the conduct of the business,
property, operations, financial condition or earnings of the Company as a whole;
and no labor disturbance by the employees of the Company individually exists or
is, to the knowledge of the Company, imminent which might be expected to
materially and adversely affect the conduct of the business, property,
operations, financial condition or earnings of the Company as a whole.
(xii) Except as may be disclosed in the Prospectus, the
Company has properly prepared and filed all necessary federal, state, local and
foreign income and franchise tax returns, has paid all taxes shown as due
thereon, has established adequate reserves for such taxes which are not yet due
and payable, and does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(xiii) The Company has sufficient licenses, permits, right to
use trade or service marks and other governmental authorizations currently
required for the conduct of its business as now being conducted and as
contemplated to be conducted and the Company is in all material respects
complying therewith. Except as set forth in the Prospectus, the expiration of
any such licenses, permits, or other governmental authorizations would not
materially affect the Company's operations. To its knowledge, none of the
activities or businesses of the Company are in material violation of, or cause
the Company to materially violate any law, rule, regulations, or order of the
United States, any state, county or locality, or of any agency or body of the
United States or of any state, county or locality.
(xiv) The Company has not at any time (i) made any
contributions to any candidate for political office in violation of law, or
failed to disclose fully any such contribution, or (ii) made any payment to any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi public duties, other than payments required
or allowed by applicable law.
(xv) Except as set forth in the Prospectus the Company knows
of no outstanding claims for services either in the nature of a finder's fee,
brokerage fee or otherwise with respect to this financing for which the Company
or the Underwriters may be responsible, or which may affect the Underwriter's
compensation as determined by the National Association of Securities Dealers,
Inc. ("NASD") except as otherwise disclosed in the Prospectus or known by the
Underwriters.
(xvi) The Company has its property adequately insured against
loss or damage by fire and maintains such other insurance as is customarily
maintained by companies in the same or similar business.
(xvii) The Representative's Warrants herein described are duly
and validly authorized and upon delivery to the Representative in accordance
herewith will be duly issued and legal, valid and binding obligations of the
Company, except as the enforceability thereof may be limited by bankruptcy or
other similar laws affecting the rights of creditors generally or by equitable
principles, and except as the enforcement of indemnification provisions may be
limited by federal or state securities laws.
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The Representative's Securities issuable upon exercise of any
of the Representative's Warrants have been duly authorized, and when issued upon
payment of the exercise price therefor, will be validly issued, fully paid and
nonassessable.
(xviii) Except as set forth in the Prospectus, no default
exists in the due performance and observance of any term, covenant or condition
of any material license, contract, indenture, mortgage, installment sale
agreement, lease, deed of trust, voting trust agreement, stockholders agreement,
note, loan or credit agreement, purchase order, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which the property or assets (tangible or intangible) of the
Company is subject or affected.
(xix) To the best of the Company's knowledge it has generally
enjoyed a satisfactory employer-employee relationship with its employees and, to
the best of its knowledge, is in substantial compliance in all material respects
with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours. To the best of the Company's knowledge, there are no pending
investigations involving the Company, by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. To the best of the Company's
knowledge, 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 to its knowledge involving the Company, or any predecessor entity, and none
has ever occurred. To the best of the Company's knowledge, no representation
question is pending respecting the employees of the Company, and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company. To the best of the Company's knowledge, no grievance or arbitration
proceeding is pending or to its knowledge threatened under any expired or
existing collective bargaining agreements of the Company. No labor dispute with
the employees of the Company is pending, or, to its knowledge is imminent; and
the Company is not aware of any pending or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors which
may result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company.
(xx) Except as may be set forth in the Registration Statement,
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") ("ERISA 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 Internal Revenue Code (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."
(xxi) None of the Company, or 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, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities,
Option Securities, Representative's Securities or otherwise.
(xxii) None of the patents, patent applications, trademarks,
service marks, trade names, copyrights, and licenses and rights to the foregoing
presently owned or held by the Company, are in dispute or, to the best knowledge
of the Company's management are in any conflict with the right of any other
person or entity. The Company (i) except as disclosed in the Prospectus owns or
has the right to use, all patents, trademarks, service marks, trade names and
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copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing, and except as set forth in the Prospectus or otherwise disclosed
to the Underwriter in writing, to the best knowledge of the Company's management
is not obligated or under any liability whatsoever to make any material payments
by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service ▇▇▇▇, trade name, copyright,
know-how, technology or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business or otherwise. There is no
suit, proceeding, inquiry, arbitration, investigation, litigation or
governmental or other proceeding, domestic or foreign, pending or, to the best
of the Company's knowledge, threatened ( or circumstances that may give rise to
the same) against the Company which challenges the 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.
(xxiii) Except as disclosed in the Prospectus the Company owns
and has adequate right to use to the best knowledge of the Company's management
all trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") required for or
incident 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. The Company is not aware of any
such development of similar or identical trade secrets or technical information
by others. The Company has valid and binding confidentiality agreements with all
of its officers, covering its intellectual property (subject to the equitable
powers of any court), which agreements have remaining terms of at least two
years from the effective date of the Registration Statement except where the
failure to have such agreements would not materially and adversely effect the
Company's business taken as a whole. 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
those referred to in the Prospectus and liens for taxes not yet due and payable.
(xxiv) BDO ▇▇▇▇▇▇▇, LLP whose reports are 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.
(xxv) The Company has agreed to cause to be duly executed,
agreements pursuant to which each of the Company's officers and directors,
holders of more than 5% of the outstanding Common Stock excluding Lancer
Partners, calculated as of the date immediately preceding the date of the Letter
of Intent which is dated December 15, 1999, and any person or entity deemed to
be an affiliate of the Company pursuant to SEC Rules and Regulations, has agreed
not to, directly or indirectly, sell, assign, transfer, or otherwise dispose of
any shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) for a period commencing on the effective date until after 12 months
from the effective date of the offering (the Lock-up).
Any shares of common stock released from the foregoing restrictions
will remain restricted securities subject however to the resale provisions of
Rule 144
These officers, directors and 5% holders, excluding Lancer Partners,
also agree not to dispose of (sell or transfer) their shares until the share
price, adjusted for any splits, trades above 125% of the offering price for a
twenty (20) consecutive day period. This lock-up expires on the first day of the
third year after the effective date of the offering.
The Company will cause the Transfer Agent, as defined below, 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.
The Company also agrees that it will not release any securities subject to this
Agreement without the written consent of the Representative. It is also agreed
that upon the second anniversary of the first day of the Lock-Up Period, the
securities subject to the Lock-Up will no longer be subject to the restrictions
contained in such agreement.
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(xxvi) The Registered Securities have been approved for
listing on NASDAQ or an Exchange.
(xxvii) Except as set forth in the Prospectus or disclosed in
writing to the Underwriter (which writing specifically refers to this Section),
no officer or director of the Company, holder of 5% or more of securities of the
Company or any "affiliate" or "associate" (as these terms are defined in Rule
405 promulgated under 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 beneficiary interest in any contract or agreement to which the Company is
a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions" or disclosed in writing to the
Underwriter (which writing specifically refers to this Section) 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, principal stockholder of the Company, or any
partner, affiliate or associate of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the Company,
and delivered to the Underwriter or to the Underwriter's counsel (as defined
herein) shall be deemed a representation and warranty by the Company to the
Underwriter as to the matters covered thereby.
(xxix) Each of the minute books of the Company has been made
available to the Underwriter and contains 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 respects.
(xxx) As of the Initial Closing Date, the Company will enter
into the Consulting Agreement substantially in the form filed as an exhibit to
the Registration Statement with respect to the rendering of consulting services
by the Representative to the Company..
(xxxi) Except and only to the extent described in the
Prospectus or disclosed in writing to the Underwriter (which writing
specifically refers to this Section), no holders of any securities of the
Company or of any options, warrants or other convertible or exchangeable
securities of the Company have the right to include any securities issued by the
Company in the Registration Statement or any registration statement to be filed
by the Company or to require the Company to file a registration statement under
the Act and no person or entity holds any anti-dilution rights with respect to
any securities of the Company. Except as disclosed in the Prospectus, all rights
so described or disclosed have been waived or have not been triggered with
respect to the transactions contemplated by this Agreement and the
Representative's Warrant Agreement (including the warrants issuable thereunder).
(xxxii) The Company has not entered into any employment
agreements with its executive officers, except as disclosed in the Prospectus.
(xxxiii) No consent, approval, authorization or order of, and
no filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Registered Securities
pursuant to the Prospectus and the Registration Statement, the issuance of the
Underwriter's Warrants, the performance of this Agreement, the Representative's
Warrant Agreement, and the transactions contemplated hereby and thereby,
including without limitation, any waiver of any preemptive, first refusal or
other rights that any entity or person may have for the issue and/or sale of any
of the Securities, the Option Securities and the Underwriter's Securities,
except such as have been or may be obtained under the Act, otherwise or may be
required under state securities or blue sky laws in connection with the
Underwriter's purchase and distribution of the Securities, the Option
Securities, the Representative's Securities and the Underwriter's Warrants to be
sold by the Company hereunder or may be required by the Rules of the National
Association of Securities Dealer, Inc. ("NASD"). Since a portion of the
Securities may be offered and sold through foreign broker-dealers not registered
with the NASD, any sales by such broker-dealers are to be made in compliance
with the securities laws of the country thereof and any required orders from a
regulatory body obtained therefrom.
(xxxiv) 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 businesses may be subject have
been duly and validly authorized, executed and delivered by the Company and
8
constitute the legal, valid and binding agreements of the Company, enforceable
against the Company, in accordance with their respective terms. 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 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.
(xxxv) Within the past five (5) years, none of the Company's
independent public accountants has brought to the attention of the Company's
management any "material weakness" as defined in the Statement of Auditing
Standard No. 60 in any of the Company's internal controls.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with you
that:
(a) It will cooperate in all respects in making the Prospectus
effective and will not at any time, whether before or after the effective date,
file any amendment to or supplement to the Prospectus of which you shall not
previously have been advised and furnished with a copy or to which you or your
counsel shall have reasonably objected or which is not in material compliance
with the Act and the Rules and Regulations or applicable state law.
As soon as the Company is advised thereof, the Company will advise you,
and confirm the advice in writing, of the receipt of any comments of the
Commission or any state securities department, when the Registration Statement
becomes effective if the provisions of Rule 430A promulgated under the Act will
be relied upon, when the Prospectus has been filed in accordance with said Rule
430A, of the effectiveness of any post-effective amendment to the Registration
Statement or Prospectus, or the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission or any state
securities department for amendment of the Prospectus or for supplementing of
the Prospectus or for additional information with respect thereto, of the
issuance of any stop order suspending the effectiveness of the Prospectus or any
order preventing or suspending the use of any Prospectus or any order suspending
trading in the Common Stock of the Company, or of the suspension of the
qualification of the Securities, the Option Securities or the Representatives
Securities for offering in any jurisdiction, or of the institution of any
proceedings for any such purposes, and will use its best efforts to prevent the
issuance of any such order and, if issued, to obtain as soon as possible the
lifting or dismissal thereof.
The Company has caused to be delivered to you copies of such
Prospectus, and the Company has consented and hereby consents to the use of such
copies for the purposes permitted by law. The Company authorizes you and the
dealers to use the Prospectus and such copies of the Prospectus in connection
with the sale of the Securities, the Option Securities and the Representative's
Securities for such period as in the opinion of your counsel and our counsel the
use thereof is required to comply with the applicable provisions of the Act and
the Rules and Regulations. The Company will prepare and file with the states,
promptly upon your request, any such amendments or supplements to the
Prospectus, and take any other action, as, in the opinion of your counsel, may
be necessary or advisable in connection with the initial sale of the Securities,
the Option Securities and the Underwriter's Securities and will use its best
efforts to cause the same to become effective as promptly as possible.
The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to rule
424(b)(1) or pursuant to Rule 424(b)(3) not later than the Commission's close of
business on the earlier of (i) the second business day following the execution
and delivery of this Agreement, and (ii) the fifth business day after the
effective date of the Registration Statement.
In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in connection with the
initial sale of the Securities, the Option Securities and the Representative's
Securities of any event of which the Company has knowledge and which materially
affects the Company, or the securities thereof, and which should be set forth in
an amendment of or a supplement to the Prospectus in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required under the Act to be delivered, or in case
it shall be necessary to amend or supplement the Prospectus to comply with the
Act, the Rules and Regulations or any other law, the Company will forthwith
9
prepare and furnish to you copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they are made.
The preparation and furnishing of any such amendment or supplement to the
Prospectus or supplement to be attached to the Prospectus shall be without
expense to you.
The Company will to the best of its ability comply with the Act, the
Exchange Act and applicable state securities laws so as to permit the initial
offer and sales of the Securities, the Option Securities and the Representatives
Securities under the Act, the Rules and Regulations, and applicable state
securities laws.
(b) It will cooperate to qualify the Securities and the Option
Securities and the Representative's Securities for initial sale under the
securities laws of such jurisdictions as you may designate and will make such
applications and furnish such information as may be required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long as the Underwriter may reasonably request.
(c) So long as any of the Securities, the Option Securities or the
Representative's Securities remain outstanding in the hands of the public, the
Company, at its expense, will annually furnish to its shareholders a report of
its operations to include financial statements audited by independent public
accountants, and will furnish to the Underwriter as soon as practicable after
the end of each fiscal year, a balance sheet of the Company as at the end of
such fiscal year, together with statements of operations, shareholders' equity,
and changes in cash flow of the Company for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon of
independent public accountants.
(d) It will deliver to you at or before the Initial Closing Date three
signed copies of the signature pages to the Registration Statement and three
copies of the registration statement including all financial statements and
exhibits filed therewith, whether or not incorporated by reference. The Company
will deliver to you, from time to time until the effective date of the
Prospectus, as many copies of the Prospectus as you may reasonably request. The
Company will deliver to you on the effective date of the Prospectus and
thereafter for so long as a Prospectus is required to be delivered under the Act
and the Rules and Regulations as many copies of the Prospectus, in final form,
or as thereafter amended or supplemented, as you may from time to time
reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Securities and the Option Securities substantially in the manner set forth under
"Use of Proceeds" in the Prospectus. No portion of the proceeds shall be used,
directly or indirectly, to acquire any securities issued by the Company, without
the prior written consent of the Underwriter.
(f) As soon as it is practicable, but in any event not later than the
first (lst) day of the fifteenth (15th) full calendar month following the
effective date of the Registration Statement, the Company will make available to
its security holders and the Underwriter an earnings statement (which need not
be audited) covering a period of at least twelve (12) consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations.
5. NON-ACCOUNTABLE EXPENSE ALLOWANCE AND OTHER COSTS AND EXPENSES. The
Company shall pay to the Underwriter at each closing date, and to be deducted
from the purchase price for the Securities and the Option Securities, an amount
equal to three percent (3%) of the gross proceeds received by the Company from
the sale of the Securities and the Option Securities at such closing date less
in the case of the Initial Closing Date, the sum of $55,000 previously paid by
the Company. If the sale of the Securities by the Underwriter is not consummated
for any reason not attributable to the Underwriter, or if (i) the Company
unilaterally withdraws the Registration Statement or does not proceed with the
public offering for reasons other than the affirmative wrongdoing of the
Underwriter, or (ii) the representations in Section 3 hereof are not correct or
the covenants cannot be complied with, or (iii) there has been a materially
adverse change in the condition, prospects or obligations of the Company or a
materially adverse change in stock market conditions from current conditions, or
(iv) the road show presentation produced a negative affect on the intended
10
syndicate members, or (v) the Company unilaterally terminates the financing, the
Company will reimburse us for our out-of-pocket expenses.
6. COSTS AND EXPENSES. Subject to the provisions above the Company will
pay all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement and Prospectus (including the fee of the Commission, any securities
exchange and the NASD in connection with the filing required by the NASD
relating to the offering of the Securities contemplated hereby); all expenses,
including fees of counsel, which shall be due and payable on the Closing Date in
connection with the qualification of the Securities under the state securities
or blue sky laws; the cost of furnishing to you copies of the Prospectus, this
Agreement, the cost of printing the certificates representing the Securities and
of preparing and photocopying the Underwriting Agreement and related
Underwriting documents, the cost of three underwriter's bound volumes, any
advertising costs and expenses, including but not limited to the Company's
expenses on "road show" information meetings and presentations, prospectus
memorabilia, issue and transfer taxes, if any. The Company will also pay all
costs and expenses incident to the furnishing of any amended Prospectus of or
any supplement to be attached to the Prospectus.
(a) As a condition of the closing, the Company shall obtain from its
officers and directors and holders of 5% of the outstanding Common Stock of the
Company excluding Lancer Partners, written commitments restricting the sale of
100% of their common stock for (12) months after the closing pursuant to lock-up
agreements satisfactory to the Underwriter and as described in section 3(a)(xxv)
of this Agreement..
(b) During a date five years after the date hereof, the Company will
make available to its shareholders, as soon as practicable, and deliver to the
Underwriter:
(1) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders;
(2) 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;
(3) 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 prepared and released by or on behalf of the Company; and
(4) any additional information of a public nature concerning
the Company (and any future subsidiaries) or its businesses which the
Underwriter may request.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(c) The Company will maintain a Transfer 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 its Common Stock.
(d) The Company will furnish to the Underwriter or on the Underwriter's
order, without charge, at such place as the Underwriter may designate, copies of
each Preliminary Prospectus, the Final Prospectus the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may request.
(e) Neither the Company nor any of its officers, directors,
stockholders or any of its affiliates will take, directly or indirectly, any
action designed to, or which might in the future reasonably be expected to cause
or result in stabilization or manipulation of the price of any of the Company's
securities.
11
(f) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(g) The Company shall cause the Securities to be listed on the NASDAQ
Small Cap Market or on an exchange for a period of five (5) years from the date
hereof, and use its best efforts to maintain the listing of the Securities to
the extent they are outstanding.
(h) As soon as practicable, (i) before the effective date of the
Registration Statement, file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities and (ii) but in no event
more than 30 days from the effective date of the Registration Statement, take
all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and/or ▇▇▇▇▇'▇ OTC Manual and to continue such
inclusion for a period of not less than five years if the securities are not
listed on an exchange. The Company also agrees to take such steps as may be
necessary to comply with the requirements of any state to be in compliance with
the aftermarket provisions of Section 18 of the Securities Act of 1933, as
amended, and as further amended by the National Securities Markets Improvement
Act of 1996.
(i) Until the completion of the distribution of the Securities, the
Company shall not without the prior written consent of the Underwriter and its
counsel which consent shall not be unreasonably withheld or delayed, 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.
(j) During the five (5) year period from the date hereof, the Company
will not take any action or actions which may prevent or disqualify the
Company's use of Form SB-2 (or other appropriate form) for the registration
under the Act of the Representative's Securities.
(k) For a period of three (3) years from the Initial Closing Date, the
Company shall, at the Company's sole expense, (i ) promptly provide the
Representative, upon any and all requests of the Representative, 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.
(l) For a period of two years after the closing, the Company will allow
the Underwriter to nominate an observer to the Board of Directors of the
Company. The choice of such person shall be subject to the approval of the
Company, which approval shall not unreasonably be withheld. All out-of-pocket
expenses incurred by that person shall be reimbursed by the Company who will not
receive compensation different from the other non-officer directors.
7. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation of the
Underwriters to offer and sell the Securities and the Option Securities is
subject to the accuracy (as of the date hereof, and as of the Closing Dates) of
and compliance with the representations and warranties of the Company to the
performance by it of its agreement and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective as and when
cleared by the Commission, and you shall have received notice thereof, on or
prior to any closing date no stop order suspending the effectiveness of the
Prospectus shall have been issued and no proceedings for that or similar purpose
shall have been instituted or shall be pending, or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the Underwriter; and
qualification, under the securities laws of such states as you may designate, of
the issue and sale of the Securities upon the terms and conditions herein set
forth or contemplated and containing no provision unacceptable to you shall have
been secured, and no stop order shall be in effect denying or suspending
effectiveness of such qualification nor shall any stop order proceedings with
respect thereto be instituted or pending or threatened under such law.
12
(b) On any closing date and, with respect to the letter referred to in
subparagraph (iii), as of the date hereof, you shall have received:
(i) the opinion, together with such number of signed or facsimile
copies of such opinion as you may reasonably request, addressed to you by
▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, counsel for the Company, in form and substance
reasonably satisfactory to the Underwriter and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., counsel
to the Underwriter, dated each such closing date, to the effect that:
(A) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the jurisdiction in
which it is incorporated and has all necessary corporate power and authority to
carry on its business as described in the Prospectus.
(B) The Company is qualified to do business in each
jurisdiction in which conducting its business requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on the Company's business or assets.
(C) The Company has the full corporate power and authority
to enter into this Agreement, the Representative's Warrant Agreement and to
consummate the transactions provided for therein and each such Agreement has
been duly and validly authorized, executed and delivered by the Company. Each of
this Agreement and the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party thereto, constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency or
similar laws governing the rights of creditors and to general equitable
principles, and provided that no opinion need be given as to the enforceability
of any indemnification or contribution provisions, and none of the Company's
execution or delivery of this Agreement, or the Representative's Warrant
Agreement, its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its business as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or will
result in any material breach or violation of any of the terms or provisions of,
or constitutes or will constitute a material default under, or result in the
creation or imposition of any material lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company pursuant to the terms
of (A) the articles of incorporation or by-laws of the Company, (B) to the
knowledge of such counsel, any material license, contract, indenture, mortgage,
deed of trust, voting trust agreement, stockholders' agreement, note, loan or
credit agreement or any other agreement or instrument to which the Company is a
party or by which it is or may be bound, or (C) to the knowledge of such
counsel, any statute, judgment, decree, order, rule or regulation applicable to
the Company, whether domestic or foreign.
(D) The Company had authorized and outstanding capital
stock as set forth in the Prospectus under the heading "Capitalization" as of
the date set forth therein, and all of such issued and outstanding shares of
capital stock have been duly and validly authorized and issued, and to the
knowledge of such counsel are fully paid and nonassessable, and to the knowledge
of such counsel no stockholder of the Company is entitled to any preemptive
rights to subscribe for, or purchase shares of the capital stock and to the
knowledge of such counsel none of such securities were issued in violation of
the preemptive rights of any holders of any securities of the Company.
(E) To the knowledge of such counsel, 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 Representative's Warrant Agreement,
and except as described in the Prospectus. The Common Stock, and the
Representative's Warrants each conforms in all material respects to the
respective descriptions thereof contained in the Prospectus. The outstanding
shares of Common Stock and the Representative's Securities, upon issuance and
delivery and payment therefore in the manner described herein, the Warrant
Agreement and the Representative Agreement, as the case may be, will be, duly
authorized, validly issued, fully paid and nonassessable. There are no
preemptive or other rights to subscribe for or to purchase, or any restriction
upon the voting or transfer of, any shares of Common Stock pursuant to the
Company's articles of incorporation, by-laws, other governing documents or any
agreement or other instrument known to such counsel to which the Company is a
party or by which it is bound except as stated in the prospectus.
13
(F) The certificates representing the Securities comprising
the Common Stock are in due and proper form and the Representative's Warrant has
been duly authorized and reserved for issuance and when issued and delivered in
accordance with the respective terms of the Warrant Agreement and
Representative's Warrant Agreement, respectively, will duly and validly issued,
fully paid and nonassessable.
(G) To the knowledge of such counsel, there are no claims,
suits or other legal proceedings pending or threatened against the Company in
any court or before or by any governmental body which might materially affect
the business of the Company or the financial condition of the Company as a
whole, except as set forth in or contemplated by the Prospectus.
(H) Based on oral and/or written advice from the staff of
the Commission, the Registration Statement has become effective and, to the
knowledge of such counsel, no stop order suspending the effectiveness of the
Prospectus is in effect and no proceedings for that purpose are pending before,
or threatened by, federal or by a state securities administrator
(I) To the knowledge of such counsel, there are no legal or
governmental proceedings, actions, arbitrations, investigations, inquiries or
the like pending or threatened against the Company of a character required to be
disclosed in the Prospectus which have not been so disclosed, questions the
validity of the capital stock of the Company or this Agreement or the
Representative's Warrant Agreement or might adversely affect the condition,
financial or otherwise, or the prospects of the Company or which could adversely
affect the Company's ability to perform any of its obligations under this
Agreement, or the Representative's Warrant Agreement.
(J) To such counsel's knowledge, there are no material
agreements, contracts or other documents known to such counsel required by the
Act to be described in the Registration Statement and the Prospectus not filed
as exhibits to the Registration Statement and the Prospectus , and to such
counsel's knowledge (A) 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 contracts and other documents to which the Company is a party or by
which it is bound, including any document to which the Company is a party or by
which it is bound incorporated by reference into the Prospectus and any
supplement or amendment thereto, are accurate in all material respects and
fairly represent the information required to be shown by Form SB-2.
(K) No consent, approval, order or authorization from any
regulatory board, agency or instrumentality having jurisdiction over the
Company, or its properties (other than registration under the Act or
qualification under state or foreign securities law or approval by the NASD) is
required for the valid authorization, issuance, sale and delivery of the
Securities, the Option Securities or the Representative's Warrant.
(L) The statements in the Prospectus under "Risk Factors-
Dependence on Key Personnel" "Management-Limitation of Liability" "Description
of the Securities," and "Shares Eligible For Future Sale" have been reviewed by
such counsel, and insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions, are correct in
all material respects.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Underwriter, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not certified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the Closing Date and on any later date on which Option Shares are to
be purchased, the Registration Statement and any amendment or supplement, when
such documents became effective or were filed with the Commission (other than
the financial statements including the notes thereto and supporting schedules
and other financial and statistical information derived therefrom, as to which
such counsel need express no comment) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or at the Closing
Date or any later date on which the Option Shares are to be purchased, as the
case may be, the Prospectus and any amendment or supplement thereto (other than
the financial statements including the notes thereto and other financial and
statistical information derived therefrom, as to which such counsel need express
14
no comment) contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
Such opinion shall also cover such other matters incident to the
transactions contemplated hereby and the offering Prospectus as you or counsel
to the Underwriter shall reasonably request. In rendering such opinion, to the
extent deemed reasonable by them, such counsel may rely upon certificates of any
officer of the Company or public officials as to matters of fact of which the
maker of such certificate has knowledge.
(i) a certificate, signed by the Chief Executive Officer and the
Principal Financial or Accounting Officer of the Company dated the Closing Date,
to the effect that with regard to the Company, each of the conditions set forth
in Section 5(d) have been satisfied.
(ii) a letter, addressed to the Underwriter and in form and substance
satisfactory to the Underwriter in all respects (including the nonmaterial
nature of the changes or decreases, if any, referred to in clause (D) below),
from BDO ▇▇▇▇▇▇▇, LLP, dated, respectively, as of the effective date of the
Registration Statement and as of the Closing Date, as the case may be:
(A) Confirming that they are independent public accountants
with respect to the Company and its consolidated subsidiaries, if any, within
the meaning of the Act and the applicable published Rules and Regulations.
(B) Stating that, in their opinion, the financial
statements, related notes and schedules of the Company and its consolidated
subsidiaries, if any, included in the Registration Statement examined by them
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published Rules and Regulations thereunder.
(C) Stating that, with respect to the period from December
31, 1999, to a specified date (the specified date") not earlier than five (5)
business days prior to the date of such letter, they have read the minutes of
meetings of the stockholders and board of directors (and various committees
thereof) of the Company and its consolidated subsidiaries, if any, for the
period from December 31, 1999 through the specified date, and made inquiries of
officers of the Company and its consolidated subsidiaries, if any, responsible
for financial and accounting matters and, especially as to whether there was any
decrease in sales, income before extraordinary items or net income as compared
with the corresponding period in the preceding year; or any change in the
capital stock of the Company or any change in the long term debt or any increase
in the short-term bank borrowings or any decrease in net current assets or net
assets of the Company or of any of its consolidated subsidiaries, if any, and
further stating that while such procedures and inquiries do not constitute an
examination made in accordance with generally accepted auditing standards,
nothing came to their attention which caused them to believe that during the
period from December 31, 1999, through the specified date there were any
decreases as compared with the corresponding period in the preceding year in
sales, income before extraordinary items or net income; or any change in the
capital stock of the Company or consolidated subsidiary, if any, or any change
in the long term debt or any increase in the short-term bank borrowings (other
than any increase in short-term bank borrowings in the ordinary course of
business) of the Company or any consolidated subsidiary, if any, or any decrease
in the net current assets or net assets of the Company or any consolidated
subsidiary, if any; and
(D) Stating that they have carried out certain specified
procedures (specifically set forth in such letter or letters) as specified by
the Underwriter (after consultations with BDO ▇▇▇▇▇▇▇, LLP, CPA's relating to
such procedures), not constituting an audit, with respect to certain tables,
statistics and other financial data in the Prospectus specified by the
Underwriter and such financial data not included in the Prospectus but from
which information in the Prospectus is derived, and which have been obtained
from the general accounting records of the Company or consolidated subsidiaries,
if any, or from such accounting records by analysis or computation, and having
compared such financial data with the accounting records of the Company or the
consolidated subsidiaries, if any, stating that they have found such financial
data to agree with the accounting records of the Company.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Prospectus and other related matters shall be satisfactory to or
approved by counsel to the Underwriter and you shall have received from
15
▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, a signed opinion dated as of each closing date, with
respect to the incorporation of the Company, the validity of the Securities, the
form of the Prospectus, (other than the financial statements together with
related notes and other financial and statistical data contained in the
Prospectus or omitted therefrom, as to which such counsel need express no
opinion), the execution of this Agreement and other related matters as you may
reasonably require.
(d) At each closing date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects with the same effect as if made on and as of such closing date; (ii)
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations and in all material respects conform to the
requirements thereof, and neither the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary, in light of the
circumstances under which they were made, in order to make the statements
therein not misleading; (iii) there shall have been since the respective dates
as of which information is given no material adverse change in the business,
properties or condition (financial or otherwise), results of operations, capital
stock, long term debt or general affairs of the Company from that set forth in
the Prospectus, except changes which the Prospectus indicates might occur after
the effective date of the Prospectus, and the Company shall not have incurred
any material liabilities or material obligations, direct or contingent, or
entered into any material transaction, contract or agreement not in the ordinary
course of business other than as referred to in the Prospectus and which would
be required to be set forth in the Prospectus; and (iv) except as set forth in
the Prospectus, no action, suit or proceeding at law or in equity shall be
pending or threatened against the Company which would be required to be set
forth in the Prospectus, and no proceedings shall be pending or threatened
against the Company or any subsidiary before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company.
(e) On the Initial Closing Date, the Company shall have executed and
delivered to the Underwriter, (i) the Representatives' Warrant Agreement
substantially in the form filed as an Exhibit to the Registration Statement in
final form and substance satisfactory to the Underwriter, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(f) On or before the Initial Closing Date, the Securities shall have
been duly approved for listing on an exchange or on NASDAQ, Small Cap Market.
(g) On or before the Initial Closing Date, there shall have been
delivered to the Underwriter all of the Lock-up Agreements required to be
delivered pursuant to Section 3(a)(xxv) and 4(h), in form and substance
satisfactory to the Underwriter and Underwriter's counsel.
If any condition to the Underwriter's obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant 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.
8. CONDITIONS OF THE COMPANY'S OBLIGATIONS. The obligation of the Company
to sell and deliver the Securities is subject to the following:
(a) The provisions regarding the effective date, as described in
Section 10.
(b) At the Initial Closing Date, no stop order suspending
the effectiveness of the Prospectus shall have been issued under the Act or
any proceedings therefor initiated or threatened by the Commission or by any
state securities department.
(c) Tender of payment by the Underwriter in accord with Section 2
hereof.
16
9. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and its employees and each person, if any, who controls you within the meaning
of the Act, against any losses, claims, damages or liabilities, joint or several
(which shall, for any purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
each Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission made in the Prospectus, or such amendment or supplement to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, which is in reliance upon and in conformity
with written information furnished by the Company to you specifically for use in
the preparation thereof, and provided further that the indemnity agreement
contained in this subsection (a) shall not inure to the benefit of you with
respect to any person asserting any such loss, claim, damage or liability who
has purchased the Securities which are the subject thereof if you or any
participants failed to send or give a copy of the Prospectus to such person at
or prior to the written confirmation of the sale of such Securities to such
person and except that, with respect to any untrue statement or omission or any
alleged untrue statement or omission, made in any Pre-Effective Prospectus, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Underwriter ( or to any person controlling any such underwriter)
from whom the person asserting any such loss, claim, damage or liability
purchased the securities concerned to the extent that such untrue statement or
omission, or alleged untrue statement or omission, has been corrected in a later
Pre-Effective Prospectus or in the Final Prospectus unless the Underwriter
circulated a later Pre-Effective Prospectus or the Final Prospectus to such
person
(b) Each Underwriter will indemnify and hold harmless the Company, each
of its directors, each of its officers, each person, if any, who controls the
Company within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission was made in the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by you specifically for use in the preparation thereof. This indemnity
will be in addition to any liability which any Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party, similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that, if the indemnified party is you or a person who controls you, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both you or such controlling person
and the indemnifying party and you or such controlling person shall have been
advised by such counsel that there is a conflict of interest which would prevent
counsel for the indemnifying party from representing the indemnifying party and
you or such controlling person (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of you or such
controlling person, it being understood, however, that the indemnifying party
17
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction or which are consolidated
into the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for you and all such controlling persons, which firm
shall be designated in writing by you). No settlement of any action against an
indemnified party shall be made without the consent of the indemnified party,
which shall not be unreasonably withheld in light of all factors of importance
to such indemnified party.
10. CONTRIBUTION. In order to provide for just and equitable contribution
under the Act in any case in which (i) the indemnifying party makes a claim for
indemnification pursuant to Section 7 hereof but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of the
Underwriters, then the Company and the Underwriters in the aggregate shall
contribute to the aggregate losses, claims, damages, or liabilities to which
they may be subject (which shall, for all purposes of this Agreement, include,
but not be limited to, all costs of defense and investigation and all attorneys'
fees) in either such case (after contribution from others) in such proportions
that the Underwriters are responsible in the aggregate for that portion of such
losses, claims, damages or liabilities determined by multiplying the total
amount of such losses, claims, damages or liabilities times the difference
between the public offering price and the commission to the Underwriter and
dividing the product thereof by the public offering price, and the Company, if
applicable, shall be responsible for that portion of such losses, claims,
damages or liabilities times the commission to the Underwriters and dividing the
product thereof by the public offering price; provided, however, that the
Underwriters shall not be required to so contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder if such allocation is not permitted by applicable law, then the
relative fault of the Company and the Underwriters in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 12(2) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The foregoing contribution agreement shall in no
way affect the contribution liabilities of any person having liability under
Section 12 of the Act other than the Company and the Underwriter. As used in
this paragraph, the term "Underwriters" includes any person who controls the
Underwriters within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then any
Underwriter and each person who controls any Underwriter shall be entitled to
contribution from the Company, to the full extent permitted by law.
11. EFFECTIVE DATE. This Agreement shall become effective at 10:00 a.m. New
York time on the next full business day following the effective date of the
Registration Statement, or at such other time after the effective date of the
Prospectus as you in your discretion shall first commence the public offering of
any of the Securities covered thereby, provided, however, that at all times the
provisions of Sections 7, 8, 9 and 11 shall be effective.
12. TERMINATION.
(a) This Agreement, may be terminated at any time prior to the Closing
Date by you if in your judgment it is impracticable to offer for sale or to
enforce contracts made by you for the sale of the Securities agreed to be sold
hereunder by reason of (i) the Company as a whole having sustained a material
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action, order
or decree, (ii) trading in securities of the Company having been suspended by a
state securities administrator or by the Commission, (iii) material governmental
restrictions having been imposed on trading in securities generally (not in
force and effect on the date hereof) or trading on the New York Stock Exchange,
American Stock Exchange, or in the over-the-counter market shall have been
suspended, (iv) a banking moratorium having been declared by federal or New York
State authorities, (v) an outbreak or escalation of hostilities or other
national or international calamity having occurred, (vi) the passage by the
Congress of the United States or by any state legislative body, of any act or
measure, or the adoption of any orders, rules or regulations by any governmental
body or any authoritative accounting institute or board, or any governmental
executive, which is believed likely by you to have a material impact on the
business, financial condition or financial statements of the Company; or (vii)
any material adverse change having occurred, since the respective dates as of
which information is given in the Prospectus, in the condition, financial or
otherwise, of the Company as a whole, whether or not arising in the ordinary
18
course of business, (viii) ▇▇▇▇ ▇▇▇▇▇▇, Sr., ▇▇▇▇ ▇▇▇▇▇▇, Jr. and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
cease to be employed by the Company in their present capacity; (ix)or the
Securities are not listed on NASDAQ or an Exchange.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 10 or in Section 9, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company (or its officers) and the Underwriter set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of the Underwriter, the Company, or
any of their officers or directors and will survive delivery of and payment for
the Securities.
14. NOTICES. All communications hereunder will be in writing and, except
as otherwise expressly provided herein, if sent to you, will be mailed,
delivered or telephoned and confirmed to you at, ▇▇▇▇▇▇ Partners, Inc. ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇▇▇▇; and to the Company
to ▇▇▇▇ ▇▇▇▇▇▇, Jr., CEO, Genetic Vectors Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇. Copy of the foregoing to be forwarded to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
15. PARTIES IN INTEREST. This Agreement is made solely for the benefit of
the Underwriter(s), and the Company, and their respective controlling persons,
directors and officers, and their respective successors, assigns, executors and
administrators. No other person shall acquire or have any right under or by
virtue of this Agreement.
16. HEADINGS. The Section headings in this Agreement have been inserted as
a matter of convenience of reference and are not a part of this Agreement.
17. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, without giving effect to
conflict of law principles.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
instrument.
If the foregoing correctly sets forth the understanding between the Company
and you, as Representative of the several underwriters, please so indicate in
the space provided below for such purpose, whereupon this letter and your
acceptance shall constitute a binding agreement between us.
Very truly yours,
Genetic Vectors Inc.
By:
----------------------------------
(Authorized Officer)
▇▇▇▇ ▇▇▇▇▇▇, Jr., CEO
Accepted as of the date first above written:
▇▇▇▇▇▇ Partners, Inc.
As Representative of the several Underwriters
By:
----------------------------------------
(Authorized Officer)
▇▇▇▇ ▇. ▇▇▇▇, Vice President
EXHIBIT A
SCHEDULE I
UNDERWRITERS
SHARES OF
UNDERWRITER COMMON STOCK
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▇▇▇▇▇▇ Partners, Inc.
TOTAL 1,400,000
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