▇▇▇▇▇▇ ELECTRONICS, INC.
1,200,000 Shares of Common Stock
and
1,830,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
March 31, 1998
The Thornwater Company, L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
▇▇▇▇▇▇ Electronics, Inc., a corporation organized under the laws of the
State of New York (the "Company"), and ▇▇▇▇▇▇ Acquisition Company, LLC, a
Delaware limited liability company ("Selling Shareholder"), severally hereby
confirm their respective agreement with The Thornwater Company, L.P.
("Thornwater"), as representative (the "Representative") of the several
underwriters listed on Schedule 1 annexed hereto (the "Underwriters"), as set
forth below.
The Company proposes to issue and sell to the Underwriters an aggregate of
(i) 1,025,000 shares of the Company's common stock, no par value (the "Common
Stock"), and (ii) 1,830,000 redeemable warrants to purchase Common Stock (the
"Firm Warrants"), and the Selling Shareholder proposes to sell to the
Underwriters 175,000 shares of Common Stock (the "Selling Shareholder Firm
Shares"). The shares of Common Stock being sold by the Company are referred to
as the "Company Firm Shares" and the Company Firm Shares and the Selling
Shareholder Firm Shares are sometimes referred to as the "Firm Shares." In
addition, for the sole purpose of covering over-allotments from the sale of the
Firm Shares and the Firm Warrants, (A) the Company proposes to grant to the
Underwriters an option to purchase an additional 274,500 redeemable warrants to
purchase Common Stock (the "Option Warrants" the "Company Option Securities")
and (B) the Selling Shareholder proposes to grant to the Underwriters an option
to purchase 180,000 shares of Common Stock (the "Selling Shareholder Option
Shares" or the "Option Shares"), all as provided in section 2(c) of this
agreement (the "Agreement"). The Firm Shares and the Option Shares are
collectively referred to herein as the "Shares." The Firm Warrants and the
Option Warrants are collectively referred to herein as the "Warrants." Any
shares of Common Stock issuable upon the exercise of any Warrants are referred
to herein as "Warrant Shares." The Firm Shares and the Firm Warrants are
collectively referred to herein as the "Firm Securities;" the Option Shares and
the Option Warrants are collectively referred to herein as the "Option
Securities;" the Selling Shareholder Firm Shares and the Selling Shareholder
Option Shares are sometimes collectively referred to as "Selling Shareholder
Securities". The Company Firm Shares and the Warrant Shares are sometimes
collectively referred to as the "Company Shares" and the Firm Securities, the
Option Securities and the Warrant Shares are collectively referred to herein as
the "Securities."
Pursuant to an agreement to be entered into among the Company, the
Underwriter and Registrar and Transfer Company (the "Warrant Agreement"), each
Warrant will be exercisable during the period commencing on the second
anniversary of the effective date of the Registration Statement (as hereinafter
defined) (the "Effective Date") and expiring on the fifth anniversary thereof,
subject to redemption by the Company (as described below), at an initial
exercise price (subject to adjustment as set forth in the Warrant Agreement) of
$5.50 per share [110% of IPO price per share]. The Warrants will be redeemable
at a price of $.10 per Warrant, commencing on the second anniversary of the
Effective Date (or earlier with the consent of the Representative) and prior to
their expiration, upon not less than 30 days prior written notice to the holders
of the Warrants, provided that the closing bid price of the Common Stock as
reported on the Nasdaq SmallCap Market if traded thereon, or if not traded
thereon, the closing sale price if listed on the Nasdaq National Market or a
national or regional securities exchange (or other reporting system that
provides last sales prices), shall have been at least $7.50 per share [150% of
IPO price per share], subject to adjustment, for 20 consecutive trading days
ending three days prior to the date on which the Company gives notice of
redemption, subject to the right of the holder to exercise such Warrants prior
to redemption.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333-42121), with
respect to the Securities and the Representative's Warrant Securities (as
hereinafter defined), including a prospectus subject to completion, has been
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act "), and one
or more amendments to that registration statement may have been so filed. Copies
of such registration statement and of each amendment heretofore filed by the
Company with the Commission have been delivered to the Underwriters. After the
execution of this Agreement, the Company will file with the Commission either
(i) if the registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in that registration statement (or, if an amendment
thereto shall have been filed, in such amendment), with such changes or
insertions as are required by Rule 430A under the Act or permitted by Rule
424(b) under the Act and as have been provided to and approved by the
Underwriters prior to the execution of this Agreement, or (ii) if that
registration statement, as it may have been amended, has not been declared by
the Commission to be effective under the Act, an amendment to that registration
statement, including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Underwriters prior to the execution of this
Agreement. The Company also may file a related registration statement with the
Commission pursuant to Rule 462(b) under the Act for purposes of registering
certain additional Securities, which registration statement shall become
effective upon filing with the Commission (the "Rule 462(b) Registration
Statement"). As used in this Agreement, the term "Registration Statement" means
that registration statement, as amended at the time it was or is declared
effective, and any amendment thereto that was or is thereafter declared
effective, including all financial schedules and exhibits thereto and any
information omitted therefrom pursuant to Rule 430A under the Act and included
in the Prospectus (as hereinafter defined), together with any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus" means each prospectus
subject to completion filed with the Registration Statement (including the
prospectus subject to completion, if any, included in the Registration Statement
at the time it was or is declared effective); and the term "Prospectus" means
the prospectus first filed with the Commission pursuant to Rule 424(b) under the
Act or, if no prospectus is so filed pursuant to Rule 424(b), the prospectus
included in the Registration Statement. The Company has caused to be delivered
to the Underwriters copies of each Preliminary Prospectus and has consented to
the use of those copies for the purposes permitted by the Act. If the Company
has elected to rely on Rule 462(b) and the Rule 462(b) Registration Statement
has not been declared effective, then (i) the Company has filed a Rule 462(b)
Registration Statement in compliance with and that is effective upon filing
pursuant to Rule 462(b) and has received confirmation of its receipt and (ii)
the Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under the Act or
the Commission has received payment of such filing fee.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus. When each Preliminary Prospectus and each
amendment and each supplement thereto was filed with the Commission it (i)
contained all statements required to be stated therein, in accordance with, and
complied with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement was or is declared
effective, it (i) contained or will contain all statements required to be stated
therein in accordance with, and complied or will comply with the requirements
of, the Act and the rules and regulations of the Commission thereunder and (ii)
did not or will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading.
When the Prospectus and each amendment or supplement thereto is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or
supplement is not required so to be filed, when the Registration Statement
containing such Prospectus or amendment or supplement thereto was or is declared
effective) and on the Firm Closing Date and any Option Closing Date (as each
such term is hereinafter defined), the Prospectus, as amended or supplemented at
any such time, (i) contained or will contain all statements required to be
stated therein in accordance with, and complied or will comply with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing provisions of this paragraph (b) do not
apply to statements or omissions made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
in reliance upon and in conformity with written information furnished to the
Company by the Underwriters specifically for use therein.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of New York, and is
duly qualified or authorized to transact business as a foreign corporation and
is in good standing in each jurisdiction where the ownership or leasing of its
property or the conduct of its business requires such qualification or
authorization.
(d) The Company has full corporate power and authority, and all necessary
material authorizations, approvals, orders, licenses, certificates and permits
of and from all governmental regulatory authorities, to own or lease its
property and conduct its business as now being conducted and as proposed to be
conducted as described in the Registration Statement and the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(e) The Company does not own, directly or indirectly, an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
(f) The Company has an authorized, issued and outstanding capitalization as
set forth in the Prospectus (and, if the Prospectus is not in existence, the
most recent Preliminary Prospectus). All of the issued shares of capital stock
of the Company, including the Selling Shareholder Shares, have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. There are no outstanding options, warrants or other rights
granted by the Company to purchase shares of its Common Stock or other
securities, other than as described in the Prospectus (and, if the Prospectus is
not in existence, the most recent Preliminary Prospectus). The Company Shares
have been duly authorized, and the Warrant Shares have been duly reserved for
issuance, by all necessary corporate action on the part of the Company and, when
the Company Firm Shares are issued and delivered to and paid for by the
Underwriter pursuant to this Agreement and the Warrant Shares are issued and
delivered to and paid for by the holders of Warrants upon exercise of the
Warrants in accordance with the terms thereof, the Firm Shares and the Warrant
Shares will be validly issued, fully paid, nonassessable and free of preemptive
rights and will conform to the description thereof in the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus). No
holder of outstanding securities of the Company is entitled as such to any
preemptive or other right to subscribe for any of the Securities, and no person
is entitled to have securities registered by the Company under the Registration
Statement or otherwise under the Act other than as described in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(g) The capital stock of the Company conforms to the description thereof
contained in the Prospectus (and, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(h) All issuances of securities of the Company have been effected pursuant
to an exemption from the registration requirements of the Act. Except as
previously disclosed in writing to the Representative, no compensation was paid
to or on behalf of any member of the National Association of Securities Dealers,
Inc. ("NASD"), or any affiliate or employee thereof, in connection with any such
issuance.
(i) The financial statements of the Company included in the Registration
Statement and the Prospectus (and, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) fairly present the financial position of the
Company as of the dates indicated and the results of operations of the Company
for the periods specified. Such financial statements have been prepared in
accordance with accounting principles generally accepted in effect in the United
States of America, consistently applied, except to the extent that certain
footnote disclosures regarding unaudited interim periods may have been omitted
in accordance with the applicable rules of the Commission under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The financial data set forth
under the caption "Summary Financial Information" in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) fairly
present, on the basis stated in the Prospectus (or such Preliminary Prospectus),
the information included therein.
(j) Ernst & Young LLP, who have audited certain financial statements of the
Company and delivered their report with respect to the financial statements
included in the Registration Statement and the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), are
independent public accountants with respect to the Company as required by the
Act and the applicable rules and regulations thereunder.
(k) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), (i) except as otherwise
contemplated therein, there has been no material adverse change in the business,
operations, condition (financial or otherwise), earnings or prospects of the
Company, whether or not arising in the ordinary course of business, (ii) except
as otherwise stated therein, there have been no transactions entered into by the
Company and no commitments made by the Company that, individually or in the
aggregate, are material with respect to the Company, (iii) there has not been
any change in the capital stock or indebtedness of the Company, and (iv) there
has been no dividend or distribution of any kind declared, paid or made by the
Company in respect of any class of its capital stock.
(l) The Company has full corporate power and authority to enter into and
perform its obligations under this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement (as hereinafter defined). The execution and
delivery of this Agreement, the Warrant Agreement and the Representative's
Warrant Agreement have been duly authorized by all necessary corporate action on
the part of the Company and this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement have each been duly executed and delivered by
the Company and each is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other similar laws affecting creditors'
rights generally and by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and except as
rights to indemnity and contribution under this Agreement may be limited by
applicable law. The issuance, offering and sale by the Company to the
Underwriters of the Securities pursuant to this Agreement or the
Representative's Securities pursuant to the Representative's Warrant Agreement,
the compliance by the Company with the provisions of this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement, and the consummation of
the other transactions contemplated by this Agreement, the Warrant Agreement and
the Representative's Warrant Agreement do not (i) require the consent, approval,
authorization, registration or qualification of or with any court or
governmental or regulatory authority, except such as have been obtained or may
be required under state securities or blue sky laws and, if the registration
statement filed with respect to the Securities (as amended) is not effective
under the Act as of the time of execution hereof, such as may be required (and
shall be obtained as provided in this Agreement) under the Act, or (ii) conflict
with or result in a breach or violation of, or constitute a default under, any
material contract, indenture, mortgage, deed of trust, loan agreement, note,
lease or other material agreement or instrument to which the Company is a party
or by which the Company or any of its property is bound or subject, or the
certificate of incorporation or by-laws of the Company, or any statute or any
rule, regulation, judgment, decree or order of any court or other governmental
or regulatory authority or any arbitrator applicable to the Company.
(m) No legal or governmental proceedings are pending to which the Company
is a party or to which the property of the Company is subject, and no such
proceedings have been threatened against the Company or with respect to any of
its property, except such as are described in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). No
contract or other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein (and, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) or filed as required.
(n) The Company is not in (i) violation of its certificate of
incorporation, by-laws or other governing documents, (ii) violation in any
material respect of any law, statute, regulation, ordinance, rule, order,
judgment or decree of any court or any governmental or regulatory authority
applicable to it, or (iii) default in any material respect in the performance or
observance of any obligation, agreement, covenant or condition contained in any
material contract, indenture, mortgage, deed of trust, loan agreement, note,
lease or other material agreement or instrument to which it is a party or by
which it or any of its property may be bound or subject, and no event has
occurred which with notice or lapse of time or both would constitute such a
default.
(o) The Company currently own or possess adequate rights to use all
intellectual property, including all trademarks, service marks, trade names,
copyrights, inventions, know-how, trade secrets, proprietary technologies,
processes and substances, or applications or licenses therefor, that are
described in the Prospectus (and if the Prospectus is not in existence, the most
recent Preliminary Prospectus), and any other rights or interests in items of
intellectual property as are necessary for the conduct of the business now
conducted or proposed to be conducted by them as described in the Prospectus
(or, such Preliminary Prospectus), and, except as disclosed in the Prospectus
(and such Preliminary Prospectus), the Company is not aware of the granting of
any patent rights to, or the filing of applications therefor by, others, nor is
the Company aware of, nor has the Company received notice of, infringement of or
conflict with asserted rights of others with respect to any of the foregoing.
All such intellectual property rights and interests are (i) valid and
enforceable and (ii) to the best knowledge of the Company, not being infringed
by any third parties.
(p) The Company possesses adequate licenses, orders, authorizations,
approvals, certificates or permits issued by the appropriate federal, state or
foreign regulatory agencies or bodies necessary to conduct its business as
described in the Registration Statement and the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), and,
except as disclosed in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there are no pending or, to
the best knowledge of the Company, threatened, proceedings relating to the
revocation or modification of any such license, order, authorization, approval,
certificate or permit.
(q) The Company has good and marketable title to all of the properties and
assets reflected in the Company's financial statements or as described in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind, except those reflected in
such financial statements or as described in the Registration Statement and the
Prospectus (and such Preliminary Prospectus). Except as disclosed in the
Prospectus, the Company occupies its leased properties under valid and
enforceable leases conforming to the description thereof set forth in the
Registration Statement and the Prospectus (and such Preliminary Prospectus).
(r) The Company is not and does not intend to conduct its business in a
manner in which it would be an "investment company" as defined in Section 3(a)
of the Investment Company Act of 1940 (the "Investment Company Act").
(s) The Company has obtained and delivered to the Representative the
agreements (the "Lock-up Agreements") with the officers, directors and other
security holders owning or having rights to acquire shares of Common Stock or
preferred stock to the effect that, among other things, each such person (i)
will not, commencing on the Effective Date and continuing for the period set
forth in Schedule 2, directly or indirectly, publicly sell, offer or contract to
sell or grant any option to purchase, transfer, assign or pledge, or otherwise
encumber, or dispose of any shares of Common Stock or preferred stock or any
securities convertible into or exercisable for Common Stock or preferred stock
now or hereafter owned by such person without the prior written consent of the
Representative and that the purchaser or transferee in any private sale agrees
to be bound by the Lock Up Agreement, and (ii) will comply with any additional
restriction or condition on the disposition of such Common Stock or preferred
stock which may be required to qualify the offering of the Securities in any
state in accordance with the blue sky or securities laws of such state.
(t) No labor dispute with the employees of the Company exists, is
threatened or, to the best of the Company's knowledge, is imminent that could
result in a material adverse change in the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Company, except
as described in or contemplated by the Prospectus (and, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
(u) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which it is engaged; the Company has not been
refused any insurance coverage sought or applied for; and the Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition (financial or
otherwise), business, prospects, net worth or results of operations of the
Company, except as described in or contemplated by the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(v) The Representative's Warrant (as hereinafter defined) will conform to
the description thereof in the Registration Statement and in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and, when sold to and paid for by the Representative in accordance
with the Representative's Warrant Agreement, will have been duly authorized and
validly issued and will constitute valid and binding obligations of the Company
entitled to the benefits of the Representative's Warrant Agreement. The shares
of Common Stock issuable upon exercise of the Representative's Warrant and the
Warrants issuable upon exercise thereof (the "Representative's Warrant Shares")
have been duly authorized and reserved for issuance upon exercise of the
Representative's Warrant and the Warrants issuable upon exercise thereof by all
necessary corporate action on the part of the Company and, when issued and
delivered and paid for upon such exercise in accordance with the terms of the
Representative's Warrant Agreement, the Representative's Warrant, and the
Warrants issuable upon exercise thereof, respectively, will be validly issued,
fully paid, nonassessable and free of preemptive rights and will conform to the
description thereof in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(w) No person has acted as a finder in connection with, or is entitled to
any commission, fee or other compensation or payment for services as a finder
for or for originating, or introducing the parties to, the transactions
contemplated herein and the Company will indemnify the Underwriter with respect
to any claim for finder's fees in connection herewith. Except as set forth in
the Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company has no
management or financial consulting agreement with anyone. No promoter, officer,
director or stockholder of the Company is, directly or indirectly, affiliated or
associated with an NASD member and no securities of the Company have been
acquired by an NASD member, except as previously disclosed in writing to the
Representative.
(x) The Company has filed all federal, state, local and foreign tax returns
which are required to be filed through the date hereof, or has received
extensions thereof, and has paid all taxes shown on such returns and all
assessments received by it to the extent that the same are material and have
become due.
(y) Neither the Company nor any director, officer, agent, employee or other
person associated with or acting on behalf of the Company has, directly or
indirectly: used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity; made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds;
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended;
or made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment. No transaction has occurred between or among the Company and
any of its officers or directors or any affiliates of any such officer or
director, that is required to be described in and is not described in the
Registration Statement and the Prospectus.
(z) Neither the Company nor any of its officers, directors or affiliates
(as defined in the Regulations), has taken or will take, directly or indirectly,
prior to the completion of the Offering, any action designed to stabilize or
manipulate the price of any security of the Company, or which has caused or
resulted in, or which might in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any security of the
Company, to facilitate the sale or resale of any of the Securities or the Option
Securities.
2. Purchase, Sale and Delivery of the Securities and the Underwriter's
Warrants.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to each Underwriter and the Selling
Shareholder agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, and the Selling
Shareholder the number of Firm Shares as set forth opposite its name on Schedule
1 annexed hereto, at a purchase price of $4.50 per share and the Firm Warrants
at a purchase price of $.09 per Warrant.
(b) Certificates in definitive form for the Firm Securities that the
Underwriters have agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Underwriters request
upon notice to the Company at least 48 hours prior to the Firm Closing Date,
shall be delivered by or on behalf of the Company to the Underwriters, against
payment by or on behalf of the Underwriters of the purchase prices therefor by
certified or official bank check or checks drawn upon or by a New York Clearing
House bank and payable in next-day funds to the order of the Company. Such
delivery of and payment for the Firm Securities shall be made at the offices of
Counsel for the Underwriters, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 9:30
A.M., New York City time on April 3, 1998, or at such other place, time or date
as the Underwriters and the Company may agree upon, such time and date of
delivery against payment being herein referred to as the "Firm Closing Date."
The Company will make such certificates for the Firm Securities available for
checking and packaging by the Underwriters, at such offices as may be designated
by the Representative, at least 24 hours prior to the Firm Closing Date. In lieu
of physical delivery, the closing may occur by "DTC" delivery.
(c) For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Securities as contemplated by the Prospectus,
the Company hereby grants to the Underwriter an option to purchase any or all of
the Company Option Warrants and the Selling Shareholder hereby grants the
Underwriters an option to purchase the Selling Shareholder Option Shares, which
options are exercisable by the Representative on behalf of and for the account
of the Underwriters. The purchase price to be paid for any of the Option
Securities shall be the same price per share or Warrant as the price per share
or Warrant for the Firm Securities set forth above in paragraph (a) of this
section 2. The option granted hereby may be exercised as to all or any part of
the Option Securities from time to time within 45 calendar days after the Firm
Closing Date. The Underwriters shall not be under any obligation to purchase any
of the Option Securities prior to the exercise of such option. The
Representative may from time to time exercise the option granted hereby on
behalf of the Underwriters by giving notice in writing or by telephone
(confirmed in writing) to the Company and the Selling Shareholder (in the case
of the Selling Shareholder Option Shares) setting forth the aggregate number of
Option Securities as to which the Underwriters are then exercising the option
and the date and time for delivery of and payment for such Option Securities.
Any such date of delivery shall be determined by the Underwriters but shall not
be earlier than two business days or later than three business days after such
exercise of the option and, in any event, shall not be earlier than the Firm
Closing Date. The time and date set forth in such notice, or such other time on
such other date as the Representative and the Company may agree upon, is herein
called the "Option Closing Date" with respect to such Option Securities. Upon
exercise of the option as provided herein, the Company and/or the Selling
Shareholder shall become obligated to sell to the Underwriters, and, subject to
the terms and conditions herein set forth, each Underwriter shall become
obligated to purchase from the Company and the Selling Shareholder, the Option
Securities as to which the Underwriter is then exercising its option. If the
option is exercised as to all or any portion of the Option Securities,
certificates in definitive form for such Option Securities, and payment
therefor, shall be delivered on the related Option Closing Date in the manner,
and upon the terms and conditions, set forth in paragraph (b) of this section 2,
except that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph (c), to refer to such Option
Securities and Option Closing Date, respectively.
(d) On the Firm Closing Date, the Company will further issue and sell to
the Representative or, at the direction of the Representative, to bona fide
officers of the Underwriters, for an aggregate purchase price of $10, warrants
to purchase Common Stock and redeemable warrants to purchase Common Stock (the
"Representative's Warrant") entitling the holders thereof to purchase an
aggregate of 120,000 shares of Common Stock and/or 183,000 redeemable warrants
to purchase Common Stock for a period of four years, such period to commence on
the first anniversary of the Effective Date. The Representative's Warrant shall
be exercisable at a price equal to 160% of the initial public offering price of
the Common Stock and Warrants, respectively, and shall contain terms and
provisions more fully described herein below and as set forth more particularly
in the warrant agreement relating to the Representative's Warrant to be executed
by the Company on the Effective Date (the "Representative's Warrant Agreement"),
including, but not limited to, (i) customary anti-dilution provisions in the
event of stock dividends, split mergers, sales of all or substantially all of
the Company's assets, sales of stock below then prevailing market or exercise
prices and other events, and (ii) prohibitions of mergers, consolidations or
other reorganizations of or by the Company or the taking by the Company of other
action during the five-year period following the Effective Date unless adequate
provision is made to preserve, in substance, the rights and powers incidental to
the Representative's Warrant. As provided in the Representative's Warrant
Agreement, the Representative may designate that the Representative's Warrant be
issued in varying amounts directly to bona fide officers of the Underwriters. As
further provided, no sale, transfer, assignment, pledge or hypothecation of the
Representative's Warrant shall be made for a period of 12 months from the
Effective Date, except (i) by operation of law or reorganization of the Company,
or (ii) to the Underwriters and bona fide partners, officers of the Underwriters
and selling group members. The shares of Common Stock issuable upon exercise of
the Representative's Warrant and the warrants issuable upon exercise thereof are
referred to herein as the "Representative's Warrant Shares"; and the
Representative's Warrant, the warrants issuable upon exercise thereof, and the
Representative's Warrant Shares are collectively referred to herein as the
"Representative's Securities."
3. Offering by the Underwriters. The Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set forth in the Prospectus
(the "Offering").
4. Covenants of the Company. The Company covenants and agrees with the
Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, to
become effective as promptly as possible. If required, the Company will file the
Prospectus and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rule 424(b) under the Act. During
any time when a prospectus relating to the Securities is required to be
delivered under the Act, the Company (i) will comply with all requirements
imposed upon it by the Act and the rules and regulations of the Commission
thereunder to the extent necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (ii) will not file with the
Commission any prospectus or amendment referred to in the first sentence of
section (a) (i) hereof, any amendment or supplement to such prospectus or any
amendment to the Registration Statement as to which the Underwriters shall not
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Underwriters
shall not have given their consent. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Underwriters or counsel to the Underwriters, any
amendments to the Registration Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities by the Underwriters, and will use its best
efforts to cause any such amendment to the Registration Statement to be declared
effective by the Commission as promptly as possible. The Company will advise the
Underwriters, promptly after receiving notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or declared
effective or the Prospectus or any amendment or supplement thereto has been
filed and will provide evidence satisfactory to the Underwriters of each such
filing or effectiveness.
(b) The Company will advise the Underwriters, promptly after receiving
notice or obtaining knowledge thereof, of (i) the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, (ii) the suspension of the
qualification of any Securities for offering or sale in any jurisdiction, (iii)
the institution, threat or contemplation of any proceeding for any such purpose
or (iv) any request made by the Commission for amending the Registration
Statement, for amending or supplementing the Prospectus or for additional
information. The Company will use its best efforts to prevent the issuance of
any such stop order and, if any such stop order is issued, to obtain the
withdrawal thereof as promptly as possible.
(c) The Company will, in cooperation with counsel to the Underwriters,
arrange for the qualification of the Securities for offering and sale under the
blue sky or securities laws of such jurisdictions as the Underwriters may
designate and will continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Securities.
(d) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary at
any time to amend or supplement the Prospectus to comply with the Act or the
rules or regulations of the Commission thereunder, the Company will promptly
notify the Underwriters thereof and, subject to section 4(a) hereof, will
prepare and file with the Commission, at the Company's expense, an amendment to
the Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(e) So long as any Warrants are outstanding, the Company shall use its best
efforts to cause post-effective amendments to the Registration Statement to
become effective in compliance with the Act and without any lapse of time
between the effectiveness of any such post-effective amendments and cause a copy
of each Prospectus, as then amended, to be delivered to each holder of record of
a Warrant and to furnish to the Underwriters and any dealer as many copies of
each such Prospectus as the Underwriters or dealer may reasonably request. The
Company shall not call for redemption of the Warrants unless a registration
statement covering the securities underlying the Warrants has been declared
effective by the Commission and remains current at least until the date fixed
for redemption. In addition, for so long as any Warrant is outstanding, the
Company will promptly notify the Underwriters of any material change in the
business, financial condition or prospects of the Company. So long as any of the
Warrants remain outstanding, the Company will timely deliver and supply to its
Warrant Agent sufficient copies of the Company's current Prospectus, as will
enable such Warrant agent to deliver a copy of such Prospectus to any Warrant or
other holder where such Prospectus delivery is by law required to be made.
(f) The Company will, without charge, provide to the Underwriters and to
counsel for the Underwriters (i) as many signed copies of the registration
statement originally filed with respect to the Securities and each amendment
thereto (in each case including exhibits thereto) as the Underwriters may
reasonably request, (ii) as many conformed copies of such registration statement
and each amendment thereto (in each case without exhibits thereto) as the
Underwriters may reasonably request and (iii) so long as a prospectus relating
to the Securities is required to be delivered under the Act, as many copies of
each Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto as the Underwriters may reasonably request.
(g) The Company, as soon as practicable, will make generally available to
its security holders and to the Underwriters an earnings statement of the
Company that satisfies the provisions of section 11 (a) of the Act and Rule 158
thereunder.
(h) The Company will reserve and keep available for issuance that maximum
number of authorized but unissued shares of Common Stock which are issuable upon
exercise of the Warrants and the Representative's Warrant (including the
underlying securities) outstanding from time to time.
(i) The Company will apply the net proceeds from the sale of the Securities
being sold by it as set forth under "Use of Proceeds" in the Prospectus.
(j) The Company will not, without the prior written consent of the
Representative, directly or indirectly offer, agree to sell, sell, grant any
option to purchase or otherwise dispose (or announce any offer, agreement to
sell, sales grant of any option to purchase or other disposition) of any shares
of Common Stock, preferred stock or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock or preferred stock for a
period of 36 months after the Effective Date, except (i) the Shares and Warrants
issued pursuant to this Agreement, (ii) the Warrant Shares issuable upon
exercise of the Warrants, (iii) the Warrants, (iv) the Representative's Warrant
Shares and Warrants issuable upon the exercise of the Representative's Warrant,
and (v) shares of Common Stock issuable upon the exercise of options granted and
to be granted under the Company's Stock Option Plan as in effect as of the date
hereof. The Company also will not for a period of 36 months following the
Effective Date, without the prior written consent of the Representative, (i)
issue or sell any of its securities pursuant to Regulation S promulgated under
the Act or (ii) file a registration on Form S-8 for the sale of securities by a
person other than an employee of the Company or a subsidiary of the Company.
(k) Prior to the Closing Date or the Option Closing Date (if any), the
Company will not, directly or indirectly, without prior written consent of the
Representative, issue any press release or other public announcement or hold any
press conference with respect to the Company or its activities with respect to
the Offering (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).
(l) If, at the time that the Registration Statement becomes effective, any
information shall have been omitted therefrom in reliance upon Rule 430A under
the Act, then immediately following the execution of this Agreement, the Company
will prepare, and file or transmit for filing with the Commission in accordance
with Rule 430A and Rule 424(b) under the Act, copies of the Prospectus including
the information omitted in reliance on Rule 430A, or, if required by such Rule
430A, a post-effective amendment to the Registration Statement (including an
amended Prospectus), containing all information so omitted.
(m) The Company will cause the Securities to be included in The Nasdaq
Small Cap Market on the Effective Date and to maintain such listing thereafter.
The Company will file with The Nasdaq Small Cap Market all documents and notices
that are required by companies with securities that are traded on The Nasdaq
Small Cap Market.
(n) During the period of five years from the Firm Closing Date, the Company
will, as promptly as possible, not to exceed 135 days, after each annual fiscal
period render and distribute reports to its stockholders which will include
audited statements of its operations and changes of financial position during
such period and its audited balance sheet as of the end of such period, as to
which statements the Company's independent certified public accountants shall
have rendered an opinion and shall timely file all reports required to be filed
under the securities laws, including Form SR.
(o) During a period of three years commencing with the Firm Closing Date,
the Company will furnish to the Representative, at the Company's expense, copies
of all periodic and special reports furnished to stockholders of the Company and
of all information, documents and reports filed with the Commission.
(p) The Company has appointed Registrar and Transfer Company as transfer
agent for the Common Stock and warrant agent for the Warrants, subject to the
Closing. The Company will not change or terminate such appointment for a period
of three years from the Firm Closing Date without first obtaining the written
consent of the Representative. For a period of three years after the Effective
Date, the Company shall cause the transfer agent and warrant agent to deliver
promptly to the Underwriters a duplicate copy of the daily transfer sheets
relating to trading of the Securities. The Company shall also provide to the
Representative, on a weekly basis, copies of the DTC special securities
positions listing report.
(q) During the period of 180 days after the date of this Agreement, the
Company will not at any time, directly or indirectly, take any action designed
to or that will constitute, or that might reasonably be expected to cause or
result in, the stabilization of the price of the Common Stock or the Warrants to
facilitate the sale or resale of any of the Securities.
(r) The Company will not take any action to facilitate the sale of any
shares of Common Stock pursuant to Rule 144 under the Act if any such sale would
violate any of the terms of the Lock-up Agreements.
(s) Prior to the 120th day after the Firm Closing Date, the Company will
provide the Underwriters and their designees with six bound volumes of the
transaction documents relating to the Registration Statement and the closing(s)
hereunder, in form and substance reasonably satisfactory to the Representative.
(t) The Company shall consult with the Representative prior to the
distribution to third parties of any financial information news releases or
other publicity regarding the Company, its business, or any terms of this
offering and the Underwriters will consult with the Company prior to the
issuance of any research report or recommendation concerning the Company's
securities. Copies of all documents that the Company or its public relations
firm intend to distribute will be provided to the Representative for review
prior to such distribution.
(u) The Company and the Underwriters will advise each other immediately in
writing as to any investigation, proceeding, order, event or other circumstance,
or any threat thereof, by or relating to the Commission or any other
governmental authority, that could impair or prevent the Offering. Except as
required by law or as otherwise mutually agreed in writing, neither the Company
nor the Underwriters will acquiesce in such circumstances and each will actively
defend any proceedings or orders in that connection.
(v) The Company will, for a period of no less than three years commencing
immediately after the Effective Date, engage one designee of the Representative
as an advisor (the "Advisor") to the Company's Board of Directors, who shall
attend meetings of the Board, receive all notices and other correspondence and
communications sent by the Company to its Board of Directors and receive
compensation equal to that of other non-officer directors; provided, that in
lieu of the Representative's right to designate the Advisor, the Representative
shall have the right during such three-year period, in its sole discretion, to
designate one person for election as a director of the Company and the Company,
and Selling Shareholder will utilize their respective best efforts (including in
the case of Selling Shareholder, voting all shares owned by it in favor thereof)
to obtain the election of such person, who shall be entitled to receive the same
compensation, expense reimbursements and other benefits as set forth above. In
addition, such Advisor shall be entitled to receive reimbursement for all costs
incurred in attending such meetings including, but not limited to, food, lodging
and transportation. The Company, during said three-year period, shall schedule
no less than four formal meetings (at least one of which shall be "in person"
and the others may be held telephonically) of its Board of Directors in each
such year at which meetings such Advisor shall be permitted to attend (in
person, for each meeting held "in person") as set forth herein; said meetings
shall be held quarterly each year and advance notice of such meetings identical
to the notice given to directors shall be given to the Advisor. The Company and
its principal stockholders shall, during such three year period, give the
Representative timely prior written notice of any proposed acquisitions,
mergers, reorganizations or other similar transactions. The Company shall
indemnify and hold the Representative and such Advisor or director harmless
against any and all claims, actions, damages, costs and expenses, and judgments
arising solely out of the attendance and participation of such Advisor or
director at any such meeting described herein, and, if the Company maintains a
liability insurance policy affording coverage for the acts of its officers and
directors, it shall, if possible, include such Advisor or director as an insured
under such policy.
(w) The Company shall first submit to the Representative certificates
representing the Securities for approval prior to printing, and shall, as
promptly as possible, after filing the Registration Statement with the
Commission, obtain CUSIP numbers for the Securities.
(x) The Company shall engage the Underwriters' counsel to provide the
Underwriters, at the closing of any sale of Securities hereunder and thereafter
on request, with an opinion, setting forth those states in which the Common
Stock and Warrants may be traded in non-issuer transactions under the blue sky
or securities laws of the 50 states. The Company shall pay such counsel a
one-time fee of $12,500 for such opinions at the closing of the sale of the Firm
Securities.
(y) The Company will prepare and file a registration statement with the
Commission pursuant to section 12 of the 1934 Act, and will use its best efforts
to have such registration statement declared effective by the Commission on an
accelerated basis on the day after the Effective Date. For this purpose the
Company shall prepare and file with the Commission a General Form of
Registration of Securities (Form 8-A or Form 10).
(z) For so long as the Securities are registered under the 1934 Act, the
Company will hold an annual meeting of stockholders for the election of
directors within 180 days after the end of each of the Company's fiscal years
and within 135 days after the end of each of the Company's fiscal years will
provide the Company's stockholders with the audited financial statements of the
Company as of the end of the fiscal year just completed prior thereto. Such
financial statements shall be those required by Rule 14a-3 under the 1934 Act
and shall be included in an annual report pursuant to the requirements of such
Rule.
(aa) Prior to the Effective Date, the Company shall obtain key-man life
insurance in the minimum amount of $3,000,000 on ▇▇▇▇▇▇▇▇ ▇▇▇▇ on such terms and
conditions as are reasonably satisfactory to the Representative, assuming such
coverage is available on commercially reasonable terms.
(bb) The Company shall retain the Representative as a financial advisors at
an annual fee of $41,220 for a 36-month period commencing on the Closing Date.
The entire fee of $123,660 shall be payable on the Closing Date.
(cc) The Company will engage a financial public relations firm reasonably
satisfactory to the Representative on or before the Firm Closing Date, and
continuously engage such firm, or a substitute firm reasonably acceptable to the
Representative, for a period of twelve (12) months following the Firm Closing
Date.
(dd) The Company will take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Descriptions or other equivalent
manual and to maintain its listing therein for a period of five (5) years from
the Effective Date.
(ee) On or prior to the Effective Date, the Company will give written
instructions to the transfer agent for the Common Stock directing said transfer
agent to place stop-order restrictions against, and appropriate legends advising
of the Lock-up Agreements on, the certificates representing the securities of
the Company owned by the persons who have entered into the Lock-up Agreements.
4A. Representations, Warranties and Agreements of the Selling Shareholder.
The Selling Shareholder represents and warrants to, and agrees with, the
Underwriters as follows:
(a) On the Effective Date, and at all times subsequent thereto up to and on
each Option Closing Date (i) all information with respect to Selling Shareholder
contained in the Registration Statement does not and will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading, and (ii) all information with
respect to Selling Shareholder contained in the Prospectus, as amended or
supplemented, does not and will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties contained
in this subsection 4A (a) only apply to statements or omissions made in reliance
upon and in conformity with information furnished to the Company or the
Underwriters, by or on behalf of Selling Shareholder, specifically for inclusion
in Registration Statement or the Prospectus.
(b) Selling Shareholder has duly authorized, executed and delivered on
___________, 1998 the Irrevocable Power of Attorney and Custody Agreement (the
"Custody Agreement") with the Company, as custodian (the "Custodian"), and
Ruskin, Moscou, ▇▇▇▇▇ & Faltischek, as attorneys-in-fact (the
"Attorneys-in-Fact"), and, such Custody Agreement constitutes the valid, legal
and binding agreement of Selling Shareholder, enforceable in accordance with its
terms; Selling Shareholder has pursuant to the Custody Agreement, duly
authorized each and all of the Attorneys-in-Fact to execute and deliver this
Agreement on behalf of Selling Shareholder, and otherwise to act, and to execute
documents and instruments, on behalf of Selling Shareholder in connection with
the transactions contemplated by this Agreement, and the Attorneys-in-Fact and
the Custodian are each duly authorized by Selling Shareholder under the Custody
Agreement to deliver the Selling Shareholder Shares to be sold by Selling
Shareholder pursuant to the Agreement, and to accept payment therefor. When
executed and delivered by one or more of the Attorneys-in-Fact on behalf of
Selling Shareholder in accordance with the Custody Agreement and this Agreement
will have been duly authorized, executed and delivered on behalf of Selling
Shareholder.
(c) No consent, approval, authorization or order of any court, government,
governmental agency or body or financial institution, domestic or foreign (other
than under the Securities Act and state securities or blue sky laws), is
required for the consummation by Selling Shareholder of the transactions
contemplated in this Agreement or the Custody Agreement, including, without
limitation, the sale of the Shares to the Underwriters, as contemplated herein
or therein (other than those that have been obtained and are in full force and
effect).
(d) The execution and delivery of this Agreement and the Custody Agreement,
and the consummation of the transactions contemplated herein and therein,
including, without limitation, the sale of the Selling Shareholder Shares by the
Underwriters, as contemplated herein or therein, will not (i) result in a breach
by Selling Shareholder of, or constitute a default by Selling Shareholder under,
any agreement or instrument or any decree, judgment or order to which Selling
Shareholder is a party or by which Selling Shareholder is bound or the
properties of Selling Shareholder are subject or (ii) violate any provision of
the certificate of organization, operating agreement, or comparable governing
documents of Selling Shareholder or any law, rule or regulation, domestic or
foreign, applicable to Selling Shareholder or to which its properties are
subject.
(e) Selling Shareholder has, and will on each Option Closing Date have,
good and marketable title to the Selling Shareholder Shares to be sold by
Selling Shareholder pursuant to this Agreement, free and clear of any pledge,
lien, security interest, charge, claim, equity or encumbrance of any kind, or
restriction on voting or other rights as a shareholder of any nature, other than
pursuant to this Agreement and the Custody Agreement; Selling Shareholder has
full right, power and authority to sell, transfer and deliver the Selling
Shareholder Shares, pursuant to this Agreement; upon delivery of such Selling
Shareholder Shares and payment of the purchase price therefor as contemplated in
this Agreement each Underwriter will receive good and marketable title to the
Selling Shareholder Shares purchased by it from Selling Shareholder, free and
clear of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind or of any restriction on transfer or voting or other
rights as a shareholder of any nature.
(f) Certificates for the Shares to be sold by Selling Shareholder pursuant
to this Agreement in suitable form for transfer by delivery or accompanied by
duly executed instruments of transfer or assignment, executed in blank, have
been placed in custody with the Custodian pursuant to the Custody Agreement for
purpose of effecting delivery, in accordance with the Custody Agreement and this
Agreement.
(g) Selling Shareholder hereby agrees that for the period of specified
below from the Effective Date (the "Lock-Up-Period"), Selling Shareholder will
not, without prior written consent of the Representative directly or indirectly,
offer, sell or grant any option to purchase, transfer or otherwise dispose of or
contract to dispose of (or announce any offer, sale, grant of any option to
purchase, or other disposition of), for value or otherwise, any shares of Common
Stock, options or warrants to purchase Common Stock, or any securities
convertible into or exchangeable for Common Stock, owned directly by such person
or with respect to which such person has the power of disposition, other than
the sale of the Shares under this Agreement. As to 25% of such Securities, the
Lock-Up Period shall be 12 months with respect to an additional 25% of such
securities, the Lock-Up Period should be 18 months and with respect to 50% of
such securities this Lock-Up Period should be 24 months.
(h) Selling Shareholder has not taken and will not take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
violate Regulation M under the 1934 Act, or cause or result in stabilization or
manipulation of the price of the Common Stock; and Selling Shareholder has not
distributed and will not distribute any prospectus or other offering material in
connection with the offering and sale of the Shares.
(i) Selling Shareholder is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, with all necessary
power and authority to execute, deliver and perform the Custody Agreement and
this Agreement, each of which have been duly and validly authorized by all
action required to be taken by the members and/or managers of Selling
Shareholder, and to sell and deliver the Selling Shareholder Shares to the
Underwriters in accordance with this Agreement, and upon execution and delivery
thereof by one or more of the Attorneys-in-Fact, such agreements will be duly
executed and delivered and enforceable against Selling Shareholder in accordance
with their respective terms.
5. Expenses
(a) The Company shall pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to section 10 hereof, including all costs and expenses incident to (i)
the preparation, printing and filing or other production of documents with
respect to the transactions, including any costs of printing the registration
statement originally filed with respect to the Securities and any amendment
thereto, any Preliminary Prospectus and the Prospectus and any amendment or
supplement thereto, this Agreement, the selected dealer agreement and the other
agreements and documents governing the underwriting arrangements and any blue
sky memoranda, (ii) all reasonable and necessary arrangements relating to the
delivery to the Underwriters of copies of the foregoing documents, and the costs
and expenses of the Underwriters in mailing or otherwise distributing the same
including telephone charges, duplications and other accountable expenses (iii)
the fees and disbursements of the counsel, the accountants and any other experts
or advisors retained by the Company, (iv) the preparation, issuance and delivery
to the Underwriters of any certificates evidencing the Securities, including
transfer agent's, warrant agent's and registrar's fees or any transfer or other
taxes payable thereon, (v) the qualification of the Securities under state blue
sky or securities laws, including filing fees and fees and disbursements of
counsel for the Underwriters relating thereto (such counsel fees shall be
$35,000, of which $12,500 shall be due and payable upon the commencement of blue
sky filing, together with the related filing fees) and any fees and
disbursements of local counsel, if any, retained for such purpose, (vi) the
filing fees of the Commission and the NASD relating to the Securities, (vii) the
inclusion of the Securities on The Nasdaq SmallCap Market, the Boston Stock
Exchange and in the Standard and Poor's Corporation Descriptions Manual, (viii)
any "road shows" or other meetings with prospective investors in the Securities,
including transportation, accommodation, meal, conference room, audio-visual
presentation and similar expenses, but not including such expenses for the
Underwriters or their representatives or designees in excess of $15,000 and (ix)
the publication of "tombstone advertisements" in newspapers or other
publications selected by the Representative, and the manufacture of prospectus
memorabilia. In addition to the foregoing, the Company and the Selling
Shareholder, pro rata, shall reimburse the Representative for its expenses on
the basis of a non-accountable expense allowance in the amount of 3.00% of the
gross offering proceeds to be received by the Company and Selling Shareholder.
The expense allowance, based on the gross proceeds from the sale of the Firm
Securities, shall be deducted from the funds to be paid by the Representative in
payment for the Firm Securities, pursuant to section 2 of this Agreement, on the
Firm Closing Date. To the extent any Option Securities are sold, any remaining
non-accountable expense allowance based on the gross proceeds from the sale of
the Option Securities shall be deducted from the funds to be paid by the
Representative in payment for the Option Securities, pursuant to section 2 of
this Agreement, on the Option Closing Date. The Company and Selling Shareholder
each warrant, represent and agree that all such payments and reimbursements will
be promptly and fully made.
(b) Notwithstanding any other provision of this Agreement, if the offering
of the Securities contemplated hereby is terminated for any reason, the Company
agrees that, in addition to the Company paying its own expenses as described in
subparagraph (a) above, the Company shall reimburse the Representative for its
actual accountable out-of-pocket expenses (in addition to blue sky legal fees
and expenses referred to in subparagraph (a) above). Such expenses shall
include, but are not to be limited to, fees for the services and time of counsel
for the Underwriters to the extent not covered by clause (i) above, plus any
additional expenses and fees, including, but not limited to, travel expenses,
postage expenses, duplication expenses, long-distance telephone expenses, and
other expenses incurred by the Representative in connection with the proposed
offering.
6. Warrant Solicitation Fee. The Company agrees to pay any Underwriter a
fee of five percent (5%) of the aggregate exercise price of the Warrants if (i)
the market price of the Common Stock is not less than the exercise price of the
Warrants on the date of exercise; (ii) the exercise of the Warrants is solicited
by such Underwriter at such time as it is a member of the NASD and such
Underwriter is designated in writing by the holder of the Warrants as the NASD
member soliciting the exercise; (iii) the Warrants are not held in a
discretionary account; (iv) the disclosure of compensation arrangements is made
both at the time of the Offering and at the time of the exercise; and (v) the
solicitation of the Warrant exercise is not in violation of Regulation M
promulgated under the 1934 Act. The Company agrees not to solicit the exercise
of any Warrant other than through the Representative and/or other Underwriter
and will not authorize any other dealer to engage in such solicitation without
the prior written consent of the Representative which will not be unreasonably
withheld. The Warrant solicitation fee will not be paid in a non-solicited
transaction. Any request for exercise will be presumed to be unsolicited unless
the customer states in writing that a transaction was solicited and designates
in writing that the Underwriter solicited the exercise. No Warrant solicitation
by the Representative will occur for a period of 12 months after the Effective
Date.
7. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Firm Shares shall be subject, in the
Underwriters' sole discretion, to the accuracy of the representations and
warranties of the Company and the Selling Shareholder contained herein as of the
date hereof and as of the Firm Closing Date as if made on and as of the Firm
Closing Date, to the accuracy of the statements of the Company's officers made
pursuant to the provisions hereof, to the performance by the Company of its
covenants and agreements hereunder and to the following additional conditions:
(a) If the registration statement, as heretofore amended, has not been
declared effective as of the time of execution hereof, the registration
statement, as heretofore amended or as amended by an amendment thereto to be
filed prior to the Firm Closing Date, shall have been declared effective not
later than 5:30 P.M., New York City time, on the date on which the amendment to
such registration statement containing information regarding the initial public
offering price of the Securities has been filed with the Commission, or such
later time and date as shall have been consented to by the Underwriters; if
required, the Prospectus and any amendment or supplement thereto shall have been
filed with the Commission in the manner and within the time period required by
Rule 424(b) under the Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of the
Company or the Underwriters, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Underwriters shall have received an opinion, dated the Firm Closing
Date, of Ruskin, Moscou, ▇▇▇▇▇ & Faltischek, P.C., counsel to the Company, to
the effect that:
(1) the Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
organization and is duly qualified to transact business as a foreign corporation
and is in good standing under the laws of each other jurisdiction in which its
ownership or leasing of any properties or the conduct of its business requires
such qualification, except where the failure to so qualify would not have a
materially adverse effect upon the Company;
(2) the Company has full corporate power and authority to own or lease its
property and conduct its business as now being conducted and as proposed to be
conducted, as described in the Registration Statement and the Prospectus, and
the Company has full corporate power and authority to enter into this Agreement,
the Warrant Agreement and the Representative's Warrant Agreement and to carry
out all the terms and provisions hereof and thereof to be carried out by it;
(3) to the knowledge of such counsel, there are no outstanding options,
warrants or other rights granted by the Company to purchase shares of its Common
Stock, preferred stock or other securities other than as described in the
Prospectus; the Company Shares have been duly authorized and the Warrant Shares
and the Representative's Warrant Shares have been duly reserved for issuance by
all necessary corporate action on the part of the Company and the Company Shares
when issued and delivered to and paid for by the Underwriters, pursuant to this
Agreement, the Warrant Shares when issued upon payment of the exercise price
specified in the Warrants, the Representative's Warrant when issued and
delivered and paid for in accordance with this Agreement and the
Representative's Warrant Agreement by the Underwriters and the Warrant Shares
when issued upon payment of the exercise price specified in the Representative's
Warrant, will be validly issued, fully paid, nonassessable and free of
preemptive rights and will conform to the description thereof in the Prospectus;
to the knowledge of such counsel, no holder of outstanding securities of the
Company is entitled as such to any preemptive or other right to subscribe for
any of the Company Shares, the Warrant Shares or the Representative's Warrant
Shares; and to the knowledge of such counsel, no person is entitled to have
securities registered by the Company under the Registration Statement or
otherwise under the Act other than as described in the Prospectus;
(4) the execution and delivery of this Agreement, the Warrant Agreement,
the Representative's Warrant Agreement and the Financial Advisory and Investment
Banking Agreement have been duly authorized by all necessary corporate action on
the part of the Company and this Agreement, the Warrant Agreement, the
Representative's Warrant Agreement and the Financial Advisory and Investment
Banking Agreement have been duly executed and delivered by the Company, and each
is a valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
other similar laws affecting creditors' rights generally and to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and except as rights to indemnity and
contribution under this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement may be limited by applicable securities laws
and the public policy underlying such laws;
(5) the Representative's Warrant conform to the description thereof in the
Registration Statement and in the Prospectus and are duly authorized and upon
payment of the purchase price therefore specified in Section 2(d) of this
Agreement are validly issued and constitute valid and binding obligations of the
Company entitled to the benefits of the Representative's Warrant Agreement; and
the certificates representing the Securities are in due and proper form under
law;
(6) the statements set forth in the Prospectus under the caption
"Description of Securities" insofar as those statements purport to summarize the
terms of the capital stock and warrants of the Company, provide a fair summary
of such terms; the statements set forth in the Prospectus describing statutes
and regulations and the descriptions of the consequences to the Company under
such statutes and regulations are fair summaries of the information set forth
therein and are accurate in all material respects; the statements in the
Prospectus, insofar as those statements constitute summaries of the contracts,
instruments, leases or licenses referred to therein, constitute a fair summary
of those contracts, instruments, leases or licenses and include all material
terms thereof, as applicable;
(7) none of (A) the execution and delivery of this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement, (B) the issuance, offering
and sale by the Company to the Underwriters of the Securities pursuant to this
Agreement and the Representative's Warrant Securities pursuant to the
Representative's Warrant Agreement, nor (C) the compliance by the Company with
the other provisions of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement and the consummation of the transactions
contemplated hereby and thereby, (1) requires the consent, approval,
authorization, registration or qualification of or with any court or
governmental authority known to us, except such as have been obtained and such
as may be required under state blue sky or securities laws or (2) conflicts with
or results in a breach or violation of, or constitutes a default under, any
material contract, indenture, mortgage, deed of trust, loan agreement, note,
lease or other material agreement or instrument known to such counsel to which
the Company is a party or by which the Company or any of its property is bound
or subject, or the certificate of incorporation or by-laws of the Company, or
any material statute or any judgment, decree, order, rule or regulation of any
court or other governmental or regulatory authority known to us applicable to
the Company.
(8) to the knowledge of such counsel, (A) no legal or governmental
proceedings are pending to which the Company is a party or to which the property
of the Company is subject except those arising on the ordinary course of
business and fully covered by insurance and (B) no contract or other document is
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement that is not described
therein or filed as required;
(9) the Company possesses adequate licenses, orders, authorizations,
approvals, certificates or permits issued by the appropriate federal, state or
local regulatory agencies or bodies necessary to conduct its business as
described in the Registration Statement and the Prospectus, and, to the
knowledge of such counsel, there are no pending or threatened proceedings
relating to the revocation or modification of any such license, order,
authorization, approval, certificate or permit, except as disclosed in the
Registration Statement and the Prospectus;
(10) The Company is not in violation or breach of, or in default with
respect to, any term of its certificate of incorporation or by-laws, and to the
knowledge of such counsel, the Company is not in (i) violation in any material
respect of any law, statute, regulation, ordinance, rule, order, judgment or
decree of any court or any governmental or regulatory authority applicable to
it, or (ii) default in any material respect in the performance or observance of
any obligation, agreement, covenant or condition contained in any material
contract, indenture, mortgage, deed of trust, loan agreement, note, lease or
other material agreement or instrument to which it is a party or by which it or
any of its property may be bound or subject, and no event has occurred which
with notice, lapse of time or both would constitute such a default;
(11) the Shares and Warrants have been approved for inclusion on The Nasdaq
SmallCap Market and the Boston Stock Exchange;
(12) to the knowledge of such counsel, neither the Company is not in
default in any material respect in the performance or observance of any
obligation, agreement, covenant or condition contained in any material contract,
indenture, mortgage, deed of trust, loan agreement, note, lease or other
material agreement or instrument to which it is a party or by which it or any of
its property may be bound or subject, and no event has occurred which with
notice, lapse of time or both would constitute such a default;
(13) the statements in the Prospectus under the caption "Description of
Securities" in the Prospectus, insofar as such statements purport to summarize
the terms of the capital stock and warrants of the Company, provide a fair
summary of such terms; and the statements in the Prospectus, insofar as those
statements constitute matters of law or legal conclusions, or summaries of the
contracts, agreement instruments, leases or licenses referred to therein,
constitute a fair summary of those matters, legal conclusions, contracts,
agreement instruments, leases or licenses and include all material terms thereof
as applicable;
(14) the Registration Statement is effective under the Act; any required
filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement or any amendment thereto has been
issued, and no proceedings for that purpose have been instituted or threatened
or, to the best knowledge of such counsel, are contemplated by the Commission;
(15) the registration statement originally filed with respect to the
Securities and each amendment thereto and the Prospectus (in each case, other
than the financial statements and schedules and other financial and statistical
information contained therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable requirements of
the Act and the rules and regulations of the Commission thereunder; and
(16) the Company is not an "investment company" as defined in Section 3(a)
of the Investment Company Act and, if the Company conducts its business as set
forth in the Prospectus, it will not become an "investment company" and will not
be required to register under the Investment Company Act; and
(d) The Underwriters shall have received the opinion, dated the Firm
Closing Date, of Ruskin, Moscou, ▇▇▇▇▇ & Faltischek, P.C., in its capacity as
counsel for the Selling Shareholder, to the effect set forth below:
(i) Selling Shareholder has full legal right power and authority to enter
into this Agreement and the Custody Agreement, each of which has been duly and
validly authorized by all action of members and managers of Selling Shareholder
and to sell, assign, transfer and deliver in the manner provided herein the
Selling Shareholder Shares; this Agreement has been duly executed and delivered
by Selling Shareholder; and this Agreement, assuming due authorization,
execution and delivery by each other party thereto and further assuming it is a
valid and binding agreement of each of the Underwriters, is a valid and binding
agreement of Selling Shareholder, enforceable against Selling Shareholder in
accordance with the terms (except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws now or hereafter in effect
relating to or affecting creditors' rights generally and by general principles
of equity relating to the availability of remedies and except as rights to
indemnity and contribution may be limited by applicable securities laws and the
public policy underlying such laws);
(ii) None of the execution, delivery or performance of this Agreement, the
Power of Attorney and the Custody Agreement by Selling Shareholder and the
consummation by Selling Shareholder of the transactions herein and therein
contemplated, conflict with or result in a breach of, or default under, any
indenture, mortgage, deed of trust, voting trust agreement, shareholders
agreement, note agreement or other agreement or other instrument known to such
counsel to which Selling Shareholder is a party or by which Selling Shareholder
is bound or to which any of the property of any of the Selling Shareholder is
subject, or the charter or by-laws of any of the Selling Shareholder and nothing
has come to such counsel's attention which causes such counsel to believe that
such actions will result in any violation of any law, rule, administrative
regulation or court decree applicable to Selling Shareholder (other than state
or provincial securities or blue sky laws or regulations, as to which such
counsel need not express any opinion);
(iii) A Power of Attorney and the Custody Agreement have been duly executed
and delivered by Selling Shareholder and, assuming the due authorization,
execution and delivery of the Custody Agreement by the other parties thereto,
each constitutes the valid and binding agreement of Selling Shareholder
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally or by general
principles of equity relating to the availability of remedies and except rights
to indemnity or contribution may be limited by applicable securities laws and
the public policy underlying such laws;
(iv) Upon the delivery of the Selling Shareholder Shares to be sold
hereunder by the Selling Shareholder and payment therefor in accordance with the
terms of this Agreement and assuming that each of the Underwriters which has
severally purchased such Selling Shareholder acquires such Selling Shareholder
Shares without notice of any adverse claim (within the meaning of the Uniform
Commercial Code) such Underwriters will have acquired all of the rights of
Selling Shareholder to the Selling Shareholder Shares and in addition will have
acquired title to such Selling Shareholder Shares free and clear of any adverse
claim; and
Each such counsel also shall state in its opinion that it has participated
in the preparation of the Registration Statement and the Prospectus and that
nothing has come to its attention that has caused it to believe that the
Registration Statement, at the time it became effective (including the
information deemed to be a part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus, as of its date or as of the Firm Closing Date, contained an
untrue statement of material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials, copies of which certificates will
be provided to the Underwriters, and, as to matters of the laws of certain
jurisdictions, on the opinions of other counsel to the Company, which opinions
shall also be delivered to the Underwriters, in form and substance acceptable to
the Underwriters, if such other counsel expressly authorize such reliance and
counsel to the Company expressly states in their opinion that such counsel's and
the Underwriters' reliance upon such opinion is justified.
(e). A. At the time this Agreement is executed, the Representative shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory (including the non-material nature of the changes or
decreases, if any, referred to in clause (iii) below) in all respects to the
Representative and Representative's counsel, from Ernst & Young LLP:
i. confirming that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable Rules
and Regulations;
ii. stating that it is their opinion that the financial statements of the
Company included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations thereunder and that the Representative may rely upon the opinion
of Ernst & Young LLP with respect to the financial statements included in the
Registration Statement;
iii. stating that, on the basis of a limited review which included a
reading of the latest available unaudited interim financial statements of the
Company, a reading of the latest available minutes of the stockholders and board
of directors and the various committees of the boards of directors of the
Company, consultations with officers and other employees of the Company
responsible for financial and accounting matters and other specified procedures
and inquiries (which, as to the interim financial statements included in the
Registration Statement, shall constitute a review as described in SAS No. 71,
Interim Financial Statements), nothing has come to their attention which would
lead them to believe that (A) the unaudited financial statements of the Company
included in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than five (5) days
prior to the Effective Date, there has been any change in the capital stock or
long-term debt of the Company, or any decrease in the stockholders' equity or
net current assets or net assets of the Company as compared with amounts shown
in the January 31, 1998 balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any change or decrease, setting forth the amount of such change or
decrease, and (C) during the period from January 31, 1998 to a specified date
not more than five (5) days prior to the Effective Date, there was any decrease
(increase) in net revenues, net income (loss) or in net earnings (loss) per
common share of the Company, in each case as compared with the corresponding
period ending February 1, 1997, other than as set forth in or contemplated by
the Registration Statement, or, if there was any such decrease, setting forth
the amount of such decrease (increase);
iv. setting forth, at a date not later than five (5) days prior to the
Effective Date, the amount of liabilities of the Company;
v. stating that they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each case
to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
vi. statements as to such other matters incident to the transaction
contemplated hereby as the Representative may request.
B. At the Closing Date and each Option Closing Date, if any, the
Representative shall have received from Ernst & Young LLP a letter, dated as of
the Closing Date or the Option Closing Date, as the case may be, to the effect
that they reaffirm that statements made in the letter furnished pursuant to
subsection A. of this Section 7(e), except that the specified date referred to
shall be a date not more than five (5) days prior to the Closing Date or the
Option Closing Date, as the case may be, and, if the Company has elected to rely
on Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of subsection A of this
Section 7(e) with respect to certain amounts, percentages and financial
information as specified by the Representative and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (v).
(f) The representations and warranties of the Company contained in this
Agreement shall be true and correct as if made on and as of the Firm Closing
Date; the Registration Statement shall not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
necessary to make the statements therein not misleading, and the Prospectus, as
amended or supplemented as of the Firm Closing Date, shall not include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and the Company shall have performed all
covenants and agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Firm Closing Date.
(g) No stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no proceedings
for that purpose shall have been instituted or threatened or contemplated by the
Commission.
(h) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective material
adverse change, in the business, operations, condition (financial or otherwise),
earnings or prospects of the Company, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or supplement
thereto).
(i) The Underwriters shall have received a certificate, dated the Firm
Closing Date, of the Chief Executive Officer and the Secretary of the Company to
the effect set forth in subparagraphs (f) through (h) above.
(j) The Common Stock and Warrants shall be qualified in such jurisdictions
as the Underwriters may reasonably request pursuant to section 4(c), and each
such qualification shall be in effect and not subject to any stop order or other
proceeding on the Firm Closing Date.
(k) The Company shall have executed and delivered to the Underwriters the
Representative's Warrant Agreement and a certificate or certificates evidencing
the Representative's Warrant, in each case in a form acceptable to the
Underwriters.
(l) The Underwriters shall have received Lock-up Agreements executed by the
persons listed on Schedule 2 annexed hereto.
(m) The Underwriters shall have received on each Closing Date a certificate
from Selling Shareholder on such Closing Date to the affect that, and the
Underwriters shall be satisfied that, the representations and warranties of
Selling Shareholder contained in this Agreement are true and correct as if made
on and as of such Closing Date, and that Selling Shareholder has complied with
all agreements and satisfied all conditions on its part to be complied with or
satisfied at or prior to such Closing Date.
(n) The Selling Shareholder shall have delivered to the Underwriters on or
prior to the date hereof a fully executed Custody Agreement. Selling Shareholder
shall also agree and consent to the entry of stop transfer instructions with the
Company's transfer agent against the transfer of shares held by Selling
Shareholder, except in compliance with the Custody Agreement and this Agreement.
(o) On or before the Firm Closing Date, the Underwriters and counsel for
the Underwriters shall have received such further certificates, documents,
letters or other information as they may have reasonably requested from the
Company, the Selling Shareholder, and other security holders of the Company.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriters and counsel
for the Underwriters. The Company shall furnish to the Underwriters such
conformed copies of such opinions, certificates, letters and documents in such
quantities as the Underwriters and counsel for the Underwriters shall reasonably
request.
The obligation of the Underwriters to purchase and pay for any Option
Securities shall be subject, in its discretion, to each of the foregoing
conditions to purchase the Firm Securities, except that all references to the
Firm Securities and the Firm Closing Date shall be deemed to refer to such
Option Securities and the related Option Closing Date, respectively.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Underwriters,
Selling Shareholder and each person, if any, who controls the Underwriters or
Selling Shareholder within the meaning of section 15 of the Act or section 20 of
the 1934 Act against any losses, claims, damages, or liabilities, joint or
several, to which the Underwriters, Selling Shareholder 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:
(1) any untrue statement or alleged untrue statement of any material fact
contained in (A) the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto
or (B) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Securities under the Blue Sky or securities laws thereof or filed with the
Commission or any securities association or securities exchange (each an
"Application"), or
(2) the omission or alleged omission to state in such Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, the Underwriters and such
controlling person for any legal or other expenses reasonably incurred by the
Underwriters or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
loss, claim, damage, liability, action, investigation, litigation or proceeding;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or any Application in reliance upon and in conformity with written information
furnished to the Company by the Underwriters or Selling Shareholder, as the case
may be, specifically for use therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have. The Company will
not, without the prior written consent of the Underwriters, Selling Shareholder
or controlling person, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not the
Underwriters or any person who controls the Underwriters or Selling Shareholder
within the meaning of section 15 of the Act or section 20 of the 1934 Act is a
party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of the Underwriters or
Selling Shareholder and each such controlling person from all liability arising
out of such claim, action, suit or proceeding.
(b) Selling Shareholder agrees to indemnify and hold harmless the Company,
each director of the Company and each officer of the Company who signed the
Registration Statement, the Underwriters and each person, if any, who controls
the Company or the Underwriters within the meaning of section 15 of the Act or
section 20 of the 1934 Act against any losses, claims, damages, liabilities,
joint or several, to which the Company, such director or officer of the Company,
the Underwriters 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:
(1) any untrue statement or alleged untrue statement of any material fact
contained in (A) the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto
or (B) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Securities under the Blue Sky or securities laws thereof or filed with the
Commission or any securities association or securities exchange (each an
"Application"), or
(2) the omission or alleged omission to state in such Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, the Underwriters and such
controlling person for any legal or other expenses reasonably incurred by the
Underwriters or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
loss, claim, damage, liability, action, investigation, litigation or proceeding,
in each case to the extent, but only to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company or the
Underwriters by the Selling Shareholder specifically for use therein. This
indemnity agreement will be in addition to any liability which the Selling
Shareholder may otherwise have. The Selling Shareholder will not, without the
prior written consent of the Company and the Underwriters, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not the Company or the Underwriters or any person who
controls the Company or the Underwriters within the meaning of section 15 of the
Act or section 20 of the 1934 Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Company, the Underwriters and each such controlling
person from all liability arising out of such claim, action, suit or proceeding.
(c) The Underwriters will indemnify and hold harmless the Company, each of
its directors, each of its officers who signed the Registration Statement,
Selling Shareholder, and each person, if any, who controls the Company or
Selling Shareholder within the meaning of section 15 of the Act or section 20 of
the Exchange Act against, any losses, claims, damages or liabilities to which
the Company or any such director, officer, Selling Shareholder or controlling
person may become subject under the Act or otherwise, but only insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application, or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application, or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by the Underwriters specifically for use
therein; and, subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses reasonably
incurred by the Company or any such director, officer, Selling Shareholder or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or any action in respect thereof. This indemnity
agreement will be in addition to any liability which the Underwriters may
otherwise have.
(d) Promptly after receipt by an indemnified party under this section 8 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 8, 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 8. 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 therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this section 8 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence or (ii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the indemnifying party.
(e) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this section 8 is unavailable or insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and the other
equitable considerations appropriate in the circumstances. The Company and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Underwriters
shall not be obligated to make contributions hereunder that in the aggregate
exceed the total public offering price of the Securities purchased by the
Underwriters under this Agreement, less the aggregate amount of any damages that
the Underwriters has otherwise been required to pay in respect of the same or
any substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of section 11 (f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls an Underwriters within the meaning of section 15 of the Act or section
20 of the 1934 Act shall have the same rights to contribution as the
Underwriters, and each director of the Company, each officer of the Company who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of section 15 of the Act or section 20 of the 1934
Act, shall have the same rights to contribution as the Company.
9. Substitution of Underwriters.
If any Underwriter shall for any reason not permitted hereunder cancel its
obligations to purchase the Firm Securities hereunder, or shall fail to take up
and pay for the number of Firm Securities set forth opposite names in Schedule 1
hereto upon tender of such Firm Securities in accordance with the terms hereof,
then:
(a) If the aggregate number of Firm Securities which such Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
number of Firm Securities, the other Underwriter shall be obligated to purchase
the Firm Securities which such defaulting Underwriter agreed but failed to
purchase.
(b) If any Underwriter so defaults and the agreed number of Firm Securities
with respect to which such default or defaults occurs is more than 10% of the
total number of Firm Securities, the remaining Underwriter shall have the right
to take up and pay for the Firm Securities which the defaulting Underwriter
agreed but failed to purchase. If such remaining Underwriter does not, at the
Firm Closing Date, take up and pay for the Firm Securities which the defaulting
Underwriter agreed but failed to purchase, the time for delivery of the Firm
Securities shall be extended to the next business day to allow the remaining
Underwriter the privilege of substituting within twenty-four hours (including
nonbusiness hours) another underwriter or underwriters satisfactory to the
Company. If no such underwriter or underwriters shall have been substituted as
aforesaid, within such twenty-four hour period, the time of delivery of the Firm
Securities may, at the option of the Company, be again extended to the next
following business day, if necessary, to allow the Company the privilege of
finding within twenty-four hours (including nonbusiness hours) another
underwriter or underwriters to purchase the Firm Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase. If it shall be
arranged for the remaining Underwriter or substituted Underwriters to take up
the Firm Securities of the defaulting Underwriter as provided in this section,
(i) the Company or the underwriter shall have the right to postpone the time of
delivery for a period of not more than seven business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other document or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
numbers of Firm Securities to be purchased by the remaining Underwriters or
substituted Underwriters shall be taken as the basis of the underwriting
obligation for all purposes of this agreement.
If in the event of a default by any Underwriter and the remaining
Underwriter shall not take up and pay for all the Firm Securities agreed to be
purchased by the defaulting Underwriter or substitute another underwriter or
underwriters as aforesaid, the Company shall not find or shall not elect to seek
another underwriter or underwriters for such Firm Securities as aforesaid, then
this Agreement shall terminate.
If, following exercise of the option provided in Section 3(c) hereof, any
Underwriter or Underwriters shall for any reason not permitted hereunder cancel
their obligations to purchase Option Securities at the Option Closing Date, or
shall fail to take up and pay for the number of Option Securities, which it
became obligated to purchase at the Option Closing Date upon tender of such
Option Securities in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Units of the defaulting Underwriters in the manner provided in Section 9(b)
hereof. If the remaining Underwriters or substituted Underwriters shall not take
up and pay for all such Option Securities, the Underwriters shall be entitled to
purchase the number of Option Securities for which there is no default or, at
their election, the option shall terminate, the exercise thereof shall be of no
effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any non-defaulting Underwriter to the
Company, provided that the provisions of this Section 9 shall not in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
10. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, any of its officers
or directors and the Underwriter set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Underwriter or any
controlling person referred to in section 8 hereof and (ii) delivery of and
payment for the Securities. The respective agreements, covenants, indemnities
and other statements set forth in sections 5 and 8 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
11. Termination.
(a) This Agreement may be terminated with respect to the Firm Securities or
any Option Securities in the sole discretion of the Underwriter by notice to the
Company given prior to the Firm Closing Date or the related Option Closing Date,
respectively, in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied under Section 7 hereunder at or prior thereto or if at or
prior to the Firm Closing Date or such Option Closing Date, respectively:
(1) the Company sustains a loss by reason of explosion, fire, flood,
accident or other calamity, which, in the opinion of the Underwriter,
substantially affects the value of the properties of the Company or which
materially interferes with the operation of the business of the Company
regardless of whether such loss shall have been insured; there shall have been
any material adverse change, or any development involving a prospective material
adverse change (including, without limitation, a change in management or control
of the Company), in the business, operations, condition (financial or
otherwise), earnings or prospects of the Company, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment or
supplement thereto);
(2) any action, suit or proceeding shall be threatened, instituted or
pending, at law or in equity, against the Company, by any person or by any
federal, state, foreign or other governmental or regulatory commission, board or
agency wherein any unfavorable result or decision could materially adversely
affect the business, operations, condition (financial or otherwise), earnings or
prospects of the Company;
(3) trading in the Common Stock or Warrants shall have been suspended by
the Commission, the NASD or on Nasdaq, or trading in securities generally on the
New York Stock Exchange shall have been suspended or minimum or maximum prices
shall have been established on either such exchange or quotation system;
(4) a banking moratorium shall have been declared by New York or United
States authorities;
(5) there shall have been (A) an outbreak of hostilities between the United
States and any foreign power (or, in the case of any ongoing hostilities, a
material escalation thereof), (B) an outbreak of any other insurrection or armed
conflict involving the United States or (C) any other calamity or crisis or
material change in financial, political or economic conditions, having an effect
on the financial markets that, in any case referred to in this clause (5), in
the sole judgment of the Underwriter makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities as
contemplated by the Registration Statement;
(6) termination of this Agreement pursuant to this section 10 shall be
without liability of any party to any other party, except as provided in section
5(b) and section 8 hereof.
12. Information Supplied by the Underwriter. The statements set forth in
the first paragraph on page 42 , (as to the underwriting commitment of each
Underwriter) and the third, tenth and seventeenth paragraphs under the heading
"Underwriting" in any Preliminary Prospectus or the Prospectus (to the extent
such statements relate to the Underwriter) constitute the only information
furnished by the Underwriter to the Company for the purposes of section 8(b)
hereof. The Underwriter confirms that such statements (to such extent) are
correct.
13. Notices. All notice hereunder to or upon either party hereto shall be
deemed to have been duly given for all purposes if in writing and (i) delivered
in person or by messenger or an overnight courier service against receipt, or
(ii) send by certified or registered mail, postage paid, return receipt
requested, or (iii) sent by telegram, facsimile, telex or similar means,
provided that a written copy thereof is sent on the same day by postage paid
first-class mail, to such party at the following address:
To the Company: ▇▇▇▇▇▇ Electronics, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To the Selling Shareholder: ▇▇▇▇▇▇ Acquisition Company, LLC
c/o Recca & Company, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To the Representative: The Thornwater Company, L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Managing Director
Corporate Finance Department
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as either party hereto may at any time, or from time
to time, direct by notice given to the other party in accordance with this
section. The date of giving of any such notice shall be, in the case of clause
(i), the date of the receipt; in the case of clause (ii), five business days
after such notice or demand is sent; and, in the case of clause (iii), the
business day next following the date such notice is sent.
14. Amendment. Except as otherwise provided herein, no amendment of this
Agreement shall be valid or effective, unless in writing and signed by or on
behalf of the parties hereto.
15. Waiver. No course of dealing or omission or delay on the part of either
party hereto in asserting or exercising any right hereunder shall constitute or
operate as a waiver of any such right. No waiver of any provision hereof shall
be effective, unless in writing and signed by or on behalf of the party to be
charged therewith. No waiver shall be deemed a continuing waiver or waiver in
respect of any other or subsequent breach or default, unless expressly so stated
in writing.
16. Applicable Law. This agreement shall be governed by, and interpreted
and enforced in accordance with, the laws of the State of New York without
regard to principles of choice of law or conflict of laws.
17. Jurisdiction. Each of the parties hereto hereby irrevocably consents
and submits to the exclusive jurisdiction of the Supreme Court of the State of
New York and the United States District Court for the Southern District of New
York in connection with any suit, action or other proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby, waives any
objection to venue in the County of New York, State of New York, or such
District and agrees that service of any summons, complaint, notice or other
process relating to such suit, action or other proceeding may be effected in the
manner provided by clause (ii) of Section 12.
18. Remedies. In the event of any actual or prospective breach or default
by either party hereto, the other party shall be entitled to equitable relief,
including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive, and
nothing herein shall be deemed to prohibit or limit either party from pursuing
any other remedy or relief available at law or in equity for such actual or
prospective breach or default, including the recovery of damages.
19. Attorneys' Fees. The prevailing party in any suit, action or other
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, shall be entitled to recover its costs and reasonable
attorneys' fees.
20. Severability. The provisions hereof are severable and in the event that
any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
21. Counterparts. This agreement may be executed in counterparts, each of
which shall be deemed an original and which together shall constitute one and
the same agreement.
22. Successors. This agreement shall inure to the benefit of and be binding
upon the Underwriter, the Company and their respective successors and assigns.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company contained in
section 8 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of section 15 of the Act
or section 20 of the Exchange Act and (ii) the indemnities of the Underwriter
contained in section 8 of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of section 15 of the Act or section 20 of the Exchange Act. No
purchaser of Securities from the Underwriter shall be deemed a successor because
of such purchase.
23. Titles and Captions. The titles and captions of the articles and
sections of this Agreement are for convenience of reference only and do not in
any way define or interpret the intent of the parties or modify or otherwise
affect any of the provisions hereof.
24. Grammatical Conventions. Whenever the context so requires, each pronoun
or verb used herein shall be construed in the singular or the plural sense and
each capitalized term defined herein and each pronoun used herein shall be
construed in the masculine, feminine or neuter sense.
25. References. The terms "herein," "hereto," "hereof," "hereby," and
"hereafter," and other terms of similar import, refer to this Agreement as a
whole, and not to any Article, Section or other part hereof.
26. Entire Agreement. This Agreement embodies the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, commitment or arrangement relating thereto.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company and the
Underwriter.
Very truly yours,
▇▇▇▇▇▇ ELECTRONICS, INC.
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman
▇▇▇▇▇▇ ACQUISTION COMPANY, LLC
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
A Member
The foregoing agreement is hereby confirmed and accepted as of the date
first above written.
THE THORNWATER COMPANY, L.P.
as representative of the several underwriters listed
on Schedule l annexed hereto
By:/s/▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Title: Chief Executive Officer
Schedule 1
Underwriter Number of Shares Number of Redeemable Warrants
The Thornwater Company, L.P. 325,000 505,625
▇.▇. ▇▇▇▇▇▇ & Co., Inc. 400,000 600,000
▇. ▇. ▇▇▇▇▇▇▇ & Co., Inc. 300,000 457,500
▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ Clearing Corporation
175,000 266,875
-------
Total 1,200,000 1,830,000
=========
SCHEDULE 2
SHAREHOLDER LOCK UP PERIOD
▇▇▇▇▇▇ Acquisition Company LLC 12 months as to 25%, 18 months as to an additional 25% and
24 months as to balance
Officers and directors 24 months
Preferred stock holders, including warrants and Two years or one year from conversion,
stock underlying warrants and preferred stock whichever is longer, subject to suspension if
common stock trades at or above $7.50 for 45
consecutive trading days.
Paragon Capital 24 months
InterEquity Partners 12 months
Ruskin, Moscou, ▇▇▇▇▇ & Faltischek 24 months