EXHIBIT 1.1
SHARES OF
COMMON STOCK
CUMETRIX DATA SYSTEMS CORP.
UNDERWRITING AGREEMENT
New York, New York
__________ __, 1998
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & COMPANY, INC.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
CUMETRIX DATA SYSTEMS CORP., a California corporation (the
"Company"), confirms its agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc.
("JSC") (hereinafter also referred to as "you" or the "Underwriter"), with
respect to the sale by the Company and the purchase by the Underwriter of
shares of common stock, no par value (the "Common Stock"). Such
shares of Common Stock are hereinafter referred to as the "Firm
Shares." Upon the Underwriter's request, as provided in Section 2(b) of this
Agreement, the Company shall also issue and sell to the Underwriter up to an
additional shares for the purpose of covering over-allotments, if
any. Such shares are hereinafter collectively referred to as the
"Option Shares." The Company also proposes to issue and sell to the
Underwriter or its designees warrants (the "Underwriter's Warrants"),
pursuant to the Underwriter's Warrant Agreement (the "Underwriter's Warrant
Agreement"), for the purchase of an additional shares of Common Stock
(the "Underwriter's Shares"). The Firm Shares, the Option Shares, the
Underwriter's Warrants and the Underwriter's Shares are hereinafter
collectively referred to as the "Securities" and are more fully described in
the Registration Statement and the Prospectus referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and covenants and agrees with, the Underwriter as of
the date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form S-1 (Registration No. 333-43151), including any related
preliminary prospectus or prospectuses (each a "Preliminary Prospectus"), for
the registration of the Securities, under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations of the Commission under the Act. The Company will not
file any other amendment to such registration statement which the Underwriter
shall have objected to in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time it becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to, those documents or that information incorporated
by reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430A of the rules and regulations under
the Act), is hereinafter called the "Registration Statement," and the form of
prospectus in the form first filed with the Commission pursuant to Rule 424(b)
of the rules and regulations under the Act is hereinafter called the
"Prospectus." For purposes hereof, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or threatened. Each of the Preliminary Prospectus, the Registration Statement
and the Prospectus, at the respective times of filing thereof, conformed with
the requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement nor the Prospectus, at the
respective times of filing thereof, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; PROVIDED, HOWEVER, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or the Prospectus.
The Company has filed all reports, forms or other documents required to be filed
under the Act and the Exchange Act and the respective Rules and Regulations
thereunder, and all such reports, forms or other documents, when so filed or as
subsequently amended, complied in all material respects with the Act and the
Exchange Act and the respective Rules and Regulations thereunder.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Option Closing Date, if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriter or a dealer, the
Registration Statement and the Prospectus will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations,
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and will conform to the requirements of the Act and the Rules and Regulations;
and, at and through such dates, neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; PROVIDED, HOWEVER, that
this representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in the Preliminary Prospectus, Registration Statement or the
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations require such qualification
or licensing. Except as set forth in the Prospectus, the Company does not own,
directly or indirectly, an interest in any corporation, partnership, trust,
joint venture or other business entity. The Company has all requisite power and
authority (corporate and other), and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and with all federal, state, local and
foreign laws, rules and regulations to which it is subject; and the Company has
not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, prospects, stockholders'
equity, value, operations, properties, business or results of operations of the
Company. The disclosure in the Registration Statement concerning the effects of
federal, state, local and foreign laws, rules and regulations on the Company's
business as currently conducted and as contemplated is correct in all respects
and does not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing Date, if any, based upon the
assumptions set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement
and the Underwriter's Warrant Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company on or
prior to the Closing Date and each Option Closing Date, if any, conform or, when
issued and paid for, will conform, in all respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and
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non-assessable; the holders thereof have no rights of rescission with respect
thereto and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holder of any security of the Company or any similar contractual
right granted by the Company. The Securities to be sold by the Company
hereunder and pursuant to the Underwriter's Warrant Agreement are not and will
not be subject to any preemptive or other similar rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof and thereof, will be validly issued, fully paid and
non-assessable and conform to the descriptions thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities, when delivered by the Company, will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof and the Underwriter's Warrant Agreement of the Securities to be sold by
the Company hereunder and thereunder to the Underwriter, the Underwriter will
acquire good and marketable title to such Securities, free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever asserted against the Company or any
affiliate (within the meaning of the Rules and Regulations) of the Company.
(f) The financial statements of the Company together with the related
notes thereto, included in the Registration Statement, each Preliminary
Prospectus and the Prospectus fairly present the financial position, income,
changes in stockholders' equity and the results of operations of the Company at
the respective dates and for the respective periods to which they apply and the
pro forma financial information included in the Registration Statement and
Prospectus presents fairly on a basis consistent with that of the audited
financial statement therein, what the Company's pro forma capitalization and
balance sheet data would have been for the respective periods and as of the
respective dates to which they apply after giving effect to the adjustments
described therein. Such financial statements have been prepared in conformity
with generally accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved. There has been no adverse
change or development involving a material prospective change in the condition,
financial or otherwise, or in the earnings, prospects, stockholders' equity,
value, operations, properties, business or results of operations of the Company,
whether or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the Prospectus;
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company conform in all respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. The financial
information set forth in the Prospectus under the headings "Summary Financial
Data," "Capitalization," "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operation" fairly presents,
on the basis stated in the Prospectus, the information set forth therein and
such financial information has been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(g) The Company (i) has paid all federal, state, local and foreign
taxes for which it is liable, including, but not limited to, withholding taxes
and amounts payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has
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furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriter in connection with (i) the issuance by the Company
of the Securities, (ii) the purchase by the Underwriter of the Securities from
the Company, (iii) the consummation by the Company of any of its obligations
under this Agreement or the Underwriter's Warrant Agreement, or (iv) resales of
the Firm Shares or the Option Shares in connection with the distribution
contemplated hereby.
(i) The Company maintains insurance policies, including, but not
limited to, general liability, property, personal and product liability
insurance, and surety bonds which insure the Company and its employees against
such losses and risks generally insured against by comparable businesses. The
Company (i) has not failed to give notice or present any insurance claim with
respect to any insurable matter under the appropriate insurance policy or surety
bond in a due and timely manner, (ii) does not have any disputes or claims
against any underwriter of such insurance policies or surety bonds, nor has
failed to pay any premiums due and payable thereunder, or (iii) has not failed
to comply with all conditions contained in such insurance policies and surety
bonds. There are no facts or circumstances under any such insurance policy or
surety bond which would relieve any insurer of its obligation to satisfy in full
any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those pertaining to environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that may give rise to
the same), or involving the properties or business of, the Company which (i)
questions the validity of the capital stock of the Company, this Agreement, the
Underwriter's Warrant Agreement or the Consulting Agreement (as defined in
Section 1(ff) hereof) or of any action taken or to be taken by the Company
pursuant to or in connection with this Agreement, the Underwriter's Warrant
Agreement or the Consulting Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
respects), or (iii) might materially and adversely affect the condition,
financial or otherwise, or the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the Company.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, to enter into this Agreement,
the Underwriter's Warrant Agreement and the Consulting Agreement and to
consummate the transactions provided for in such agreements; each of this
Agreement, the Underwriter's Warrant Agreement and the Consulting Agreement have
been duly and properly authorized, executed and delivered by the Company. Each
of this Agreement, the Underwriter's Warrant Agreement and the Consulting
Agreement constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its respective terms (except
as such enforceability may be limited by applicable
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bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting the enforcement of creditors' rights and
the application of equitable principles in any motion, legal or equitable, and
except as obligations to indemnify or contribute to losses may be limited by
applicable law). None of the Company's issue and sale of the Securities,
execution or delivery of this Agreement, the Underwriter's Warrant Agreement or
the Consulting Agreement, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein or the conduct
of its business as described in the Registration Statement and the Prospectus
and any amendments or supplements thereto, conflicts with or will conflict with
or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of (i) the certificate of incorporation or by-laws of the Company,
(ii) any license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit agreement or
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by which it
is or may be bound or to which its properties or assets (tangible or intangible)
are or may be subject, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
its activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any arbitrator, court, regulatory body, administrative agency,
government agency or other body, domestic or foreign, is required for the
issuance of the Securities pursuant to the Prospectus and the Registration
Statement, this Agreement and the Underwriter's Warrant Agreement, the
performance of this Agreement, the Underwriter's Warrant Agreement and the
Consulting Agreement and the transactions contemplated hereby and thereby,
except such as have been obtained under the Act, state securities laws, The
Nasdaq Stock Market and the rules of the National Association of Securities
Dealers, Inc. (the "NASD") in connection with the Underwriter's purchase and
distribution of the Securities.
(m) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company, and
constitute legal, valid and binding agreements of the Company enforceable
against the Company, in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles in any motion, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law). The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate and fairly present the information required to be shown
with respect thereto by Form S-1; and there are no agreements,
6
contracts or other documents which are required by the Act to be described in
the Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required; and the exhibits which have been
filed are complete and correct copies of the documents of which they purport to
be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution on or in respect of any class of its capital stock; and,
subsequent to such dates, and except as may be otherwise disclosed in the
Prospectus, there has not been any change in the capital stock, debt (long or
short term) or liabilities or any material change in the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company.
(o) No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, indenture, mortgage,
lease, deed of trust, voting trust agreement, stockholders' agreement, note,
loan or credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company is or may be bound or to which the
property or assets (tangible or intangible) of the Company is or may be subject.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance with all
federal, state, local and foreign laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours. There are no pending investigations involving the Company by the
United States Department of Labor or any other governmental agency responsible
for the enforcement of any federal, state, local or foreign laws, rules and
regulations relating to employment. There is no unfair labor practice charge or
complaint against the Company pending before the National Labor Relations Board
or any strike, picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company, or any predecessor entity, and none
has ever occurred. No representation question exists respecting the employees
of the Company, and no collective bargaining agreement or modification thereof
is currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
exists or is imminent.
(q) The Company does not maintain, sponsor or contribute to any
program or arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan" or a "multiemployer plan," as such terms are defined in
Sections 3(2), 3(l) and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does
not maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA
7
or Section 4975 of the Code which could subject the Company to any tax penalty
on prohibited transactions and which has not adequately been corrected. Each
ERISA Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multiemployer
plan."
(r) Neither the Company nor any of its respective employees,
directors, stockholders or affiliates (within the meaning of the Rules and
Regulations), has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in, under the Exchange Act or otherwise, the stabilization or
manipulation of the price of any security of the Company, whether to facilitate
the sale or resale of the Securities or otherwise.
(s) To the best of the Company's knowledge, none of the trademarks,
trade names, service marks, service names, copyrights, patents and patent
applications, and none of the licenses and rights to the foregoing, presently
owned or held by the Company are in dispute or are in conflict with the right of
any other person or entity. The Company (i) owns or has the right to use, free
and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind whatsoever, all
trademarks, trade names, service marks, service names, copyrights, patents and
patent applications, and licenses and rights with respect to the foregoing, used
in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any trademark, trade name, service ▇▇▇▇,
service name, copyright, patent or patent application except as set forth in the
Registration Statement or the Prospectus. There is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, pending or threatened (or circumstances that
may give rise to the same) against the Company which challenges the exclusive
rights of the Company with respect to any trademarks, trade names, service
marks, service names, copyrights, patents, patent applications or licenses or
rights to the foregoing used in the conduct of its business.
(t) Except as set forth in the Registration Statement or the
Prospectus, the Company owns and has the unrestricted right to use all trade
secrets, know-how (including all unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), inventions, technology,
designs, processes, works of authorship, computer programs and technical data
and information that are material to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the Company,
free and clear of and without violating any right, lien, or claim of others,
including, without limitation, former employers of its employees.
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(u) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, other than liens for taxes not
yet due and payable.
(v) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose reports are filed with the Commission
as a part of the Registration Statement, are independent certified public
accountants as required by the Act and the Rules and Regulations.
(w) The holders of all of the shares of Common Stock of the Company,
including each director, officer and principal shareholder of the Company, but
excluding the Bridge Investors (as such term is defined below), have executed an
agreement (collectively, the "Lock-Up Agreements") pursuant to which he, she or
it has agreed, for a period extending eighteen (18) months following the
effective date of the Registration Statement (the "Lock-Up Period"), not to
directly or indirectly, offer, offer to sell, sell, grant an option for the
purchase or sale of, transfer, pledge, assign, hypothecate or otherwise encumber
(whether pursuant to Rule 144 of the Rules and Regulations or otherwise) any
securities issued or issuable by the Company, whether or not owned by or
registered in the name of such persons, or dispose of any interest therein,
without the prior written consent of the Underwriter; provided, however, that
the Lock-Up Period shall immediately terminate if the average closing bid price
of the Common Stock, if the Common Stock is quoted on the Nasdaq system, or the
average closing sale price of the Common Stock, if the Common Stock is listed on
the American Stock Exchange, equals or exceeds $9.00 per share (subject to
customary adjustments for stocksplits, combinations, consolidations and similar
transactions) for any 30 consecutive calendar days. Such persons have all
further agreed in the Lock-Up Agreements that, for a period extending
twenty-four (24) months following the effective date of the Registration
Statement, all sales of such securities of the Company shall be made through JSC
in accordance with its customary brokerage policies. The Company will cause its
transfer agent to ▇▇▇▇ an appropriate legend on the face of stock certificates
representing all of such securities and to place "stop transfer" orders on the
Company's stock ledgers. The investors (collectively, the "Bridge Investors"),
who purchased securities of the Company in the Company's bridge financing (the
"Bridge Financing") pursuant to the confidential private placement memorandum
dated October 29, 1997, have agreed not to directly or indirectly, issue, offer
to sell, grant an option for the sale of, transfer, assign, hypothecate, pledge,
distribute or otherwise dispose of or encumber (either pursuant to Rule 144 of
the regulations under the Securities Act or otherwise) the units, the shares of
common stock, the warrants or the shares of common stock underlying such
warrants acquired or sold in the Bridge Financing for a period extending twelve
(12) months following the effective date of the Registration Statement and
thereafter for an additional six (6) months, without the prior written consent
of the Underwriter. The Bridge Investors has further agreed that for a period
extending twenty-four (24) months following the effective date of the
Registration Statement, all sales of such securities shall be made through JSC
in accordance with its customary brokerage policies. The Company will cause its
transfer agent to make an appropriate legend on the face of stock certificates
representing all such securities and to place "stop transfer" orders on the
Company's stock ledgers.
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(x) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuances
that may affect the Underwriter's compensation, as determined by the NASD.
(y) The Common Stock has been approved for quotation on the Nasdaq
SmallCap Market.
(z) Neither the Company nor any of its respective directors,
officers, stockholders, employees, agents or any other person acting on behalf
of the Company has, directly or indirectly, given or agreed to give any money,
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or any official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any other person who was, is or may be in a
position to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (i) might subject the
Company, or any other such person to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign), (ii) if
not given in the past, might have had a material and adverse effect on the
condition, financial or otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company, or (iii) if not continued in the future, might
materially and adversely affect the condition, financial or otherwise, or the
earnings, business affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company. The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(aa) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the Company
further agrees that if it or any affiliate commences engaging in business with
the government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's,
or any affiliate's, business with Cuba or with any person or affiliate located
in Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to the
Department.
(bb) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, and no affiliate or associate (as these terms are
defined in the Rules and Regulations) of any of the foregoing persons or
entities, has or has had, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficial
10
interest in any contract or agreement to which the Company is a party or by
which the Company may be bound. Except as set forth in the Prospectus under
"Certain Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any officer,
director or any person listed in the "Principal Shareholders" section of the
Prospectus or any affiliate or associate of any of the foregoing persons or
entities.
(cc) The minute books of the Company have been made available to the
Underwriter, contain a complete summary of all meetings and actions of the
directors and stockholders of the Company since the time of its incorporation,
and reflect all transactions referred to in such minutes accurately in all
respects.
(dd) Except and to the extent described in the Prospectus, no holder
of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company has the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement. Except as set forth in the Prospectus, no person
or entity holds any anti-dilution rights with respect to any securities of the
Company.
(ee) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to Underwriter's Counsel (as defined in Section
4(d) herein), shall be deemed a representation and warranty by the Company to
the Underwriter as to the matters covered thereby.
(ff) The Company has entered into a financial advisory and consulting
agreement substantially in the form filed as Exhibit _____ to the Registration
Statement (the "Consulting Agreement") with the Underwriter, with respect to the
rendering of consulting services by the Underwriter to the Company. The
Consulting Agreement provides that the Underwriter shall be retained by the
Company commencing on the consummation of the proposed public offering and
ending 24 months thereafter, at a monthly retainer of $2,000, all of which is
payable on consummation of the proposed public offering. The Consulting
Agreement has been duly and validly authorized by the Company and assuming due
execution by the parties thereto other than the Company, constitutes a valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law).
(gg) The Company has filed a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Securities and such Form 8-A
has been declared effective by the Commission.
(hh) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with each of Max Tohgraie,
▇▇▇▇▇ ▇▇▇ and ▇▇▇ ▇▇▇▇ in the forms file as Exhibit 10.__, 10.__ and 10.__,
respectively, to the Registration Statement and
11
(ii) has obtained term key-man insurance on the lives of ▇▇▇▇▇ ▇▇▇ and Max
Toghraie in the amount of $1,000,000 which policy names the Company as sole
beneficiary.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriter, and the Underwriter agrees
to purchase from the Company, the Firm Shares at a price equal to $__________
[90% of the initial public offering price] per Share.
(b) In addition, on the basis of the representations, warranties,
covenants and agreement, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase all or any part of the Option Shares at a price equal to
$__________ [90% of the initial public offering price] per Share. The option
granted hereby will expire forty-five (45) days after (i) the date the
Registration Statement becomes effective, if the Company has elected not to rely
on Rule 430A under the Rules and Regulations, or (ii) the date of this Agreement
if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Firm Shares upon notice by the Underwriter to
the Company setting forth the number of Option Shares as to which the
Underwriter is then exercising the option and the time and date of payment and
delivery for any such Option Shares. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Underwriter, but shall not be
later than seven (7) full business days after the exercise of said option, nor
in any event prior to the Closing Date, unless otherwise agreed upon by the
Underwriter and the Company. Nothing herein contained shall obligate the
Underwriter to exercise the option granted hereby. No Option Shares shall be
delivered unless the Firm Shares shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Shares shall be made at the offices of the Underwriter at ▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be agreed
upon by the Underwriter and the Company. Such delivery and payment shall be
made at 10:00 a.m. (New York City time) on __________ __, 1998 or at such other
time and date as shall be agreed upon by the Underwriter and the Company, but
not less than three (3) nor more than seven (7) full business days after the
effective date of the Registration Statement (such time and date of payment and
delivery being herein called the "Closing Date"). In addition, in the event
that any or all of the Option Shares are purchased by the Underwriter, payment
of the purchase price for, and delivery of certificates for, such Option Shares
shall be made at the above mentioned office of the Underwriter or at such other
place as shall be agreed upon by the Underwriter and the Company. Delivery of
the certificates for the Firm Shares and the Option Shares, if any, shall be
made to the Underwriter against payment by the Underwriter of the purchase price
for the Firm Shares and the Option Shares, if any, to the order of the Company
by New York Clearing House funds. Certificates for the Firm Shares and the
Option Shares, if any, shall be in definitive, fully registered form, shall bear
no restrictive legends and shall be in such denominations and registered in such
names as the Underwriter may
12
request in writing at least two (2) business days prior to the Closing Date or
the relevant Option Closing Date, as the case may be. The certificates for the
Firm Shares and the Option Shares, if any, shall be made available to the
Underwriter at such offices or such other place as the Underwriter may designate
for inspection, checking and packaging no later than 9:30 a.m. on the last
business day prior to the Closing Date or the relevant Option Closing Date, as
the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriter or its designees the Underwriter's Warrants for an aggregate
purchase price of $.0001 per warrant, which warrants shall entitle the holders
thereof to purchase an aggregate of an additional Shares. The
Underwriter's Warrants shall be exercisable for a period of four (4) years
commencing one (1) year from the effective date of the Registration Statement at
a price equaling percent ( ) of the initial public
offering price of the Shares. The Underwriter's Warrant Agreement and the form
of the certificates for the Underwriter's Warrant shall be substantially in the
form filed as Exhibit ___ to the Registration Statement. Payment for the
Underwriter's Warrants shall be made on the Closing Date.
3. PUBLIC OFFERING OF THE SHARES. As soon after the Registration
Statement becomes effective as the Underwriter deems advisable, the Underwriter
shall make a public offering of the Firm Shares and such of the Option Shares as
the Underwriter may determine (other than to residents of or in any jurisdiction
in which qualification of the Shares is required and has not become effective)
at the price and upon the other terms set forth in the Prospectus. The
Underwriter may from time to time increase or decrease the public offering price
after distribution of the Shares has been completed to such extent as the
Underwriter, in its sole discretion, deems advisable. The Underwriter may enter
into one or more agreements as the Underwriter, in its sole discretion, deems
advisable with one or more broker-dealers who shall act as dealers in connection
with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants
and agrees with the Underwriter as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or the
Exchange Act before termination of the offering of the Securities to the public
by the Underwriter of which the Underwriter shall not previously have been
advised and furnished with a copy, or to which the Underwriter shall have
objected or which is not in compliance with the Act, the Exchange Act and the
Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Underwriter and confirm the same in writing, (i)
when the Registration Statement, as amended, becomes effective, when any
post-effective amendment to the Registration Statement becomes effective and, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A, (ii) of the
13
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding the outcome of which may result in the suspension
of the effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of any proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any of
the Securities for offering or sale in any jurisdiction or of the initiation, or
the threatening, of any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission, and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities regulatory authority shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain promptly
the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) with the Commission, or transmit the Prospectus
by a means reasonably calculated to result in filing the same with the
Commission, pursuant to Rule 424(b)(1) of the Rules and Regulations (or, if
applicable and if consented to by the Underwriter, pursuant to Rule 424(b)(4) of
the Rules and Regulations) within the time period specified in Rule 424(b)(1)
(or, if applicable and if consented to by the Underwriter, Rule 424(b)(4)).
(d) The Company will give the Underwriter notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use in
connection with the offering of any of the Securities which differs from the
corresponding prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b) of the Rules and Regulations), and will
furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such amendment or supplement to which the Underwriter
or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, its counsel ("Underwriter's Counsel"),
shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Underwriter may reasonably designate to permit
the continuance of sales and dealings therein for as long as may be necessary to
complete the distribution contemplated hereby, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; PROVIDED, HOWEVER, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall
be effected, the Company will, unless the Underwriter agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
14
(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act, the Exchange Act and the Rules and
Regulations so far as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If, at any time when a
prospectus relating to the Securities is required to be delivered under the Act,
any event shall have occurred as a result of which, in the opinion of counsel
for the Company or Underwriter's Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading, or if it is necessary at any time to amend or supplement the
prospectus to comply with the Act, the Company will notify the Underwriter
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act, each such amendment or
supplement to be satisfactory to Underwriter's Counsel, and the Company will
furnish to the Underwriter copies of such amendment or supplement as soon as
available and in such quantities as the Underwriter may request.
(g) As soon as practicable, but in any event not later than forty
five (45) days after the end of the 12-month period beginning on the day after
the end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (ninety (90) days in the event that the end of
such fiscal quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Rules and Regulations, and to the Underwriter, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least twelve (12) consecutive months after the effective
date of the Registration Statement.
(h) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings and will deliver to the Underwriter:
i) concurrently with furnishing such quarterly reports to its
stockholders statements of income of the Company for such quarter in
the form furnished to the Company's stockholders and certified by the
Company's principal financial and accounting officer;
ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity and cash flows of the Company for such fiscal
year, accompanied by a copy of the report thereon of the Company's
independent certified public accountants;
15
iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
v) every press release and every material news item or
article of interest to the financial community in respect of the
Company, or its respective affairs which was released or prepared by
or on behalf of the Company; and
vi) any additional information of a public nature concerning
the Company (and any future subsidiaries) or its respective business
which the Underwriter may request.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for the Common Stock.
(j) The Company will furnish to the Underwriter, without charge and
at such place as the Underwriter may designate, copies of each Preliminary
Prospectus, the Registration Statement and any pre-effective or post-effective
amendments thereto (one of which will be signed and will include all financial
statements and exhibits), the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such quantities
as the Underwriter may request.
(k) On or before the effective date of the Registration Statement,
the Company shall provide the Underwriter with originally-executed copies of
duly executed, legally binding and enforceable Lock-Up Agreements which are in
form and substance satisfactory to the Underwriter. On or before the Closing
Date, the Company shall deliver instructions to its transfer agent authorizing
such transfer agent to place appropriate legends on the certificates
representing the securities of the Company subject to the Lock-Up Agreements and
to place appropriate stop transfer orders on the Company's ledgers.
(l) The Company agrees that, for the duration of the Lock-Up Period
(as defined in SECTION 1(w), it and its future subsidiaries will not, without
the prior written consent of the Underwriter (i) issue, sell, contract or offer
to sell, grant an option for the purchase or sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise dispose of, directly or indirectly, any
shares of capital stock or any option, right or warrant with respect to any
shares of capital stock or any security convertible, exchangeable or exercisable
for capital stock, provided, that the
16
Company may, without consent of the Underwriter, issue securities (a) upon the
exercise of any outstanding stock options or warrants granted or issued on or
prior to the date hereof, and (b) subject to the terms of Section 4(u) of this
Agreement, up to an additional 192,283 shares of Common Stock issuable upon the
exercise stock options which may be granted pursuant to the Company's 1997 Stock
Option Plan, or (ii) file any registration statement for the offer or sale of
securities issued or to be issued by the Company or any present or future
subsidiaries.
(m) Neither the Company nor any of its officers, directors,
stockholders or affiliates (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to stabilize or
manipulate the price of any securities of the Company, or which might in the
future reasonably be expected to cause or result in the stabilization or
manipulation of the price of any such securities.
(n) The Company shall apply the net proceeds from the sale of the
Securities offered to the public in the manner set forth under "Use of Proceeds"
in the Prospectus. No portion of the net proceeds will be used, directly or
indirectly, to acquire any securities issued by the Company.
(o) The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, any Form SR
required by Rule 463 under the Act) from time to time under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents will comply as to form and substance with the applicable requirements
under the Act, the Exchange Act and the Rules and Regulations.
(p) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date hereof, the Closing Date or the relevant Option Closing
Date, as the case may be) which have been read by the Company's independent
public accountants, as stated in their letters to be furnished pursuant to
SECTION 6(j) hereof.
(q) The Company shall cause the Common Stock to be quoted on the
Nasdaq SmallCap Market and, for a period of five (5) years from the date
hereof, use its best efforts to maintain the Nasdaq SmallCap Market quotation
of the Common Stock to the extent outstanding.
(r) For a period of five (5) years from the Closing Date, the Company
shall at the request of the Underwriter, furnish or cause to be furnished to the
Underwriter and at the Company's sole expense, (i) daily consolidated transfer
sheets relating to the Common Stock and (ii) a list of holders of all of the
Company's securities.
(s) For a period of five (5) years from the Closing Date, the Company
shall, at the Company's sole expense, (i) promptly provide the Underwriter, upon
any and all requests of the Underwriter, with a "blue sky trading survey" for
secondary sales of the Company's
17
securities, prepared by counsel to the Company, and (ii) take all necessary and
appropriate actions to further qualify the Company's securities in all
jurisdictions of the United States in order to permit secondary sales of such
securities pursuant to the "blue sky" laws of those jurisdictions, provided that
such jurisdictions do not require the Company to qualify as a foreign
corporation.
(t) As soon as practicable, but in no event more than thirty (30)
days after the effective date of the Registration Statement, the Company agrees
to take all necessary and appropriate actions to be included in Standard and
Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual and to continue such
inclusion for a period of not less than five (5) years.
(u) Without the prior written consent of the Underwriter, the Company
hereby agrees that it will not, for the duration of the Lock-UP Period, adopt,
propose to adopt or otherwise permit to exist any employee, officer, director,
consultant or compensation plan or arrangement (i) permitting the grant, issue,
sale or entry into any agreement to grant, issue or sell any option, warrant or
other contract right (a) at an exercise or sale price per share that is less
than the greater of the initial public offering price of the Shares set forth
herein or the fair market value per share of the Common Stock on the date of
grant or sale, or (b) upon payment of less than the full purchase or exercise
price for such shares of Common Stock or other securities of the Company on the
date of grant or issuance; or (ii) permitting the existence of stock
appreciation rights, phantom options or similar arrangements; or (iii)
permitting the payment for such securities with any form of consideration other
than cash; or (iv) permitting the maximum number of shares of Common Stock or
other securities of the Company purchasable at any time pursuant to options,
warrants or other contract rights to exceed 600,000 (excluding the Underwriter's
Warrants and the Underwriter's Option to purchase 345,000 shares to
cover-allotments, if any); or (v) to any direct or indirect beneficial holder on
the date hereof of more than 10% of the issued and outstanding shares of Common
Stock.
(v) Until the completion of the distribution of the Securities to the
public, and during any period during which a prospectus is required to be
delivered, the Company shall not, without the prior written consent of the
Underwriter, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(w) The Company agrees that:
i) For a period of five (5) years after the effective date of
the Registration Statement, the Company shall cause one (1) individual
selected by the Underwriter, subject to the good faith approval of the
Company, to be elected to the Board of Directors of the Company (the
"Board"), if requested by the Underwriter.
ii) In the event the Underwriter elects not to exercise the
right as set forth above, then it may designate one person to attend
all meetings of the
18
Company's Board of Directors for a period of five (5) years. Such
person shall be entitled to attend all such meetings and to receive
all notices and other correspondence and communications sent by the
Company to members of its Board of Directors.
iii) The Company shall reimburse the Underwriter's designee for
his or her out-of-pocket expenses incurred in connection with his or
her attendance of the Board meetings.
iv) In the event the Underwriter shall not have designated
such individual at the time of any meeting of the Board or such person
has not been elected or is unavailable to serve, the Company shall
notify the Underwriter of each meeting of the Board.
(x) For a period equal to the lesser of (i) five (5) years from the
date hereof, and (ii) the sale to the public of the Underwriter's Securities,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Form S-1 (or other appropriate form) for the registration
under the Act of the Underwriter's Securities.
(y) For the duration of the Lock-Up Period, the Company shall not
restate, amend or alter any term of any written employment, consulting or
similar agreement entered into between the Company and any officer, director or
key employee as of the effective date of the Registration Statement in a manner
which is more favorable to such officer, director or key employee, without the
prior written consent of the Underwriter.
(aa) The Company will use its best efforts to maintain the
effectiveness of the Registration Statement for a period of five (5) years after
the date hereof.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay (such payment to be made, at the
discretion of the Underwriter, on the Closing Date and any Option Closing Date
(to the extent not paid on the Closing Date or a previous Option Closing Date))
all expenses and fees (other than fees of Underwriter's Counsel, except as set
forth in clause (iv) below), incident to the performance of the obligations of
the Company under this Agreement and the Underwriter's Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage, overnight
delivery or courier charges with
19
respect thereto) of the Registration Statement and the Prospectus and any
amendments and supplements thereto and the printing, mailing (including the
payment of postage, overnight delivery or courier charges with respect thereto)
and delivery of this Agreement, the Underwriter's Warrant Agreement and
agreements with selected dealers, and related documents, including the cost of
all copies thereof and of each Preliminary Prospectus and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriter and
such dealers as the Underwriter may request, in such quantities as the
Underwriter may request, (iii) the printing, engraving, issuance and delivery of
the Securities, (iv) the qualification of the Securities under state or foreign
securities or "blue sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, and disbursements, expenses and fees of
counsel in connection therewith, (v) advertising costs and expenses, including,
but not limited to costs and expenses in connection with "road shows,"
information meetings and presentations, bound volumes and prospectus memorabilia
and "tombstone" advertisement expenses, (vi) costs and expenses in connection
with due diligence investigations, including, but not limited to, the fees of
any independent counsel or consultants, (vii) fees and expenses of a transfer
and warrant agent and registrar for the Securities, (viii) applications for
assignments of a rating of the Securities by qualified rating agencies, (ix) the
fees payable to the Commission and the NASD, and (x) the fees and expenses
incurred in connection with the [listing of the Securities on the American Stock
Exchange] [quotation of the Securities on the Nasdaq SmallCap Market] and any
other exchange.
(b) If this Agreement is terminated by the Underwriter in accordance
with the provisions of SECTION 6 or SECTION 10(a) hereof, the Company shall
reimburse and indemnify the Underwriter for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriter's Counsel, less
any amounts already paid pursuant to SECTION 5(c) hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to SECTION 5(a) hereof, it will pay to the Underwriter on the
Closing Date by certified or bank cashier's check, or, at the election of the
Underwriter, by deduction from the proceeds of the offering of the Firm Shares,
a non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Firm Shares, thirty
thousand dollars ($30,000) of which has been paid to date by the Company. In
the event the Underwriter elects to exercise the overallotment option described
in SECTION 2(b) hereof, the Company further agrees to pay to the Underwriter on
each Option Closing Date, by certified or bank cashier's check, or, at the
Underwriter's election, by deduction from the proceeds of the Option Shares
purchased on such Option Closing Date, a non-accountable expense allowance equal
to three percent (3%) of the gross proceeds received by the Company from the
sale of such Option Shares.
6. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligations of
the Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date and each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date and each Option Closing Date, if
any, of the statements of officers of the Company made pursuant to the
provisions hereof; the performance by the Company on and as of the Closing Date
and each
20
Option Closing Date, if any, of its covenants and obligations hereunder; and to
the following further conditions:
(a) The Registration Statement shall have become effective not later
than 12:00 p.m., New York time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Underwriter, and, at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriter's Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Underwriter of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, is material, or omits to state a
fact which, in the Underwriter's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances in which they were made not misleading, or that the Prospectus, or
any supplement thereto, contains an untrue statement of fact which, in the
Underwriter's opinion, is material, or omits to state a fact which, in the
Underwriter's opinion, is material and is required to be stated therein or is
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall have
received from Underwriter's Counsel such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, the Registration
Statement, the Prospectus and such other related matters as the Underwriter may
request and Underwriter's Counsel shall have received such papers and
information as they may request in order to enable them to pass upon such
matters.
(d) On the Closing Date, the Underwriter shall have received the
favorable opinion of Troop ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel to the
Company, dated the Closing Date, addressed to the Underwriter, in form and
substance satisfactory to Underwriter's Counsel, to the effect that:
i) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, (B) is duly qualified and licensed and
in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of
its operations requires such qualification or licensing, and (C) has
all
21
requisite power and authority (corporate and other) and has obtained
any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those
having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as described in the
Prospectus. The Company is and has been doing business in compliance
with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits obtained by it from governmental
or regulatory officials and agencies and all federal, state, local and
foreign laws, rules and regulations to which it is subject; and, the
Company has not received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order,
license, certificate, franchise or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, prospects, stockholders'
equity, value, operations, properties, business or results of
operations of the Company. The disclosure in the Registration
Statement concerning the effects of federal, state, local and foreign
laws, rules and regulations on the Company's business as currently
conducted and as contemplated are correct in all respects and do not
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
ii) Except as set forth in the Prospectus, the Company does
not own, directly or indirectly, an interest in any corporation,
partnership, joint venture, trust or other business entity;
iii) the Company has a duly authorized, issued and outstanding
capitalization and as set forth in the Prospectus under
"Capitalization," and except as set forth in the Prospectus, the
Company is not a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and
the Underwriter's Warrant Agreement. The Securities and all other
securities issued or issuable by the Company conform, or when issued
and paid for, will conform, in all respects to the descriptions
thereof contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto
and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the
statutory preemptive rights of any holders of any security of the
Company or, to the best of such counsel's knowledge any similar
contractual right granted by the Company. The Securities to be sold
by the Company hereunder and under the Underwriter's Warrant Agreement
are not and will not be subject to any statutory preemptive or, to the
best of such counsel's knowledge other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms
22
hereof and thereof, will be validly issued, fully paid and
non-assessable and conform to the descriptions thereof contained in
the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be
taken for the authorization, issue and sale of the Securities has been
duly and validly taken; and the certificates representing the
Securities are in due and proper form. The Underwriter's Warrants
constitute valid and binding obligations of the Company to issue and
sell, upon exercise thereof and payment therefor, the number and type
of securities of the Company called for thereby. Upon the issuance
and delivery pursuant to this Agreement and the Underwriter's Warrant
Agreement of the Securities to be sold by the Company hereunder and
thereunder, the Underwriter will acquire good and marketable title to
such Securities, free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever asserted against the Company or any
affiliate (within the meaning of the Rules and Regulations) of the
Company;
iv) the Registration Statement is effective under the Act,
and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the Registration
Statement or the Prospectus or any part of any thereof or suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act;
v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and schedules and other
financial and statistical data included therein, as to which no
opinion need be rendered) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations;
vi) to such counsel's knowledge, (A) there are no agreements,
contracts or other documents required by the Act to be described in
the Registration Statement and the Prospectus or required to be filed
as exhibits to the Registration Statement (or required to be filed
under the Exchange Act if upon such filing they would be incorporated,
in whole or in part, by reference therein) other than those described
in the Registration Statement and the Prospectus and filed as exhibits
thereto, and the exhibits which have been filed are correct copies of
the documents of which they purport to be copies; (B) the descriptions
in the Registration Statement and the Prospectus and any supplement or
amendment thereto of agreements, contracts and other documents to
which the Company is a party or by which it is bound are accurate and
fairly represent the information required to be shown by Form S-1; (C)
there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including,
without limitation, those pertaining to environmental or similar
matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or
23
involving the properties or business of, the Company which (i) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), or (ii)
questions the validity of the capital stock of the Company or of this
Agreement, the Underwriter's Warrant Agreement or the Consulting
Agreement or of any action taken or to be taken by the Company
pursuant to or in connection with any of the foregoing; (D) no statute
or regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and (E)
there is no action, suit or proceeding pending or threatened against
or affecting the Company before any court, arbitrator or governmental
body, agency or official (or any basis thereof known to such counsel)
in which there is a reasonable possibility of an adverse decision
which may result in a material adverse change in the condition,
financial or otherwise, or the earnings, prospects, stockholders'
equity, value, operation, properties, business or results of
operations of the Company taken as a whole, which could adversely
affect the present or prospective ability of the Company to perform
its obligations under this Agreement, the Underwriter's Warrant
Agreement or the Consulting Agreement or which in any manner draws
into question the validity or enforceability of this Agreement, the
Underwriter's Warrant Agreement or the Consulting Agreement;
vii) the Company has full legal right, power and authority to
enter into each of this Agreement, the Underwriter's Warrant
Agreement, and the Consulting Agreement and to consummate the
transactions provided for herein and therein; and each of this
Agreement, the Underwriter's Warrant Agreement, and the Consulting
Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement, the Underwriter's Warrant Agreement
and the Consulting Agreement, assuming due authorization, execution
and delivery by each other party thereto, constitutes a legal, valid
and binding agreement of the Company, enforceable against the Company
in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
obligations to indemnify or contribute to losses may be limited by
applicable law). None of the Company's execution or delivery of this
Agreement, the Underwriter's Warrant Agreement, or the Consulting
Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct of
its business as described in the Registration Statement and the
Prospectus and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company pursuant to
the terms of (A) the
24
certificate of incorporation or bylaws of the Company, (B) any
license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to
which the Company is a party or by which either is or may be bound or
to which the properties or assets (tangible or intangible) of either
are or may be subject, (C) any statute applicable to the Company or
(D) any judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or
any of their activities or properties;
viii) no consent, approval, authorization or order of, and no
filing with, any arbitrator, court, regulatory body, administrative
agency, government agency or other body, domestic or foreign (other
than such as may be required under "blue sky" laws, as to which no
opinion need be rendered), is required in connection with the issuance
of the Securities pursuant to the Prospectus, the Registration
Statement, this Agreement, the Underwriter's Warrant Agreement, or the
performance of this Agreement, the Underwriter's Warrant Agreement,
and the Consulting Agreement and the transactions contemplated hereby
and thereby;
ix) the properties and business of the Company conform to the
description thereof contained in the Registration Statement and the
Prospectus; and the Company has good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, in each
case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities
of any kind whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable;
x) the Company is not in breach of, or in default under, any
term or provision of any license, contract, indenture, mortgage,
lease, deed of trust, voting trust agreement, stockholders' agreement,
note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which it is or may be
bound or to which its property or assets (tangible or intangible) are
or may be subject; and the Company is not in violation of any term or
provision of (A) its certificate of incorporation or by-laws, (B) any
authorization, approval, order, license, certificate, franchise or
permit of any governmental or regulatory official or body, or (C) any
judgement, decree, order, statute, rule or regulation to which it is
subject;
xi) the statements in the Prospectus under "Prospectus
Summary," "Risk Factors," "The Company," ["Recent Bridge Financings,"]
"Business,"
25
"Management," "Principal Shareholders," "Certain Transactions,"
"Shares Eligible For Future Sale," and "Description of Securities"
have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all material
respects;
xii) the Common Stock has been accepted for quotation on the
Nasdaq SmallCap Market;
xiii) the Company owns or possesses, free and clear of all liens
or encumbrances and right thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service
marks, copyrights, service names, tradenames, patents, patent
applications and licenses necessary to conduct its business (including
without limitation any such licenses or rights described in the
Prospectus as being owned or possessed by the Company) and there is no
claim or action by any person pertaining to, or proceeding, pending or
threatened, which challenges the rights of the Company with respect to
any trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in the conduct of the
Company's business (including, without limitation, any such licenses
or rights described in the Prospectus as being owned or possessed by
the Company);
xiv) the persons listed under the captions "Principal
Shareholders" and in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in Rule 13d-3 under the Exchange
Act) of the securities set forth opposite their respective names
thereunder as and to the extent set forth therein;
xv) except as disclosed in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration
statement;
xvi) there are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of
a finder's or origination fee with respect to the sale of the
Securities hereunder or financial consulting arrangement or any other
arrangements, agreements, understandings, payments or issuances that
may affect the Underwriter's compensation, as determined by the NASD;
and
xvii) assuming due execution by the parties thereto, the Lock-Up
Agreements are legal, valid and binding obligations of the parties
thereto, enforceable against such parties and any subsequent holder of
the securities subject thereto in accordance with their terms.
26
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus and related matters and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement or the Prospectus, on the
basis of the foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or amendment became
effective, or the Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, as of the date of the Preliminary Prospectus and the
Prospectus, and as of the date of such opinion, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading (it being understood that
such counsel need express no opinion with respect to the financial statements
and schedules and other financial and statistical data included in the
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
supplements or amendments thereto).
In rendering such opinion, such counsel may rely (a) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriter's Counsel) of
other counsel acceptable to Underwriter's Counsel, familiar with the applicable
laws; and (b) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company and
certificates or other written statements of officers of departments of
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriter's Counsel, if requested. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and that the Underwriter
and they are justified in relying thereon. Such opinion shall also state that
the Underwriters' Counsel is entitled to rely thereon. Such opinion shall not
state that it is to be governed or qualified by, or that it is otherwise subject
to, any treatise, written policy or other document relating to legal opinions,
including without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991) or any comparable state accord.
At each Option Closing Date, if any, the Underwriter shall have
received the favorable opinion of Troop ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel
to the Company, dated the relevant Option Closing Date, addressed to the
Underwriter, and in form and substance satisfactory to Underwriter's Counsel
confirming as of the Option Closing Date, the statements made by Troop ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, in its opinion delivered on the Closing Date.
(e) On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriter's Counsel shall have been furnished with such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon
27
the matters referred to in SECTION 6(c) hereof, or in order to evidence the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions of the Company herein contained.
(f) Prior to the Closing Date and each Option Closing Date, if any,
(i) there shall have been no material adverse change or development involving a
prospective adverse change in the condition, financial or otherwise, or the
earnings, stockholders' equity, value, operations, properties, business or
results of operations of the Company, whether or not in the ordinary course of
business, from the latest dates as of which such matters are set forth in the
Registration Statement and the Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and the Prospectus; (iii) the Company shall
not be in default under any provision of any instrument relating to any
outstanding indebtedness; (iv) the Company shall not have issued any securities
(other than the Securities) or declared or paid any dividend or made any
distribution in respect of its capital stock of any class and there shall not
have been any change in the capital stock, debt (long or short term) or
liabilities or obligations of the Company (contingent or otherwise) from the
latest dates as of which such matters are set forth in the Registration
Statement and the Prospectus; (v) no material amount of the assets of the
Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and the Prospectus; (vi) no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, shall be pending or threatened (or
circumstances giving rise to same) against the Company or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially and adversely affect the condition,
financial or otherwise, or the earnings, stockholders' equity, value,
operations, properties, business or results of operations of the Company taken
as a whole, except as set forth in the Registration Statement and Prospectus;
and (vii) no stop order shall have been issued under the Act with respect to the
Registration Statement and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(g) At the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or the relevant Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or the Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or
satisfied at or prior to such Closing Date or Option Closing Date, as
the case may be;
28
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, are contemplated or
threatened under the Act;
iii) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto contain all statements and
information required to be included therein, and none of the
Registration Statement, the Prospectus or any amendment or supplement
thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which
they were made, not misleading and neither the Preliminary Prospectus
nor any supplement thereto included any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and
iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (A) the
Company has not incurred any material liabilities or obligations,
direct or contingent; (B) the Company has not paid or declared any
dividends or other distributions on its capital stock; (C) the Company
has not entered into any transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or
long-term debt or any increase in the short-term borrowings (other
than any increase in short-term borrowings in the ordinary course of
business) of the Company (E) the Company has not sustained any
material loss or damage to its property or assets, whether or not
insured; (F) there is no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company or any
affiliate (within the meaning of the Rules and Regulations) of the
foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (G) there
has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this SECTION 6(g)
are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriter will have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriter shall
have received a letter, dated such date, addressed to the Underwriter and the
Board of Directors of the Company and in form and substance satisfactory in all
respects (including the non-material nature of the changes or decreases, if any,
referred to in clause (iii) below) to the Underwriter and Underwriter's Counsel,
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
29
i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the Rules and Regulations;
ii) stating that it is their opinion that the financial
statements of the Company included in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations and
that the Underwriter may rely upon the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
with respect to such financial statements and supporting schedules
included in the Registration Statement;
iii) stating that, on the basis of a limited review which
included a reading of the latest unaudited interim financial
statements of the Company, a reading of the latest available minutes
of the stockholders and board of directors and the various committees
of the board of directors of the Company, consultations with officers
and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe
that (A) the unaudited financial statements and supporting schedules
of the Company included in the Registration Statement do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included in the
Registration Statement, (B) the pro forma financial information
contained in the Registration Statement and the Prospectus does not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or is
not fairly presented in conformity with generally accepted accounting
principles applied on a basis consistent with that of the audited
financial statements of the Company or the unaudited financial
information included in the Registration Statement and Prospectus or
(C) at a specified date nor more than five (5) days prior to the
effective date of the Registration Statement, there has been any
change in the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity or net current assets or net
assets of the Company as compared with amounts shown in the September
30, 1997 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement,
or, if there was any change or decrease, setting forth the amount of
such change or decrease, and (D) during the period from September 30,
1997 to a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there was any decrease
in net revenues, net earnings or net earnings per share of Common
Stock, in each case as compared with the corresponding period
beginning September 30, 1996, 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;
30
iv) setting forth, at a date not later than five (5) days
prior to the effective date of the Registration Statement, the amount
of liabilities of the Company (including a break-down of commercial
paper and notes payable to banks);
v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in
the Prospectus, in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an audit in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
and
vi) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may request.
(j) At the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter, dated as of
the Closing Date or the relevant Option Closing Date, as the case may be, to the
effect that (i) it reaffirms the statements made in the letter furnished
pursuant to SECTION 6(i), (ii) if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP has
carried out procedures as specified in clause (v) of SECTION 6(j) hereof with
respect to certain amounts, percentages and financial information as specified
by the Underwriter and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (v).
(k) The Company shall have received a letter, dated such date,
addressed to the Company, in form and substance satisfactory in all respects to
the Underwriter, from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP stating that they have not during the
immediately preceding five (5) year period brought to the attention of the
Company's management any "weakness," as defined in Statement of Auditing
Standard No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit," in any of the Company's internal controls.
(l) On each of Closing Date and Option Closing Date, if any, there
shall have been duly tendered to the Underwriter the appropriate number of
Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to SECTION 4(e) hereof shall
have been issued on either the Closing Date or the Option Closing Date, if any,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
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(n) On or before the effective date of the Registration Statement,
the Company shall have executed and delivered to the Underwriter, the
Underwriter's Warrant Agreement, substantially in the form filed as Exhibit ___
Registration Statement. On or before the Closing Date, the Company shall have
executed and delivered to the Underwriter the Underwriter's Warrants in such
denominations and to such designees as shall have been provided to the Company.
(o) On or before Closing Date, the Common Stock shall have been duly
approved for [listing on the American Stock Exchange] [quotation on the Nasdaq
SmallCap Market], subject to official notice of issuance.
(p) On or before Closing Date, there shall have been delivered to the
Underwriter all of the Lock-Up Agreements, in form and substance satisfactory to
Underwriter's Counsel.
(q) On or before the Closing Date, the Company shall have (i)
executed and delivered to the Underwriter the Consulting Agreement,
substantially in the form filed as Exhibit _____ to the Registration Statement
and (ii) paid the Underwriter $48,000 representing the retainer fee pursuant to
the Consulting Agreement.
(r) At least two (2) full business days prior to the date hereof, the
Closing Date and each Option Closing Date, if any, the Company shall have
delivered to the Underwriter the unaudited interim financial statements required
to be so delivered pursuant to SECTION 4(p) of this Agreement.
If any condition to the Underwriter's or the Underwriter's obligations
hereunder to be fulfilled prior to or at the Closing Date or at any Option
Closing Date, as the case may be, is not so fulfilled, the Underwriter may
terminate this Agreement or, if the Underwriter so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each
Underwriter (for purposes of this SECTION 7, "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
and each person, if any, who controls the Underwriter ("controlling person")
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions, proceedings, investigations,
inquiries and suits in respect thereof), whatsoever (including but not limited
to any and all costs and expenses whatsoever reasonably incurred in
investigating, preparing or defending against such action, proceeding,
investigation, inquiry or suit commenced or threatened, or any claim
whatsoever), as such are incurred, to which the Underwriter or such controlling
person may become subject under the Act, the Exchange Act or any other statute
or at common law or otherwise or under the laws of foreign countries, arising
out of or based upon (A) any untrue statement or alleged untrue statement of
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a material fact contained (i) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the Securities; or (iii) in any application or
other document or written communication (in this SECTION 7, collectively
referred to as "applications") executed by the Company or based upon written
information furnished by the Company filed, delivered or used in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the NASD, Nasdaq or any securities exchange; (B) the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of the Prospectus, in
light of the circumstances in which they were made); or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto, unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be. The indemnity agreement in
this Section 7(a) shall be in addition to any liability which the Company may
have at common law or otherwise.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, to the same extent as the foregoing indemnity from the Company to
the Underwriter but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto or in any application made in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to any Underwriter by such Underwriter expressly for
use in such Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or the Prospectus directly
relating to the transactions effected by the Underwriter in connection with the
offering contemplated hereby. The Company acknowledges that the statements with
respect to the public offering of the Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriter expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriter for
inclusion in any Preliminary Prospectus, the Registration Statement or the
Prospectus. The indemnity agreement in this Section 7(b) shall be in addition
to any liability which the Underwriter may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this SECTION
7 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against one or more indemnifying
parties under this SECTION 7, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the
33
failure to so notify an indemnifying party shall not relieve it from any
liability which it may have under this SECTION 7 (except to the extent that it
has been prejudiced in any material respect by such failure) or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it or they may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, an indemnified party shall
have the right to employ its own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of such counsel shall have been authorized in writing
by the indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to one or all of the
indemnifying parties (in which event the indemnifying parties shall not have the
right to direct the defense of such action, investigation, inquiry, suit or
proceeding on behalf of the indemnified party or parties), in any of which
events such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action, investigation, inquiry, suit or proceeding or separate but
similar or related actions, investigations, inquiries, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle, compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party. Anything in this SECTION 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent may not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes a claim for indemnification
pursuant to this SECTION 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this SECTION 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof) (A)
in such
34
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified,
on the other hand, from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (A) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified, on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and the Underwriter is the indemnified party, the relative benefits received by
the Company, on the one hand, and the Underwriter, on the other, shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) bear to the total underwriting discounts
received by the Underwriter hereunder, in each case as set forth in the table on
the cover page of the Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriter, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions, investigations, inquiries, suits or proceedings in
respect thereof) referred to in the first (1st) sentence of this SECTION 7(d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action, claim, investigation, inquiry suit or proceeding. Notwithstanding the
provisions of this SECTION 7(d), the Underwriter shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriter hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 12(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this SECTION 7(d), each person,
if any, who controls the Company or the Underwriter within the meaning of the
Act, each officer of the Company who has signed the Registration Statement and
each director of the Company shall have the same rights to contribution as the
Company or the Underwriter, as the case may be, subject in each case to this
SECTION 7(d). Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit, inquiry, investigation or
proceeding, against such party in respect to which a claim for contribution may
be made against another party or parties under this SECTION 7(d), notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this SECTION 7(d), or to the extent that such party or
parties were not adversely affected by such omission. Notwithstanding anything
in this SECTION 7 to the contrary, no party will be liable for contribution with
respect to the settlement of any action or claim effected without its written
consent. The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company contained in this Agreement, or contained in certificates of officers of
the Company submitted pursuant
35
hereto, shall be deemed to be representations, warranties, covenants and
agreements at the Closing Date and each Option Closing Date, if any, and such
representations, warranties, covenants and agreements of the Company, and the
respective indemnity and contribution agreements contained in SECTION 7 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, the Company, any
controlling person of any Underwriter or the Company, and shall survive the
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriter.
9. EFFECTIVE DATE. This Agreement shall become effective at 10:00
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter, in its discretion, shall release the Securities
for sale to the public; PROVIDED, however, that the provisions of SECTIONS 5, 7
and 10 of this Agreement shall at all times be effective. For purposes of this
SECTION 9, the Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such shares for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. TERMINATION.
(a) Subject to SECTION 10(b) hereof, the Underwriter shall have the
right to terminate this Agreement: (i) if any domestic or international event or
act or occurrence has materially adversely disrupted, or in the Underwriter's
opinion will in the immediate future materially adversely disrupt, the financial
markets; or (ii) if any material adverse change in the financial markets shall
have occurred; or (iii) if trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the NASD, the Boston Stock Exchange, the
Commission or any governmental authority having jurisdiction over such matters;
or (iv) if trading of any of the securities of the Company shall have been
suspended, or if any of the securities of the Company shall have been delisted,
on any exchange or in any over-the-counter market; or (v) if the United States
shall have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities, or a national
emergency shall have been declared in the United States; or (vi) if a banking
moratorium shall have been declared by any state or federal authority; or (vii)
if the Company shall have sustained a material or substantial loss by fire,
flood, accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will, in
the Underwriter's opinion, make it inadvisable to proceed with the delivery of
the Securities; or (ix) if there shall have occurred any outbreak or escalation
of hostilities or any calamity or crisis or there shall have been such a
material adverse change in the conditions or prospects of the Company, or if
there shall have been such a material adverse change in the general market,
political or economic conditions, in the United States or elsewhere, as in the
Underwriter's judgment would make it inadvisable to proceed with the offering,
sale and/or delivery of the Securities; or (x) if ▇▇. ▇▇▇▇▇ ▇▇▇ or ▇▇. ▇▇▇
▇▇▇▇▇▇▇▇ shall no longer serve the Company in their present respective
capacities.
36
(b) If this Agreement is terminated by the Underwriter in accordance
with the provisions of SECTION 6 or SECTION 10(a) hereof the Company shall
promptly reimburse and indemnify the Underwriter for all its actual
out-of-pocket expenses, including the fees and disbursements of Underwriter's
Counsel, less amounts previously paid pursuant to SECTION 5(c) hereof. In
addition, the Company shall remain liable for all "blue sky" counsel fees and
expenses and "blue sky" filing fees. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to SECTIONS 6 and 10(a)
hereof), and whether or not this Agreement is otherwise carried out, the
provisions of SECTION 5 and SECTION 7 shall not be in any way be affected by
such election or termination or failure to carry out the terms of this Agreement
or any part hereof.
11. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Shares to be purchased on an Option Closing Date, the Underwriter may, at
its option, by notice from the Underwriter to the Company, terminate the
Underwriter's obligation to purchase Option Shares from the Company on such
date) without any liability on the part of any non-defaulting party other than
pursuant to SECTION 5, SECTION 7 and SECTION 10 hereof. No action taken
pursuant to this SECTION 11 shall relieve the Company from liability, if any, in
respect of such default.
12. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed
to the Company at CUMETRIX DATA SYSTEMS CORP., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, with a copy to Troop, Meisinger, ▇▇▇▇▇▇▇ & Pasich, LLP,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
13. PARTIES. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in SECTION 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Shares from the Underwriter shall be deemed to be a
successor by reason merely of such purchase.
14. CONSTRUCTION. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to choice of law or conflict of laws principles.
37
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
16. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Underwriter's
Warrant Agreement and the Consulting Agreement constitute the entire agreement
of the parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof and
thereof. This Agreement may not be amended except in a writing signed by the
Underwriter and the Company.
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If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
CUMETRIX DATA SYSTEMS CORP.
By:
-------------------------------------
Max Toghraie
Chief Executive Officer
Confirmed and accepted as of
the date first above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & COMPANY, INC.
By:
------------------------------
Name:
Title:
39