Exhibit 1(i).
Form of Underwriting Agreement
Form of Underwriting Agreement
540,000 Shares of Common Stock
and 1,080,000 Redeemable Common Stock Purchase Warrants
XETAL, INC.
UNDERWRITING AGREEMENT
New York, New York
_________, 1997
Worthington Capital Group, Inc.
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Ladies and Gentlemen:
Xetal, Inc., a Utah corporation (the "Company"), confirms its agreement with
Worthington Capital Group, Inc., ("you", the "Underwriter" or "Worthington") as
follows: The Company retains Worthington as its exclusive agent to sell (the
"Offering"), on a best efforts basis, a minimum of 300,000 shares (the
"Shares") of the Company's common stock, $0.001 par value per share (the
"Common Stock") and 600,000 redeemable common stock purchase warrants (the
"Public Warrants") and a maximum of 540,000 shares of Common Stock and
1,080,000 Public Warrants, at a price to the public of $5.00 per share of
Common Stock and $0.10 per Public Warrant, each such Public Warrant entitling
the holder to purchase one (1) share of Common Stock during an offering period
commencing on the date hereof and expiring on _______________________, 1997,
unless extended by the mutual consent of the Company and the Underwriter for u
p to an additional thirty (30) days (such period, as same may be extended,
being hereinafter referred to as the "Offering Period"). The shares of Common
Stock and the Public Warrants are being offered separately and are separately
transferable immediately upon issuance. Each Public Warrant is exercisable for
a period of four years from _____________, 1998 until _____________, 2002 and
entitles the holder to purchase one (1) share of Common Stock at an initial
exercise price of $5.00, subject to prior redemption by the Company as more
fully described in the Registration Statement and Prospectus referred to below.
Such 540,000 shares of Common Stock and 1,080,000 Public Warrants are
hereinafter collectively referred to as the "Securities". The Company also
proposes to issue and sell to you warrants (the "Underwriter's Warrants") at a
purchase price of $0.0001 per Underwriter's Warrant pursuant to the
Underwriter's Warrant Agreement entitling the holder to purchase an aggregate
of 162 ,000 shares of Common Stock and 324,000 Public Warrants entitling the
holder to purchase 324,000 shares of Common Stock exercisable for a period of
four years from ______________, 1998 until ___________________, 2002 at an
initial exercise price of $8.00, subject to adjustment in amount pro rata in
the event all of the Common Stock and/or Warrants are not sold in the Offering.
The securities issuable upon exercise of the Underwriter's Warrants are
hereinafter referred to as the "Underwriter's Securities." The shares of
Common Stock issuable upon exercise of the Public Warrants (including the
Public Warrants issuable upon exercise of the Underwriter's Warrants) are
hereinafter sometimes referred to as the "Warrant Shares". The Securities, the
Common Stock, the Public Warrants, the Underwriter's Warrants, the
Underwriter's Securities and the Warrant Shares are more fully described in the
Registration Statement and the Prospectus referred to below.
Representations and Warranties. (a) The Company, a Utah corporation, which has
three wholly-owned subsidiaries, APO Health, Inc., a New York corporation,
Dental Alternatives, Inc., a New York corporation and Universal Medical
Distributors, Inc., a ____________ corporation (individually a "Subsidiary" and
collectively the "Subsidiaries"), represents and warrants to, 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:
The Company has prepared and filed with the Securities and Exchange Commission
(the "Commission") a registration statement, and an amendment or amendments
thereto, on Form SB-2 (No. 333-20525), including any related preliminary
prospectus ("Preliminary Prospectus"), for the registration of the Securities,
the shares of Common Stock, the Public Warrants, the Underwriter's Warrants,
the Underwriter's Securities and the Warrant Shares 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
thereunder. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriter and
will not file any other amendment thereto to which the Underwriter shall have
objected in writing after having been furnished with a copy thereof. Except as
the contex t may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the Prospectus, financial statements, schedules, exhibits
and all other documents or information incorporated by reference therein and
all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the rules and regulations), is hereinafter
called the "Registration Statement", and the form of prospectus in the form
first filed with the Commission pursuant to Rule 424(b) of the rules and
regulations, is hereinafter called the "Prospectus". 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. 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 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 Prospectus at the time of filing
thereof conformed with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectuses, the Registration
Statement or Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misl eading, except that this
representation and warranty does not apply to statements made in reliance upon
and in conformity with written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, Registration Statement or Prospectus or any
amendment or supplement thereto.
When the Registration Statement becomes effective and at all times subsequent
thereto up to the Closing Date (hereinafter defined) and each Option Closing
Date (hereinafter defined), if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the
requirements of the Act and the Rules and Regulations; neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, contains
or will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under 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 information furnished to the Company in writing by or on behalf
of the Underwriter (as set forth in paragraph 1(a)(ii) hereof) expressly for
use in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto. Each of the Subsidiaries are
wholly-owned subsidiaries of the Company. Each of the Company and the
Subsidiaries has been duly organized and is validly existing as a corporation
in good standing under the laws of the state of its incorporation. Except as
set forth in the Prospectus, neither the Company nor the Subsidiaries own an
equity interest in any corporation, partnership, trust, joint venture or other
business entity. Each of the Company and the Subsidiaries 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 where the failure(s)
to be so qualified, licensed and in good standing, individually or in the
aggregate, would not materially and adversely affect the condition, financial
or otherwise, or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company and the
Subsidiaries. Each of the Company and the Subsidiaries has all requisite power
and authority (corporate and other), and has obtained any and all
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), necessary to own or lease its properties and conduct its
business as described in the Prospectus, or is subject to no material liability
or disability by reason of the failure to obtain such authorizations,
approvals, orders, licenses, certificates, franchises and permits; each of the
Company and the Subsidiaries is and has been doing business in compliance with
all such authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state, loca l and foreign laws, rules and
regulations and neither the Company nor the Subsidiaries have received any
notice of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operations, properties, business, or results of operations of the
Company and the Subsidiaries. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the business of the Company and the Subsidiaries as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact necessary to make the statements contained
therein not misleading in light of the circumstances in wh ich they were made.
The Company has a duly authorized, issued and outstanding capitalization as set
forth in the Prospectus, and will have the adjusted capitalization set forth
therein on the Closing Date (hereinafter defined) and the Option Closing
Date(hereinafter defined), 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 as
described in the Prospectus. The Securities, the Common Stock, the Public
Warrants, the Underwriter's Warrants, the Underwriter's Securities and the
Warrant Shares (collectively, hereinafter sometimes referred to as the "IPO
Securities") and all other securities issued or issuable by the Company conform
or, when issued and paid for, will conform, in all material respects to all
statements with respect thereto contained in the Registration Statement and the
Prospect us. All issued and outstanding securities of the Company and its
Subsidiaries have been duly authorized and validly issued and are fully paid
and non-assessable and the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or the
Subsidiaries or similar contractual rights granted by the Company or the
Subsidiaries. The IPO Securities are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and will
conform to the description 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 IPO Securities has been duly and validly taken; and the certificates
representing the IPO Securities are in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof of the IPO Securities to be sold by
the Underwriter hereunder, the purchasers of the IPO Securities, will acquire
good and marketable title to such IPO Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
The financial statements of the Company together with the related notes and
schedules thereto, included in the Registration Statement, each Preliminary
Prospectus and the Prospectus fairly present the financial position, income,
changes in cash flow, changes in stockholders' equity and the results of
operations of the Company and the Subsidiaries at the respective dates and for
the respective periods to which they apply and the pro forma financial
information included in the Registration Statement, each Preliminary Prospectus
and the Prospectus presents fairly on a basis consistent with that of the
audited financial statements included therein, the Company's and the
Subsidiaries' pro forma net income or loss per share, as the case may be, pro
forma net tangible book value, and the pro forma capitalization and 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 material adverse change or
development involving a material change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operation of the Company or the
Subsidiaries 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 and the Subsidiaries conforms in
all material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus.
The Company and each of its Subsidiaries (A) has paid all federal, state,
local, and foreign taxes for which it is liable, including, but not limited to,
withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (B) has
established adequate reserves for such taxes which are not due and payable, and
(C) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
No transfer tax, stamp duty or other similar tax is payable by or on behalf of
the purchasers of the IPO Securities in connection with (A) the purchase of and
the issuance and transfer by the Company of the IPO Securities and (B) the
consummation by the Company of any of its obligations under this Agreement.
The Company and each of its Subsidiaries maintains insurance policies,
including, but not limited to, general liability, product liability if
applicable and property insurance, which insures the Company and its
Subsidiaries and their employees, against such losses and risks generally
insured against by comparable businesses. The Company and its Subsidiaries (A)
have not failed to give notice or present any insurance claim with respect to
any matter, including but not limited to the Company's or the Subsidiaries'
business, property or employees, under the insurance policy or surety bond in a
due and timely manner, (B) does not have any disputes or claims against any
underwriter of such insurance policies or surety bonds or has not failed to pay
any premiums due and payable thereunder, and (C) has not failed to comply with
all conditions contained in such insurance policies and surety bonds. To the
Company's knowledge 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 and/or its
Subsidiaries.
There is no action, suit, proceeding, inquiry, arbitration, investigation,
litigation or governmental proceeding (including, without limitation, those
having jurisdiction over 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 or its
Subsidiaries which (A) questions the validity of the capital stock of the
Company, its Subsidiaries or this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, the Underwriter's
Warrant Agreement, or the Warrant Agreement, (B) 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
material respects), or (C) if adversely determined, might materially and
adversely affect the condition, financial or otherwise, or the business affairs
or business prospects, earnings, liabilities, prospects, stockholders' equity,
value, properties, business or assets of the Company and its Subsidiaries.
The Company has full legal right, power and authority to authorize, issue,
deliver and sell the IPO Securities, enter into this Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement and to consummate the
transactions provided for herein and therein; and each of this Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement have been duly and
properly authorized, executed and delivered by the Company. This Agreement,
the Underwriter's Warrant Agreement and the Warrant Agreement each constitute a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, and neither the Company's issue and sale
of the IPO Securities or execution or delivery of this Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement or 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 State ment, 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 or its Subsidiaries pursuant to the
terms of, (A) the certificate of incorporation or by-laws of the Company or its
Subsidiaries (B) any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders agreement, note, loan or credit agreement
or any other agreement or instrument to which the Company or its Subsidiaries
is a party or by which it is or may be bound or by which its properties or
assets (tangible or intangible) are or may be subject, or any indebtedness, or
(C) any statut e, judgment, decree, order, rule or regulation applicable to the
Company or its Subsidiaries by 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 its Subsidiaries
or any of their activities or properties, in each case except as described in
the Prospectuses and except for conflicts, breaches, violations, defaults,
creations or impositions which do not and would not have a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs, position, shareholder's equity, value, operation, properties, business
or results of operations of the Company and its Subsidiaries.
No consent, approval, authorization or order of, and no filing with, any court,
regulatory body, government agency or other body, domestic or foreign which has
not theretofore been obtained, is required for the issuance of the IPO
Securities pursuant to the Prospectus and the Registration Statement, the
issuance of the Underwriter's Warrants, the execution, delivery or performance
of this Agreement, the Underwriter's Warrant Agreement and the Warrant
Agreement, and the transactions contemplated hereby and thereby, including,
without limitation, any waiver of any preemptive, first refusal or other rights
that any entity or person may have for the issue and/or sale of any of the IPO
Securities, except such as have been or may be obtained under the Act or may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the IPO Securities and the Underwriter's purchase
of the Underwriter's Warrants to be sold by the Company hereunder and there
under.
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 and/or its Subsidiaries 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/or its Subsidiaries and constitute the legal, valid and binding agreement
of the Company and its Subsidiaries, enforceable against the Company and its
Subsidiaries, in accordance with its terms. The descriptions in the
Registration Statement of agreements, contracts and other documents and
statutes and regulations are accurate and fairly present the information
required to be shown with respect thereto by Form SB-2, and there are no
contracts or other documents which are required by the Act to be described in
the Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required, and the exhibits which have been
filed are complete and correct copies of the documents of which they purport to
be copies.
Subsequent to the respective dates as of which information is set forth in the
Registration Statement and Prospectus, and except as may otherwise be indicated
or contemplated herein or therein, the Company nor any of its Subsidiaries have
(A) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (B) entered into any transaction other than in
the ordinary course of business, or (C) declared or paid any dividend or made
any other distribution on or in respect of its capital stock of any class, and
there has not been any change in the capital stock, or any change in the debt
(long or short term) or liabilities or material change in or affecting the
business affairs or prospects, management, stockholders' equity, properties,
business, financial operations or assets of the Company and its Subsidiaries.
Except as described in the final Prospectus no default exists in the due
performance and observance of any term, covenant or condition of any license,
contract, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other material agreement
or instrument evidencing an obligation for borrowed money, or any other
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries may
be bound or to which the property or assets (tangible or intangible) of the
Company or any of its Subsidiaries is subject or affected, which default would
have a material adverse effect on the condition, financial or otherwise,
earnings, business affairs, position, stockholder's equity, value, operation,
properties, business or results of operations of the Company and the
Subsidiaries.
Each of the Company and its Subsidiaries has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. There are no pending
investigations involving the Company or any of the Subsidiaries by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company or
any Subsidiary 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 Subsidiary, or any predecessor entity, and none
has ever occurred. No representation question exists respecting the employees
of the Compa ny or any Subsidiary and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or its
Subsidiary. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or its
Subsidiaries. No labor dispute with the employees of the Company or its
Subsidiaries exists, or, to the knowledge of the Company is imminent.
Except as described in the Prospectus, each of the Company and its Subsidiaries
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
"multi employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company and/or each Subsidiary does not
maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust
created thereunder) has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code, which could
subject the Company or the Subsidiaries 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. Neither
the Company or any Subsidiary has never completely or partially withdrawn from
a "multi employer plan".
The Company and its Subsidiaries have not taken and will not take, directly or
indirectly and the Company and its Subsidiaries will use their best efforts to
ensure that any of their employees, directors, stockholders or affiliates
(within the meaning of the Rules and Regulations) of any of the foregoing has
not taken or will not take, directly or indirectly, any action designed to or
which has constituted or which might be expected to cause or result in, under
the Exchange Act, or otherwise, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the IPO
Securities or otherwise.
None of the patents, patent applications, trademarks, service marks, trade
names and copyrights, and licenses and rights to the foregoing presently owned
or held by the Company or any of its Subsidiaries are in dispute, to the
Company's knowledge, or are in any conflict with the right of any other person
or entity. The Company and its Subsidiaries (i) own or have the license or
other 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 patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of their 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, except as set forth in the Prospectuses and (ii) e
xcept as set forth in the Prospectus, are 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 patent, trademark, service
▇▇▇▇, tradename, copyright, know-how, technology or other intangible asset,
with respect to the use thereof or in connection with the conduct of their
business or otherwise.
Neither the Company nor any of its Subsidiaries have received any notice of
infringement of or conflict with asserted rights of others with respect to any
trademark, service ▇▇▇▇, trade name or copyright or other intangible asset used
or held for use by it in connection with the conduct of its business which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, might have a material adverse effect on the condition, financial or
otherwise, or the business affairs, position, properties, results of operations
or net worth of the Company and its Subsidiaries.
The Company and its Subsidiaries have good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal property
stated in the Prospectus, to be owned or leased by it free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects, or
other restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and payable.
The Company has caused to be duly executed legally binding and enforceable
agreements pursuant to which each of its officers, directors or any person or
entity deemed to be an affiliate of the Company and any stockholders of the
Company has agreed not to, directly or indirectly, offer to sell, sell, grant
any option for the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of any securities issued by the Company (either pursuant to
Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than 24 months following
the effective date of the Registration Statement without the prior written
consent of the Underwriter except that only with respect to 10,000 common
shares held by certain trusts and no more, the period is 6 months and not 24
months, and that for a period of 5 years following the Effective Date of the
Registration Statement any such security which has been issued and is
outstanding o n the effective date of the Registration Statement and is to be
sold or otherwise disposed of pursuant to such Rule 144 with the consent of the
Underwriter shall only be sold or otherwise disposed of through the
Underwriter. The Company will cause the Transfer Agent, as defined below, to
▇▇▇▇ an appropriate legend on the face of stock certificates representing all
of such securities and to place "stop transfer" orders on the Company's stock
ledgers.
The Company has caused to be duly executed binding and enforceable agreements
with respect to all of the outstanding loans made to the Company from time to
time wherein the Company and each lender has agreed that the Company will not
make payment of principal or accumulated interest thereon for an eighteen (18)
month period from the completion of the Offering except that Pre-Bridge Notes
in the principal amount of $250,000 and Bridge Notes in the principal amount of
$250,000 plus interest thereon are being paid from the proceeds of the
Offering.
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 IPO Securities hereunder or any
other arrangements, agreements, understandings, payments or issuance with
respect to the Company, the Subsidiaries or any of their officers, directors,
stockholders, partners, employees or affiliates that may affect the
Underwriter's compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD"), except for the sum of $25,000 previously
paid by the Company to the Underwriter and the Company is aware that the
Underwriter shall compensate any of its personnel who may have acted in such
capacities as they shall determine in their sole discretion.
The Common Stock and the Public Warrants have been approved for quotation on
the National Association of Securities Dealers, Inc. Electronic Bulletin Board
and upon notice of issuance, listing on the Boston Stock Exchange ("BSE").
Neither the Company, the Subsidiaries nor any of their respective officers,
employees, agents or any other person acting on behalf of the Company or the
Subsidiaries 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 official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or foreign)
or other person who was, is, or may be in a position to help or hinder the
business of the Company or the Subsidiaries (or assist the Company or the
Subsidiaries in connection with any actual or proposed transaction) which (A)
might subject the Company or the Subsidiaries, or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (B) if not given in the past, might have had
a materially adverse effect on the assets, business or operations of the
Company or the Subsidiaries, or (C) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company
or the Subsidiaries. The Company's and the Subsidiaries' internal accounting
controls are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
Except as set forth in the Prospectus, no officer, director, or stockholder of
the Company or any Subsidiary, or any "affiliate" or "associate" (as these
terms are defined in Rule 405 promulgated under the Rules and Regulations) of
any of the foregoing persons or entities has or has had, either directly or
indirectly, (A) an interest in any person or entity which (1) furnishes or
sells services or products which are furnished or sold or are proposed to be
furnished or sold by the Company or any Subsidiary, or (2) purchases from or
sells or furnishes to the Company or any Subsidiary any goods or services, or
(B) a beneficiary interest in any contract or agreement to which the Company or
any Subsidiary is a party or by which it may be bound or affected. 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 th e
Company or any Subsidiary, and any officer, director, and 5% or more
stockholders (as such term is defined in the Prospectus) of the Company or any
Subsidiary, or any partner, affiliate or associate of any of the foregoing
persons or entities.
Any certificate signed by any officer of the Company and delivered to the
Underwriter or to Underwriter's Counsel (as defined herein) shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
The minute books of the Company and each Subsidiary have been made available to
the Underwriter and contains a complete summary of all meetings and actions of
the directors and stockholders of the Company and each Subsidiary since the
time of its incorporation, and reflects all transactions referred to in such
minutes accurately in all material respects.
Except and to the extent described in the Prospectus, no holders of any
securities of the Company or the Subsidiaries or of any options, warrants or
other convertible or exchangeable securities of the Company or the Subsidiaries
have the right to include any securities issued by the Company or the
Subsidiaries in the Registration Statement or any registration statement under
the Act and no person or entity holds any anti-dilution rights with respect to
any securities of the Company or the Subsidiaries.
The Company has as of the effective date of the Registration Statement (a)
entered into employment agreements with ▇▇. ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ on terms
and conditions satisfactory to the Underwriter, and (ii) purchased "Key-Man"
insurance on the life of ▇▇. ▇▇▇ ▇▇▇▇▇ in the sum of $1,000,000 which names the
Company as the sole beneficiary on terms and conditions satisfactory to the
Underwriter.
The Company has entered into a Warrant Agreement with respect to the Public
Warrants substantially in the form filed as Exhibit __________ to the
Registration Statement and a Underwriter's Warrant Agreement with respect to
the Underwriter's Warrants substantially in the form filed as Exhibit _________
to the Registration Statement, each with American Stock Transfer and Trust
Company in form and substance satisfactory to the Underwriter.
Immediately prior to the effective date of the Registration Statement there
shall be no more than an aggregate of 1,125,000 shares of Common Stock issued
and outstanding (including any and all (a) securities with equivalent rights as
the Common Stock, (b) Common Stock or such equivalent securities, issuable upon
the exercise of options, warrants and other contract rights, and (c) Securities
convertible directly or indirectly into Common Stock or such equivalent
securities, and excluding a maximum of 100,000 shares of Common Stock which are
issuable upon exercise of options which may be granted pursuant to the
Company's 1996 Stock Option Plan.
Subsequent to the date hereof and prior to any Closing Date or Option Closing
Date except as otherwise described in or contemplated by the Prospectuses, the
Company will not issue or acquire any equity securities.
2. Purchase, Sale and Delivery of the Securities.
On the basis of the warranties, representations and agreements herein
contained, and subject to the satisfaction of all the terms and conditions of
this Agreement, the Company agrees to engage the Underwriter, and the
Underwriter agrees to serve as the Company's exclusive agent to sell, on a best
efforts basis, a minimum of 300,000 shares of Common Stock and 600,000 Public
Warrants (the "Minimum Offering") and a maximum of 540,000 shares of Common
Stock and 1,080,000 Public Warrants (the "Maximum Offering"), less, in the case
of each such security, an underwriting commission of ten percent (10%) of the
gross sale price of each such security sold in the Offering by deduction from
the proceeds of the Offering. The Underwriter may allow a concession not
exceeding $_______ per share of Common Stock and $______ per Public Warrant to
Selected Dealers who are members of the NASD, and to certain foreign dealers,
and such dealers may reallow to NASD members and to certain foreign dealers a
co ncession not exceeding $_____ per share of Common Stock and $____ per Public
Warrant.
The proceeds from the sale of the Securities shall be deposited by the
Underwriter upon receipt thereof in an escrow account at Chase Manhattan Bank,
New York, New York (the "Escrow Account") until the Minimum Offering amount of
300,000 shares of Common Stock and 600,000 Public Warrants are sold and
$1,560,000 is deposited in the Escrow Account. If the Minimum Offering amount
is not sold and the proceeds thereof deposited into the Escrow Account prior to
the expiration of the Offering Period, the Offering proceeds received from
investors will be promptly refunded to the investors in full without interest
thereon and/or deduction of any kind therefrom.
Delivery of the Securities and payment therefore shall be made at 10:00 a.m.,
New York time on each Closing Date and Option Closing Date, if any, as
hereinafter defined, at the offices of the Underwriter or such other location
as may be agreed upon by you and the Company. Delivery of certificates for the
Common Stock and Public Warrants (in definitive form and registered in such
names and in such denominations as you shall request by written notice to the
Company delivered at least four business days' prior to the Closing Date or
Option Closing Date, if any), shall be made to you for the account of the
purchasers of the Securities against payment of the purchase price therefor by
certified or bank check or wire transfer payable in New York Clearing House
funds to the order of the Company. The Company will make such certificates
available for inspection at least one business day prior to the Closing Date
and Option Closing Date, if any, at such place as you shall designate.
Closing Date
The "Closing Date" shall be not later than the fourth business day following
receipt of the Minimum Offering amount in cleared funds and thereafter as
additional funds are received up to the Maximum Offering amount at such times
as you shall determine (the "Option Closing Date") and advise the Company by at
least three full business days' notice.
Covenants and Agreements of the Company. The Company covenants and agrees with
the Underwriter as follows:
The Company shall use its best efforts to cause the Registration Statement and
any amendments thereto to become effective as promptly as practicable (such
Registration Statement to be in form and substance satisfactory to the
Underwriter and its counsel) 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 Exchange Act before termination of the offering of the
Securities 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 unless required under the Act, the Exchange Act or the Rules and
Regulations thereunder or which is not in compliance with the Act, the Exchange
Act or the Rules and Regulations.
As soon as the Company is advised or obtains knowledge thereof, the Company
will advise the Underwriter and confirm the notice in writing, (I) when the
Registration Statement, as amended, becomes effective, if the provisions of
Rule 430A promulgated under the Act will be relied upon, when the Prospectus
has been filed in accordance with said Rule 430A and when any post-effective
amendment to the Registration Statement becomes effective, (ii) of the issuance
by the Commission of any stop order or of the initiation, or the threatening,
of any proceeding, suspending 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
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 juris
diction 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 commission 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.
The Company shall file the Prospectus (in form and substance satisfactory to
the Underwriter and its counsel) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424 (b) (or, if applicable and if consented to by the Underwriter, pursuant to
Rule 424 (b)(47).
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 by the
Underwriter in connection with the offering of the IPO 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 prospectus to
which the Underwriter or Doros & Brescia, P.C. ("Underwriter's Counsel"), shall
reasonably object unless required under the Act or the Rules and Regulations
thereunder.
The Company shall take all action, in cooperation with the Underwriter, at or
prior to the time the Registration Statement becomes effective, to qualify the
IPO Securities for offering and sale under the securities laws of such
jurisdictions as the Underwriter may designate to permit the continuance of
sales and dealings therein for as long as may be necessary to complete the
distribution, 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 su ch
jurisdiction to continue such qualification. It is agreed that Underwriter's
Counsel (or its designees) shall perform all such required Blue Sky legal
services.
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 and the Exchange Act, as now and hereafter amended
and by the Rules and Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the IPO
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 IPO Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the reasonable 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
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act and the Rules and Regulations, 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 reasonably 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 reasonably request.
During the time when a prospectus relating to the IPO Securities is required to
be delivered under the Act, the Company will use its best efforts to comply
with all requirements imposed upon it by the Act and the Securities Exchange
Act of 1934 (the "Exchange Act"), as now and hereafter amended and by the
Regulations, as from time to time in force, as necessary to permit the
continuance of sales of or dealings in the IPO Securities in accordance with
the provisions hereof and the Prospectus and the Company shall use its best
efforts to keep the Registration Statement current and effective so long as a
Prospectus is required to be delivered in connection with the sale of the IPO
Securities by the Underwriter or by dealers effecting transactions therein in
connection with the initial public offering thereof. If at any time when a
prospectus relating to the IPO Securities is required to be delivered under the
Act, any event shall have occurred as a result of which, in the reasonable opin
ion of counsel for the Company or counsel for the Underwriter, the Prospectus
as then amended or supplemented (or the prospectus contained in a new
registration statement filed by the Company pursuant to Paragraph 4(y),
includes an 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 the light of the circumstances under which they were made, not misleading,
or if, in the reasonable opinion of either such counsel, it is necessary at any
time to amend the Prospectus (or the prospectus contained in such new
registration statement) to comply with the Act, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act and will furnish to you
copies thereof.
The Company will reserve and keep available for issuance that maximum number of
its authorized but unissued shares of Common Stock which are issuable upon
exercise of the Public Warrants and issuable upon exercise of the Underwriter's
Warrants (including the underlying securities) outstanding from time to time.
The Company will timely prepare and file at its sole cost and expense one or
more post-effective amendments to the Registration Statement or a new
registration statement as required by law as will permit holders of the Public
Warrants and Underwriter's Warrants (collectively the "Warrants") to be
furnished with a current prospectus in the event and at such time as the
Warrants are exercised, and the Company will use its best efforts and due
diligence to have the same be declared effective (with the intent that the same
be declared effective as soon as the Warrants become exercisable) and to keep
the same effective so long as the Warrants are outstanding. The Company will
deliver a draft of each such post-effective amendment or new registration
statement to the Underwriter at least ten days prior to the filing of such
post-effective amendment or registration statement.
So long as any of the Warrants remain outstanding, the Company will timely
deliver and supply to its Warrant agent sufficient copies of the Company's
current Prospectus, as will enable such Warrant agent to deliver a copy of such
Prospectus to any Warrant or other holder where such Prospectus delivery is by
law required to be made.
So long as any of the Warrants remain outstanding, the Company shall continue
to employ the services of a firm of independent certified public accountants
reasonably acceptable to the Underwriter in connection with the preparation of
the financial statements to be included in any registration statement to be
filed by the Company hereunder, or any amendment or supplement thereto. During
the same period, the Company shall employ the services of a law firm(s)
reasonably acceptable to the Underwriter in connection with all legal work of
the Company, including the preparation of a registration statement to be filed
by the Company hereunder, or any amendment or supplement thereto.
So long as any of the Warrants remain outstanding, the Company shall continue
to appoint a Warrant agent for the Warrants, who shall be reasonably acceptable
to the Underwriter.
Upon the initial Closing Date, the Company shall have entered into an agreement
with the Underwriter in form reasonably satisfactory to the Underwriter (the
"Consulting Agreement"), pursuant to which the Underwriter will be retained as
a management and financial consultant for a two year period commencing as of
the initial Closing Date, and will be paid a fee of $67,500, all of which will
be paid upon the initial Closing Date by deduction from the proceeds of the
Offering.
As soon as practicable, but in any event not later than 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 (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
12 consecutive months after the effective date of the Registration Statement.
During a period of seven years after the date hereof, the Company will furnish
to its stockholders, as soon as practicable, annual reports (including
financial statements audited by independent public accountants) and unaudited
quarterly reports of earnings, and will deliver to the Underwriter:
concurrently with furnishing such quarterly reports to its stockholders,
statements of income of the Company for each quarter in the form filed on Form
10-Q with the Commission and certified by the Company's principal financial or
accounting officer; 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 certificate thereon of independent certified public accountants; as soon
as they are available, copies of all reports (financial or other) mailed to
stockholders; 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; every press release and every material news item or
article of interest to the financial community in respect of the Company or
its affairs which was released or prepared by or on behalf of the Company;
and any additional information of a public nature concerning the Company
(and any future subsidiaries) or its businesses which the Underwriter may
reasonably request.
During such seven-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and
will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
The Company will maintain American Stock Transfer and Trust Company as its
Transfer Agent and Registrant (the "Transfer Agent") and counsel, accounting
firm and financial printer for its Common Stock and Public Warrants all of whom
shall be reasonably acceptable to the Underwriter. Such Transfer Agent shall,
for a period of two years following the Closing Date, deliver to the
Underwriter the daily securities position of the Company's stockholders of
record and for a period of three (3) years thereafter the monthly securities
position.
The Company will furnish to the Underwriter or on the Underwriter's order,
without charge, at such place as the Underwriter may designate, copies of each
Preliminary Prospectus, the Registration Statement, any pre-effective or
post-effective amendments thereto (two of which copies will be signed and will
include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any Prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such quantities as the Underwriter may reasonably request.
On or before the effective date of the Registration Statement, the Company
shall provide the Underwriter with true copies of duly executed, legally
binding and enforceable agreements pursuant to which for a period of not less
than 24 months after the effective date of the Registration Statement, (except
that only with respect to 10,000 common shares held by certain trusts and no
more the period shall be 6 months after the effective date of the Registration
Statement) each holder of securities issued by the Company and outstanding at
the effective date of the Registration Statement (including securities
convertible into Common Stock of the Company) agrees that it or he or she will
not, directly or indirectly, issue, offer to sell, sell, grant an option for
the sale of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of any of such securities (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein withou
t the prior written consent of the Underwriter (collectively, the "Lock-up
Agreements"). During the two (2) year period commencing with the effective
date of the Registration Statement, the Company shall not issue any securities
under Regulation S and will not, without the prior written consent of the
Underwriter, sell, contract or offer to sell, issue, transfer, assign, pledge,
distribute, or otherwise dispose of, directly or indirectly, any debt security
of the Company or any shares of Common Stock or any options, rights or warrants
with respect to any shares of Common Stock (other than upon exercise of options
or warrants referred to in the Registration Statement, or with respect to
transactions between the Company and its lenders and purchasers of mortgage
backed securities). On or before the Closing Date, the Company shall deliver
instructions to the Transfer Agent authorizing it to place appropriate legends
on the certificates representing the securities subject to the Lock-up
Agreements and to place appropriate stop transfer orders on the Company's
ledgers.
The Company has not taken and will not take, directly or indirectly, and the
Company will use their its efforts to ensure that any of its employees,
officers, directors, stockholders or affiliates (within the meaning of the
Rules and Regulations) will take, directly or indirectly, any action designed
to, or which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
The Company shall apply the net proceeds from the sale of the IPO Securities in
the manner, and subject to the conditions, 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 except as described
in the Prospectuses.
The Company shall timely file all such reports, forms or other documents as may
be required (including, but not limited to, a Form SR as may be required
pursuant to 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 filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act and the Rules and Regulations.
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
of the Registration Statement) 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.
The Company shall cause the Common Stock and the Public Warrants to be listed
on the NASD Electronic Bulletin Board and on the BSE, and for a period of seven
(7) years from the date hereof, use its best efforts to maintain such listings
of the Common Stock and the Public Warrants to the extent outstanding.
For a period of five (5) years from the Closing Date, the Company shall furnish
to the Underwriter at the Underwriter's request and at the Company's sole
expense, (i) the list of holders of all of the Company's securities, (ii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel to the Company, and (iii) daily consolidated transfer
sheets relating to the Common Stock and the Public Warrants but not more than
six (6) times per year.
As soon as practicable, (i) but in no event more than five business days before
the effective date of the Registration Statement, file a Form 8-A with the
Commission providing for the registration under the Exchange Act of the
Securities and (ii) but in no event more than 30 days from the effective date
of the Registration Statement, take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Records Service in order to satisfy
the requirements for "manual exemption" in those states where available and to
maintain such inclusion for as long as the IPO Securities are outstanding.
Until the completion of the distribution of the IPO Securities, the Company
shall not without the prior written consent of the Underwriter and
Underwriter's Counsel, 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.
For a period of three (3) years after the effective date of the Registration
Statement, the Underwriter shall have the right to designate, one (1)
individual for election to the Company's Board of Directors ("Board") and the
Company shall cause such individual to be elected to the Board. In the event
the Underwriter shall not have designated such individual at the time of any
meeting of the Board or such person is unavailable to serve, the Company shall
notify the Underwriter of each meeting of the Board and an individual
designated by the Underwriter shall be permitted to attend all meetings of the
Board and to receive all notices and other correspondence and communications
sent by the Company to members of the Board. Such individual shall be
reimbursed for all out-of-pocket expenses incurred in connection with his or
her service on, or attendance at meetings of, the Board. The Company shall
provide its outside directors with compensation in the form of cash and/or
options on its C ommon Stock as deemed appropriate and similar for similar
companies.
The Company hereby grants to the Underwriter a right of first refusal on the
terms and subject to the conditions set forth in this paragraph, for a period
of three years from the effective date of the Registration Statement, to
purchase for its account or to sell for the account of the Company or its
present or future subsidiaries, any securities of the Company or any of its
present or future subsidiaries, with respect to which the Company or any of its
present or future subsidiaries may seek a public or private sale. The Company,
for a period of five years from the effective date of the Registration
Statement, will consult, and will cause such present or future subsidiaries to
consult with the Underwriter with regard to any such offering or placement and
will offer, or cause any of its present or future subsidiaries to offer, to the
Underwriter the opportunity, on terms not more favorable to the Company or such
present or future subsidiary than they can secure elsewhere, to purchase or
sell any such securities. If the Underwriter fails to accept in writing such
proposal made by the Company or any of its present or future subsidiaries
within fifteen business days after receipt of a notice containing such
proposal, then the Underwriter shall have no further claim or right with
respect to the proposal contained in such notice. If, thereafter, such
proposal is materially modified, the Company shall again consult, and cause
each present or future subsidiary to consult, with the Underwriter in
connection with such modification and shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided hereinabove with respect to the original proposal.
For a period equal to the lesser of (i) seven (7) years from the date hereof,
and (ii) the date of the sale to the public of the securities issuable upon
exercise of the Underwriter's Warrants and the Underwriter's Securities, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Form SB-2 for the registration under the Act of the securities
issuable upon exercise of the Underwriter's Warrants and the Underwriter's
Securities.
Commencing one year from the date hereof, the Company shall pay the
Underwriter a commission equal to seven percent (7%) of the aggregate exercise
price of the Public Warrants, payable on the date of the exercise thereof on
terms provided in the Warrant Agreement. The Company will not solicit the
exercise of the Public Warrants other than through the Underwriter and will not
authorize any other dealer or engage in such solicitation without the
Underwriter' prior written consent. Commission will be payable only if (i)
the Public Warrant is exercised at least 12 months after the dated of this
Prospectus; (ii) the market price of the Common Stock on the date that the
Public Warrant is exercised is greater than the exercise price of the Warrants;
(iii) the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc.; (iv) the Public Warrant is not held in
a discretionary account; (v) disclosure of the compensation arrangements is
made at the time of the exercise of the Warrant; (vi) the holder of the Public
Warrant has stated in writing that the exercise was solicited and designated in
writing the soliciting broker-dealer; and (vii) the solicitation of exercise of
the Public Warrant was not in violation of Rule 10b-6 promulgated under the
Exchange Act. However, no fees will be payable to the Underwriter in
connection with Public Warrants voluntarily exercised without solicitation by
the Underwriter.
On or before the effective date of the Registration Statement, the Company
shall have retained a financial public relations firm reasonably satisfactory
to the Underwriter, which shall be continuously engaged from such engagement
date to a date twelve (12) months from the Closing Date.
Payment of Expenses.
The Company hereby agrees to pay on each of the Closing Date and the Option
Closing Date (to the extent not paid at the Closing Date) all expenses and fees
(other than fees of Underwriter's Counsel, except as provided in (iv) below)
upon presentation of an itemized schedule of expenses incident to the
performance of the obligations of the Company under this Agreement, the
Underwriter's Warrant Agreement and the 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 with respect
thereto) of the Registration Statement and the Prospectus and any amendments
and supplements thereto and the printing, mailing (including the payment of
postage with respect thereto) and delivery of this Agreement, the Underwriter's
Warrant Agreement, t he Warrant Agreement, and related documents, including the
cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriter and such dealers as the Underwriter may reasonably request, in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of the IPO Securities, including, but not limited to, (x) the purchase
by the Underwriter of the Underwriter's Warrants from the Company, (y) the
consummation by the Company of any of its obligations under this Agreement, the
Underwriter's Warrant Agreement, and the Warrant Agreement, and (z) the sale of
the IPO Securities by the Underwriter in connection with the distribution
contemplated hereby to the extent that expenses relate to the printing,
engraving, issuance and delivery of the IPO Securities, (iv) the qualification
of the IPO Securities under state or foreign securities or "Blue Sky" laws and
determination of t he 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 legal fees of counsel Doros & Brescia, P.C., of $40,000
plus disbursements incurred by them in connection therewith, (v) advertising
costs and expenses, including but not limited to costs and expenses in
connection with the "road show", information meetings and presentations, bound
volumes and prospectus memorabilia and "tomb-stone" advertisement expenses (not
to exceed $5,000), (vi) costs, fees and expenses in connection with due
diligence investigations, including but not limited to the costs of background
checks on key management and/or personnel of the Company, (vii) fees and
expenses of the transfer agent, warrant agent and registrar, (viii)
applications for assignments of a rating of the IPO Securities by qualified
rating agencies, (ix) the fees payable to th e Commission, and the NASD, and
(x) the fees and expenses incurred in connection with the listing of the IPO
Securities on the NASD Electronic Bulletin Board, the BSE and any other
exchange.
If this Agreement is terminated by the Underwriter in accordance with the
provisions of Section 6, Section 10(a) or Section 12, the Company shall
reimburse and indemnify the Underwriter for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel (and in
addition to fees and expenses of Underwriter's Counsel incurred pursuant to
Section 5(a)(iv) above for which the Company shall remain liable) less any
amounts previously paid, provided, however, that in the event of a termination
pursuant to Section 10(a) hereof such obligation of the Company shall not
exceed $50,000.
The Company further agrees that, in addition to the expenses payable pursuant
to subsection (a) of this Section 5, it will pay to the Underwriter by
certified or bank cashier's check or, at the election of the Underwriter, by
deduction from the proceeds of the Offering (i) on the initial Closing Date and
each Option Closing Date a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds of the Offering less the amount of $25,000
which was previously paid by the Company to the Underwriter and (ii) on the
initial Closing Date a Consulting Fee of $50,000.
The Underwriter shall not be responsible for any expense of the Company or
others or for any charge or claim related to the Offering in the event that the
sale of the IPO Securities as contemplated hereunder is not consummated.
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 and its Subsidiaries 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 or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of its
covenants and obligations hereunder and to the following further conditions:
The Registration Statement, which shall be in form and substance satisfactory
to Underwriter's Counsel, shall have become effective no 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 IPO Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the Commiss
ion 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.
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 under 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 and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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 and its Subsidiaries, the validity of the IPO
Securities, the Underwriter's Warrants, the Registration Statement, the
Prospectus and other related matters as the Underwriter may request and
Underwriter's Counsel shall have received such papers and information as they
request to enable them to pass upon such matters.
At the Closing Date, the Underwriter shall have received the favorable opinion
of B. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. counsel to the Company, dated as of the Closing Date,
addressed to the Underwriter and in form and substance satisfactory to
Underwriter's Counsel, to the effect that: each of the Company and the
Subsidiaries (A) has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction; (B) to such
counsel's knowledge has all requisite corporate power and authority to own or
lease its properties and conduct its business as described in the Prospectus;
(C) to such counsel's knowledge 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 (D) to such counsel's knowledge, 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 adversely affect the business,
operations, condition, financial or otherwise, or the earnings, business
affairs or prospects, properties, business, assets or results of operations of
the Company and the Subsidiaries taken as a whole. To the knowledge of such
counsel the disclosures in the Registration Statement concerning the effects of
federal, state and local laws, rules and regulations on the Company's or any
Subsidiaries' business as currently conducted and as contemplated are correct
in all material respects and do not omit to state a fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made: to such counsel's knowledge, except as set forth in the
Prospectus, the Company nor any Subsidiary does not own an equity interest in
any other corporation, partnership, joint venture, trust or other business
entity; to such counsel's knowledge the Company has a duly authorized, issued
and outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization", and, to such counsel's
knowledge, the Company nor any Subsidiary is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement and as
described in the Prospectus. The IPO Securities, and all other securities
issued or issuable by the Company, conform in all material respects to all
statements with respect thereto contained in the Registration Statement and the
Prospectus. To the knowledge of such counsel all issued and outstanding
securities of the Company and the Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable; the holders thereof have
no contractual rights of rescission with respect thereto, and are not subject
to personal liability under the laws of the State of Utah as currently in
effect by reason of being such holders; and none of such securities were issued
in violation of the preemptive rights of any holders of any security of the
Company. The IPO Securities to be sold by the Company hereunder and under the
Underwriter's Warrant Agreement and the Warrant Agreement are not and will not
be subject to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and non-assessable
and conform to the description 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 IPO Securities when issued will be duly and validly taken; and the
certificates representing the IPO Securities are in due and proper form. The
Public Warrants and the Underwriter's Warrants constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and payment
therefore the number and type of securities of the Company called for thereby.
Upon payment the issuance and delivery pursuant to this Agreement of the IPO
Securities to be sold by the Company hereunder, the purchasers thereof, will
acquire good and marketable title to the IPO Securities free and clear of any
pledge, lien, charge, claim, encumbrance, pledge, security interest, or other
restriction or equity of any kind whatsoever. 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, to such
counsel's knowledge, no stop order suspending the use of the Preliminary
Prospect us, the Registration Statement or 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; each of the Preliminary Prospectus,
the Registration Statement, and the Prospectus and any amendments or supplement
thereto (other than the financial statements 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. to the best of such counsel's knowledge, (A) there
are no agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (or required to be filed under the Exchange Act if upon
such filing they w ould be incorporated, in whole or in part, by reference
therein) and the Prospectus and filed as exhibits thereto, and the exhibits
which have been filed are substantially correct copies of the documents of
which they purport to be copies; (B) the descriptions in the Registration
Statement and the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company or any Subsidiary is a party
or by which it is bound, including any document to which the Company or any
Subsidiary is a party or by which it is bound, incorporated by reference into
the Prospectus and any supplement or amendment thereto, are accurate in all
material respects and fairly represent the information required to be shown by
Form SB-2; (C) there is not pending or threatened against the Company or any
Subsidiary any action, arbitration, suit, proceeding, inquiry, investigation,
litigation, governmental or other proceeding (including, without limitation,
those having jurisdiction over 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 or any
Subsidiary which (1) 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), (2)
questions the validity of the capital stock of the Company or any Subsidiary or
this Agreement, the Underwriter's Warrant Agreement or the Warrant 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) except as disclosed in the Prospectus, there is
no action, suit or proceeding pending, or threatened, against or affecting the
Company or any Subsidiary before a ny court or arbitrator or governmental body,
agency or official (or any basis thereof known to such counsel) in which an
adverse decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company and the Subsidiaries 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 Warrant Agreement or which in any manner draws into question the validity
or enforceability of this Agreement, the Underwriter's Warrant Agreement or the
Warrant Agreement; the Company has full legal right, power and authority to
enter into this Agreement, the Underwriter's Warrant Agreement and the Warrant
Agreement and to consummate the transactions provided for herein and therein;
and this Agreement, the Underwriter's Warrant Agreement and the Warrant
Agreement has been duly authorized, executed and delivered by the Company.
Each of this Agreement, the Underwriter's Warrant Agreement and the Warrant
Agreement assuming due authorization, execution and delivery by each other
party hereto 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 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), and neither the Company's
execution or delivery of this Agreement, the Underwriter's Warrant Agreement
and the Warrant Agreement, its performance hereunder or thereunder, its
consummation of the transactions contemplated herein or therein, or the conduct
of its business as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any 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 or the
Subsidiaries pursuant to the terms of, (A) the certificate of incorporation or
by-laws of the Company or the Subsidiaries, (B) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or instrument
to known to such counsel which the Company or any of the Subsidiaries is a
party or by which it is or may be bound or to which any of its properties or
assets (tangible or intangible) is or may be subject, or any indebtedness, or
(C) any statute, judgment, decree, order, rule or regulation applicable to the
Company or any of the Subsidiaries of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body domestic or foreign,
having jurisdiction over the Company or any of the Subsidiaries or any of its
activities or properties, except for conflicts, breaches, violations, defaults,
creations or impositions which do not and would not have a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs, position, shareholder's equity, value, operations, properties,
business or results of operations of the Company and the Subsidiaries taken as
a whole; except as described in the Prospectus, no consent, approval,
authorization or order, and no filing with, any court, regulatory body,
government agency or other body (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 IPO Securities pursuant to the Prospectus and the
Registration Statement, the issuance of the Underwriter's Warrants, the
performance of this Agreement, the Underwriter's Warrant Agreement and the
Warrant Agreement and the transactions contemplated hereby and thereby; the
properties and business of the Company and the Subsidiaries conform to the
description thereof contained in the Registration Statement and the Prospectus;
to such counsel's knowledge and except as described in the Prospectus neither
the Company nor any of the Subsidiaries is in breach of, or in default under,
any term or provision of any license, contract, indenture, mortgage,
installment sale agreement, deed of trust, lease, voting trust agreement,
stockholders' agreement, partnership agreement, note, loan or credit agreement
or any other agreement or instrument evidencing an obligation for borro wed
money, or any other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries may
be bound or to which the property or assets (tangible or intangible) of the
Company or any of the Subsidiaries is subject or affected, which could
materially adversely affect the Company or any of the Subsidiaries; and neither
the Company nor any of the Subsidiaries is in violation of any term or
provision of its Certificate of Incorporation or By-Laws, or in violation of
any franchise, license, permit, judgment, decree, order, statute, rule or
regulation the result of which would materially and adversely affect the
condition, financial or otherwise, or the earnings, business affairs, position,
shareholders' equity, value, operation, properties, business or results of
operations of the Company and the Subsidiaries taken as a whole; to the
knowledge of such counsel and except as described in the Prospectus the Company
and the Subsidiaries owns or possesses, free and clear of all liens or
encumbrances and rights thereto or therein by third parties, the requisite
licenses or other rights to use all trademarks, service marks, copyrights,
service names, trade names, 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
or any Subsidiary), and to the best of such counsel's knowledge after
reasonable investigation, there is no claim or action by any person pertaining
to, or proceeding, pending, or threatened, which challenges the exclusive
rights of the Company or any Subsidiary 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 or any Subsidiary's business
(including, without limitations, any such licenses or rights described in the
Prospectus as be ing owned or possessed by the Company or any Subsidiary). the
IPO Securities have been approved for listing on the NASD Electronic Bulletin
Board and the Company's Registration Statement on Form 8-A under the Exchange
Act has become effective; to such counsel's knowledge, the persons listed under
the caption "PRINCIPAL STOCKHOLDERS" in the Prospectus are the respective
"beneficial owners" (as such phrase is defined in Regulation 13d-3 under the
Exchange Act) of the securities set forth opposite their respective names
thereunder as and to the extent set forth therein; to such counsel's knowledge,
except as described 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; to such counsel's knowledge, except as
described in the Pro spectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the IPO Securities hereunder or the
financial consulting arrangement or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriter's
compensation, as determined by the NASD; the Lock-up Agreements are legal,
valid and binding obligations of the parties thereto, enforceable against each
such party and any subsequent holder of the securities subject thereto 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 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; (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 various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company or the Subsidiaries, 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.
At each Option Closing Date, if any, the Underwriter shall have received an
opinion letter from B. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., counsel to the Company, dated the
Option Closing Date, addressed to the Underwriter and in form and substance
satisfactory to Underwriter's Counsel confirming as of such Option Closing Date
the statements made in its opinion delivered on the Closing Date.
On or prior to each of the Closing Date and the Option Closing Date, if any,
Underwriter's Counsel shall have been furnished such documents, certificates
and opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in subsection (c) of this Section
6, or in order to evidence the accuracy, completeness or satisfaction of any of
the representations, warranties or conditions of the Company and its
Subsidiaries, or herein contained.
Prior to each Closing Date and each Option Closing Date, if any, (i) there
shall have been no adverse change nor development involving a prospective
change in the condition, financial or otherwise, prospects, stockholders'
equity or the business activities of the Company and the Subsidiaries taken as
a whole, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company or any Subsidiary, (iii)
neither the Company nor any Subsidiary shall be in default under any provision
of any instrument relating to any outstanding indebtedness; (iv) neither the
Company nor any of the Subsidiaries shall have issued any securities (other
than the IPO Securities and the Underwriter's Warrants) or declared or paid any
dividend or made any distribution in respect of its capital stock of any class
and there has not been any change in the capital or any change in the debt
(long or short term) or liabilities or obligations of the Company or any
Subsidiary (contingent or otherwise); (v) no material amount of the assets of
the Company or the Subsidiaries shall have been pledged or mortgaged, except as
set forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company or any Subsidiary, 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 adversely affect the business,
operations, management prospects or financial condition or assets of the
Company or the Subsidiaries taken as a whole, except as set forth in the
Registration Statement and Prospectus: and (vii) no stop order shall have been
issued u nder the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
At each of the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received a certificate of the principal executive
officer and the chief financial or chief accounting officer of the Company,
dated the Closing Date or 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: The representations and
warranties in this Agreement of the Company and its Subsidiaries 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 and its Subsidiaries have complied with
all agreements and covenants and satisfied all conditions contained in this
Agreement on their part to be performed or satisfied at or prior to such
Closing Date or Option Closing Date, as the case may be; No stop order
suspending the effectiveness of the Registration Statement or any part thereof
has been issued, and n o proceedings for that purpose have been instituted or
are pending or are contemplated or threatened under the Act; 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 nor 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 not misleading and neither the
Preliminary Prospectus or 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 under which they were made, not misleading; and Since the dates
as of which information is given in the Registration Statement and the
Prospectus, (A) there must not have been any mat erial change in the shares of
Common Stock or liabilities of the Company or any Subsidiary except as set
forth in or contemplated by the Prospectus; (B) there must not have been any
material adverse change in the general affairs, management, business, financial
condition or results of operations of the Company or any Subsidiary, whether or
not arising from transactions in the ordinary course of business, as set forth
in or contemplated by the Prospectus; (C) the Company and each Subsidiary must
not have sustained any material loss or interference with its business from any
court or from legislative or other governmental action, order or decree,
whether foreign or domestic, or from any other occurrence, not described in the
Registration Statement and Prospectus; (D) there must not have occurred any
event that makes untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or Prospectus or that is
not reflected in the Registration St atement or Prospectus but should be
reflected therein in order to make the statements or information therein, in
light of the circumstances in which they were made, not misleading in any
material respect; (E) the Company and each Subsidiary must not have incurred up
to and including the Closing Date or the Option Closing Date, as the case may
be, other than in the ordinary course of its business, any material liabilities
or obligations, direct or contingent; (F) the Company and each Subsidiary must
not have paid or declared any dividends or other distributions on its capital
stock; (G) the Company and each Subsidiary must not have entered into any
transactions not in the ordinary course of business; (H) 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 the short-term borrowings in the
ordinary course of business) of the Company or any Subsidiary; (i) the Company
and each Subsidiary must not have sustained any material loss or damage to its
property or assets, whether or not insured; and (J) 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 subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
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.
At the time this Agreement is executed, the Underwriter shall have received a
letter, dated such date, addressed to the Underwriter in form and substance
satisfactory (including the non-material nature of the changes or decreases, if
any, referred to in clause (iii) below) in all respects to the Underwriter and
Underwriter's Counsel, from ▇▇▇▇▇▇ & ▇▇▇▇▇▇: confirming that they are
independent accountants with respect to the Company and the Subsidiaries within
the meaning of the Act and the applicable Rules and Regulations; stating that
it is their opinion that the financial statements of the Company and the
Subsidiaries included in the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the Act and
the Rules and Regulations thereunder and that the Underwriter may rely upon the
opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ with respect to the financial statements and
supporting schedules included in the Registration Statement; stating that, on
th e basis of a limited review which included a reading of the latest available
unaudited interim financial statements of the Company and the Subsidiaries
(with an indication of the date of the latest available unaudited interim
financial statements), a reading of the latest available minutes of the
stockholders and board of directors and the various committees of the boards of
directors of the Company and the Subsidiaries, consultations with officers and
other employees of the Company and the Subsidiaries 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, if any, of the Company and the Subsidiaries
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
accepte d accounting principles applied on a basis substantially consistent
with that of the audited financial statements of the Company and the
Subsidiaries included in the Registration Statement, or (B) at a specified date
not 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 and the Subsidiaries, or any decrease in the stockholders' equity
or net current assets or net assets of the Company and the Subsidiaries as
compared with amounts shown in the ________________, 19__ 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; setting forth,
at a date not later than five (5) days prior to the date of the Registration
Statement, the amount of liabilities of the Company and the Subsidiaries
(including a breakdown of comm ercial paper and notes payable to banks) ;
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 and the Subsidiaries 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 the Subsidiaries and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement; stating that they have in addition carried
out certain specified procedures, not constituting an audit, with respect to
certain pro forma financial information whic h is included in the Registration
Statement and the Prospectus and that nothing has come to their attention as a
result of such procedures that caused them to believe such unaudited pro forma
financial information does not comply in form in all respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that the
pro forma adjustments have not been properly applied to the historical amounts
in the compilation of that information; stating that they have not during the
immediately preceding five (5) year period brought to the attention of any 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; and statements
as to such other matters incident to the transaction contemplated hereby as the
Underwriter may reasonably request.
At the Closing Date and each Option Closing Date, if any, the Underwriter shall
have received from ▇▇▇▇▇▇ & ▇▇▇▇▇▇, a letter, dated as of the Closing Date or
the Option Closing Date, as the case may be, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (i) of this
Section, except that the specified date in the referred to letter shall be a
date not more than five days prior to the Closing Date or the Option Closing
Date, as the case may be, and, if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that they have carried out
procedures as specified in clause (v) of subsection (i) of this Section 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 su ch clause (v).
On each of the Closing Date and Option Closing Date, if any, there shall have
been duly tendered to the Underwriter the appropriate number of IPO Securities.
No order suspending the sale of the IPO Securities in any jurisdiction
designated by the Underwriter pursuant to subsection (e) of Section 4 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.
On or before the Closing Date, the Common Stock and the Public Warrants shall
have been approved for quotation on the NASD Electronic Bulletin Board and
shall have been authorized upon official notice of issuance for trading on the
BSE.
On or before the Closing Date, there shall have been delivered to the
Underwriter the Lock-up Agreements, in form and substance satisfactory to
Underwriter's Counsel.
On or before the Closing Date, the Company shall have executed the financial
consulting agreement with the Underwriter, in final form and substance
satisfactory to the Underwriter.
On or before the Closing Date, the Company shall have executed and delivered to
the Underwriter, (i) the Underwriter's Warrant Agreement substantially in the
form filed as Exhibit ________ to the Registration Statement in final form and
substance satisfactory to the Underwriter, and (ii) the Underwriter's Warrants
in such denominations and to such designees as shall have been provided to the
Company.
If any condition to the Underwriter's obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the
case may be, is not so fulfilled, the Underwriter may terminate this Agreement
or, if the Underwriter so elects, it may waive any such conditions which have
not been fulfilled or extend the time for their fulfillment.
Indemnification.
The Company agrees to indemnify and hold harmless the Underwriter (for purposes
of this Section 7 "Underwriter" shall include the officers, directors,
partners, employees, agents and counsel of the Underwriter, and each person, if
any, who controls the Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against
any and all losses, claims, damages, expenses or liabilities, joint or several
(and actions in respect thereof), whatsoever (including but not limited to any
and all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), as such are incurred, to which the Underwriter or such controlling
person may become subject under the Act, the Exchange Act, or any other statute
or at common law or otherwise or under the laws of foreign countries, arising
out of or based upon any untrue statement or alleged untrue statem ent of a
material fact contained (i) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any time new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the IPO Securities; or (iii) in any application or
other document or written communication (in this Section 7 collectively called
"Application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the IPO
Securities under the securities laws thereof or filed with the Commission, any
securities commission or agency, the NASD, the BSE or any securities exchange;
or 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 the light of the circumstan ces under which
they were made), unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company with
respect to the Underwriter by or on behalf of such Underwriter expressly for
use in any Preliminary Prospectus, the Registration Statement or Prospectus, or
any amendment thereof or supplement thereto, or in any Application, as the case
may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
The Underwriter agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the Registration Statement, and
each other 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 Prospectus or any
amendment thereof or supplement thereto or in any Application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to the Underwriter by 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 Prospectus d irectly
relating to the transactions effected by the Underwriter in connection with
this offering. The Company acknowledges that the statements with respect to
the public offering of the IPO Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriter expressly for use therein.
Promptly after receipt by an indemnified party under this Section 7 of notice
of the commencement of any action, suit or proceeding, such indemnified party
shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from s uch indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties 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 or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying pa rties (in which case the indemnifying parties shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. 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 was not unreasonably withheld. In order to
provide for just and equitable contribution in any case in which (i) an
indemnified party makes claim for indemnification pursuant to this Section 7,
but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 7 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect
thereof) (A) in such proportion as is appropriate to reflect the relative
benefits received by each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand, from the offering of the IPO S
ecurities 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 (i) 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 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 necessary to make the statements
made, in light o the circumstances under which they were made, not misleading
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 or
payable by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to above in
this subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d) the Underwriter shall not be required to contribute any amount
in excess of t he underwriting discount applicable to the IPO Securities sold
by the Underwriter hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company 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, subject in each case
to this subparagraph (d), Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to 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 subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution
agreement set forth above shall be in addition to any liabilities which any
indemnifying party may have at common law or otherwise.
Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of the Company submitted pursuant hereto, shall be
deemed to be representations, warranties and agreements at the Closing Date and
any Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and its Subsidiaries and the
respective indemnity agreements contained in Section 7 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Underwriter, the Company, any controlling person of the
Underwriter or the Company, and shall survive termination of this Agreement or
the issuance and delivery of the IPO Securities to the Underwriter.
Effective Date. This Agreement shall become effective at 10:00 a.m., New York
City time, on the first full business day following the day on which the
Registration Statement becomes effective.
Termination.
Subject to subsection (b) of this Section 10, the Underwriter shall have the
right to terminate this Agreement, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in the Underwriter's opinion
will in the immediate future materially disrupt the financial markets; or (ii)
any material adverse change in the financial markets shall have occurred; or
(iii) if trading on the New York Stock Exchange, the American Stock Exchange,
or in the over-the-counter market shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required on the over-the-counter market by the
NASD or by order of the Commission or any other government authority having
jurisdiction; or (iv) 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 d eclared in
the United States; or (v) if a banking moratorium has been declared by a state
or federal authority; or (vi) if a moratorium in foreign exchange trading has
been declared; or (vii) if the Company and/or any of its Subsidiaries, shall
have sustained a loss material or substantial to the Company 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 IPO Securities; or (vii) if there shall have been such a material adverse
change in the condition (financial or otherwise), business affairs or prospects
of the Company and/or any of its Subsidiaries, whether or not arising in the
ordinary course of business, which would render, in the Underwriter's judgment,
either of such parties unable to perform satisfactorily its respective
obligations as contemplated by this Agreement or the Registra tion Statement,
or such 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 IPO Securities.
If this Agreement is terminated by the Underwriter in accordance with the
provisions of Section 10(a), the Company shall promptly reimburse and indemnify
the Underwriter for all of its actual out-of-pocket expenses, including the
fees and disbursements of counsel for the Underwriter in an amount not to
exceed $50,000 (less amounts previously paid pursuant to Section 5(c) above).
Notwithstanding any contrary provision contained in this Agreement, if this
Agreement shall not be carried out within the time specified herein, or any
extension thereof granted to the Underwriter, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied (including, without limitation,
pursuant to Section 6 or Section 12) then, the Company shall promptly reimburse
and indemnify the Underwriter for all of their actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriter (les s
amounts previously paid pursuant to Section 5 (c) above). 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 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 affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
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 ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Jr., President,
with a copy to Doros & Brescia, P.C., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. Notices to the Company
shall be directed to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇. ▇▇▇ ▇▇▇▇▇, Chief Executive Officer, with a copy to B.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
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 Underwriters and assigns and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of or
by virtue of this Agreement or any provisions herein contained. No purchaser
of Securities from the Underwriter shall be deemed to be a successor by reason
merely of such purchase.
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 the choice of
law or conflict of laws principles.
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.
Entire Agreement; Amendments. This Agreement, the Underwriter's Warrant
Agreement and the Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof.
This Agreement may not be amended except in a writing, signed by the
Underwriter and the Company.
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
among us.
Very truly yours, XETAL, INC.
By:
▇▇. ▇▇▇ ▇▇▇▇▇, Chief Executive Officer
By:
▇▇▇▇▇ ▇▇▇▇▇, President
Confirmed and accepted as of
the date first above written
WORTHINGTON CAPITAL GROUP, INC.
By:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Exhibit 1(iii).
Form of Underwriters Warrant.
UNDERWRITER'S WARRANT AGREEMENT dated as of __________, 1997 between XETAL,
INC., a Utah corporation (the "Company") and WORTHINGTON CAPITAL GROUP, INC.,
its successors, designees and assigns (hereinafter referred to as the
"Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to Worthington Capital Group, Inc.
warrants (the "Underwriter's Warrants") to purchase up to an aggregate of
162,000 shares of the Company's common stock, $0.001 par value per share (the
"Common Stock"), and up to 324,000 warrants (the "Underlying Warrants"), each
Underlying Warrant entitling the holder to purchase one share of Common Stock.
(One share of Common Stock and two Underlying Warrants hereinafter referred to
as the "Warrant Security" and the Common Stock and Underlying Warrants being
collectively referred to as the "Warrant Securities"); and
WHEREAS, the Underwriter has agreed pursuant to the underwriting agreement
(the "Underwriting Agreement") dated as of the date hereof among the
Underwriter and the Company to act as to act as the exclusive agent for the
Company, on a best efforts basis, in connection with the Company's proposed
public offering of up to 540,000 shares of Common Stock and 1,080,000
redeemable common stock purchase warrants (the "Warrants") at a public offering
price of $5.00 per share of Common Stock and $.10 per Warrant (the "Public
Offering"); and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date and Option Closing Date (s) (as such term's
are defined in the Underwriting Agreement) by the Company to the Underwriter in
consideration for, and as part of the Underwriter's compensation in connection
with, and pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of an aggregate sixteen dollars and twenty cents
($16.20), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Grant. The Underwriter is hereby granted the right to purchase, at any
time from ____________, 1998 until 5:00 P.M., New York time, on
_______________, 2002, up to an aggregate of 162,000 shares of Common Stock
(the "Shares") and 324,000 Underlying Warrants at an initial exercise price
(subject to adjustment as provided in Section 8 hereof) of $8.00 per share of
Common Stock and $0.160 per Underlying Warrant subject to the terms and
conditions of this Agreement. The shares of Common Stock and the Underlying
Warrants will be separately transferable immediately upon issuance. Each
Underlying Warrant is exercisable to purchase one share of Common Stock at an
initial exercise price of $8.00 from _____________, 1998 until 5:00 P.M. New
York time on ____________, 2002, at which time the Underlying Warrants will
expire. Except as set forth herein, the Underlying Warrants issuable upon
exercise of the Underwriter's Warrants are in all respects identical to the
Warrants being sold by Underwriter to the public pursuant to the terms and
provisions of the Underwriting Agreement and the Warrant Agreement (as such
term is defined in Section 8.8 hereof.) Except as set forth herein, the shares
issuable upon exercise of the Underwriter's Warrants are in all respects
identical to the shares of Common Stock being sold by the Underwriter to the
public pursuant to the terms and provisions of the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall
be in the form set forth in Exhibit A, attached hereto and made a part hereof,
with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Underwriter's Warrants initially are
exercisable at an aggregate initial exercise price (subject to adjustment as
provided in Section 8 hereof) per Warrant Security set forth in Section 6
hereof payable by certified or official bank check in New York Clearing House
funds, subject to adjustment as provided in Section 8 hereof. Upon surrender
of a Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Exercise Price (as hereinafter defined)
for the Warrant Securities purchased at the Company's principal offices
(presently located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ 11572) the
registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the shares of Common
Stock so purchased and a certificate or certificates for the Underlying
Warrants so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holders thereof, in whole or
part (but not as to fractional shares of the Common Stock and Underlying
Warrants). In the case of the purchase of less than all Warrant Securities
purchasable under any Warrant Certificate, the Company shall cancel said
Warrant Certificate upon the surrender thereof and shall execute and deliver a
new Warrant Certificate of like tenor for the balance of the Warrant Securities
purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the method of payment set
forth in Section 3.1 and in lieu of any cash payment required thereunder, the
Holder(s) of the Underwriter's Warrants shall have the right at any time and
from time to time to exercise the Underwriter's Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1.
The number of shares of Common Stock to be issued pursuant to this Section 3.2
shall be equal to the difference between (a) the number of shares of Common
Stock in respect of which the Underwriter's Warrants are exercised and (b) a
fraction, the numerator of which shall be the number of shares of Common Stock
in respect of which the Underwriter's Warrants are exercised multiplied by the
Exercise Price (as hereinafter defined) and the denominator of which shall be
the Market Price. The number of Underlying Warrants to be issued pursuant to
this Section 3.2 shall be equal to the difference between (a) the number of
Underlying Warrants in respect of which the Underwriter's Warrants are
exercised and (b) a fraction, the numerator of which shall be the number of
Underlying Warrants in respect of which the Warrants are exercised multiplied
by the Exercise Price (as hereinafter defined) and the denominator of which
shall be the Market Price.
3.3 Definition of Market Price. As used herein, the phrase "Market Price" at
any date shall be deemed to be (i) when referring to the Common Stock, the last
reported sale price, or, in case no such reported sale takes place on such day,
the average of the last reported sale prices for the last three (3) trading
days, in either case as officially reported by the principal securities
exchange on which the Common Stock is listed or admitted to trading or by the
Nasdaq National Market ("NNM"), or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted by NNM, the
average closing bid price as furnished by the National Association of
Securities Dealers, Inc. ("NASD") through Nasdaq or similar organization
including the NASD Electronic Bulletin Board if Nasdaq is no longer reporting
such information, or if the Common Stock is not quoted on Nasdaq, or such
similar organization as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it or (ii)
when referring to an Underlying Warrant, the last reported sale price, or, in
the case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the
Underlying Warrants are listed or admitted to trading or by NNM, or, if the
Underlying Warrants are not listed or admitted to trading on any national
securities exchange or quoted by NNM, the average closing bid price as
furnished by the NASD through Nasdaq or similar organization including the NASD
Electronic Bulletin Board if Nasdaq is no longer reporting such information, or
if the Underlying Warrant is not quoted on Nasdaq or such similar organization,
the Market Price of an Underlying Warrant shall equal the difference between
the Market Price of the Common Stock and the Exercise Price (as hereinafter de
fined) of the Underlying Warrant. Notwithstanding the foregoing, for purposes
of Section 8, the Market Price of a share of Common Stock or an Underlying
Warrant shall be determined by reference to the relevant information set forth
above during the thirty (30) trading days immediately preceding the date of the
event requiring the determination of the Market Price (except that, in the
event of a public offering of shares of Common Stock, the Market Price of a
share of Common Stock or an Underlying Warrant shall be determined by reference
to the trading day immediately preceding the effective date of the public
offering and not such thirty (30) trading day period).
4. Issuance of Certificates. Upon the exercise of the Underwriter's Warrants,
the issuance of certificates for shares of Common Stock and Underlying Warrants
and/or other securities, properties or rights underlying such Underwriter's
Warrants and, upon the exercise of the Underlying Warrants, the issuance of
certificates for shares of Common Stock and/or other securities, properties or
rights underlying such Underlying Warrants, shall be made forthwith (and in any
event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions
of Sections 5 and 7 hereof) be issued in the name of, or in such names as may
be directed by, the Holder thereof; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid.
The Warrant Certificates and the certificates representing the Shares,
Underlying Warrants and the shares of Common Stock underlying such Underlying
Warrants (and/or other securities, property or rights issuable upon the
exercise of the Underwriter's Warrants or the Underlying Warrants) shall be
executed on behalf of the Company by the manual or facsimile signature of the
then present Chairman or Vice Chairman of the Board of Directors or President
or Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the then present Secretary
or Assistant Secretary of the Company. Warrant Certificates shall be dated the
date of execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant Certificate,
by its acceptance thereof, covenants and agrees that the Underwriter's Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Underwriter's Warrants may not be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part, for a
period of one (1) year from the date hereof, except to officers of the
Underwriters.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 8 hereof, the initial exercise price of each Underwriter Warrant shall
be $8.00 per share of Common Stock and $0.160 per Underlying Warrant. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall mean the initial
exercise price or the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Current Registration Under the Securities Act of 1933. The Underwriter's
Warrants, the Shares, the Underlying Warrants issuable upon exercise of the
Warrants and the shares of Common Stock issuable upon exercise of such
Underlying Warrants have been registered under the Securities Act of 1933, as
amended (the "Act"), pursuant to the Company's Registration Statement on Form
SB-2 (Registration No. 333-20525) (the "Registration Statement"). The Company
covenants and agrees to use its best efforts to maintain the effectiveness of
the Registration Statement for a period of five (5) years from its effective
date.
7.2 Contingent Registration Rights. In the event that, for any reason
whatsoever, the Company shall fail to maintain the effectiveness of the
Registration Statement for a period of five (5) years from its effective date
and, in any event, from and after the fifth (5th) anniversary of the effective
date of the Registration Statement, the Underwriter and other Holders shall
have, commencing the date of any such occasion, the contingent registration
rights ("Registration Rights") set forth in Sections 7.3 and 7.4 hereof.
7.3 Piggyback Registration. (a) If, at any time commencing after the effective
date of the Registration Rights and expiring on the seventh (7th) anniversary
of the effective date of the Registration Statement, the Company proposes to
register any of its securities under the Act, either for its own account or the
account of any other security holder or holders of the Company possessing
registration rights ("Other Stockholders") (other than pursuant to Form S-4,
Form S-8 or comparable registration statement), it shall give written notice,
at least thirty (30) days prior to the filing of each such registration
statement, to the Underwriter and to all other Holders of Underwriter's
Warrants, Shares, Underlying Warrants and/or shares of Common Stock issuable
upon exercise of the Underlying Warrants (collectively the "Registrable
Securities") of its intention to do so. If the Underwriter or other Holders of
Registrable Securities notify the Company within twenty-one (21) days after the
receipt of any such notice of its or their desire to include any such
securities in such proposed registration statement, the Company shall afford
the Underwriter and such other Holders of such securities the opportunity to
have any such securities registered under such registration statement.
(b) If the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise the
Underwriter and such other Holders as part of the written notice given pursuant
to Section 7.3(a) hereof. The right of the Underwriter or any such other
Holders to registration pursuant to this Section 7.3 shall be conditioned upon
their participation in such underwriting and the inclusion of their Registrable
Securities in the underwriting to the extent hereinafter provided. The
Underwriter and all other Holders proposing to distribute their securities
through such underwriting shall (together with the Company and any officers,
directors or other Stockholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
Underwriter of the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 7.3, if the Underwriter of
the underwriter or underwriters advises the Company in writing that marketing
factors require a limitation or elimination of the number of shares of Common
Stock or other securities to be underwritten, the Underwriter may limit the
number of shares of Common Stock or other securities to be included in the
registration and underwriting. The Company shall so advise the Underwriter and
all other Holders of Registrable Securities requesting registration, and the
number of shares of Common Stock or other securities that are entitled to be
included in the registration and underwriting shall be allocated among the
Underwriter and other Holders requesting registration, in each case, in
proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration at the time of
filing the registration statement.
(c) Notwithstanding the provisions of this Section 7.3, the Company shall have
the right at any time after it shall have given written notice pursuant to
Section 7.3(a) hereof (irrespective of whether a written request for inclusion
of any such securities shall have been made) to elect not to file any such
proposed registration statement, or to withdraw the same after the filing but
prior to the effective date thereof.
7.4 Demand Registration. (a) At any time commencing after the effective date
of the Registration Rights and ending on the fifth (5th) anniversary of the
effective date of the Registration Statement, the Holders of Registrable
Securities representing a "Majority" (as hereinafter defined) of such
securities (assuming the exercise of all of the Underwriter's Warrants and
Underlying Warrants) (the "Initiating Holders") shall have the right (which
right is in addition to the registration rights under Section 7.3 hereof),
exercisable by written notice to the Company, to have the Company prepare and
file with the Commission, on one occasion, a registration statement and such
other documents, including a prospectus, as may be necessary in the opinion of
both counsel for the Company and counsel for the Holders, in order to comply
with the provisions of the Act, so as to permit a public offering and sale of
their respective Registrable Securities for up to two hundred and seventy (270)
days by such Holders and any other Holders of Registrable Securities, as well
as any other security holders possessing similar registration rights, who
notify the Company within twenty-one (21) days after receiving notice from the
Company of such request.
(b) The Company covenants and agrees to give written notice of any registration
request under this Section 7.4 by any Holder or Holders to all other registered
Holders of Registrable Securities, as well as any other security holders
possessing similar registration rights, within ten (10) days after the date of
the receipt of any such registration request. (c) If the Initiating Holders
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 7.4(a) hereof. The right of any Holder to
registration pursuant to this Section 7.4 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent and subject to the
limitations provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities it holds. (d) The
Company shall (together with all Holders, officers, directors and other
stockholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
Underwriter of the underwriters selected for such underwriting by the
Initiating Holders, which underwriter(s) shall be reasonably acceptable to the
Underwriter. Notwithstanding any other provision of this Section 7.4, if the
Underwriter of the underwriter or underwriters advises the Initiating Holders
in writing that marketing factors require a limitation or elimination of the
number of shares of Common Stock or other securities to be underwritten, the
Underwriter may limit the number of shares of Common Stock or other securities
to be included in the registration and underwriting. The Company shall so
advise the Underwriter and all Holders of Registrable Securities requesting
registration, and the number of shares of Common Stock or other securities that
are entitled to be included in the registration and underwriting shall be
allocated among the Underwriter and other Holders requesting registration, in
each case, in proportion, as nearly as practicable, to the respective amounts
of securities which they had requested to be included in such registration at
the time of filing the registration statement. If the Company or any Holder of
Registrable Securities who has requested inclusion in such registration as
provided above disapproves of the terms of any such underwriting, such person
may elect to withdraw its securities therefrom by written notice to the
Company, the underwriter and the Initiating Holders. Any securities so
excluded shall be withdrawn from such registration. No securities excluded
from such registration by reason of such underwriters' marketing limitations
shall be included in such registration. To facilitate the allocation of shares
in accordance with this Section 7.4(d), the Company or underwriter or
underwriter selected as provided above may round the number of securities of
any holder which may be included in such registration to the nearest 100
shares.
(e) In the event that the Initiating Holders are unable to sell all of the
Registrable Securities for which they have requested registration due to the
provisions of Section 7.4(d) hereof and if, at that time, the Initiating
Holders are not permitted to sell Registrable Securities under Rule 144(k), the
Initiating Holders shall be entitled to require the Company to afford the
Initiating Holders an opportunity to effect one additional demand registration
under this Section 7.4.
(f) In addition to the registration rights under Section 7.3 and subsection (a)
of Section 7.4 hereof, at any time commencing on the date hereof and expiring
five (5) years thereafter any Holder of Registrable Securities shall have the
right, exercisable by written request to the Company, to have the Company
prepare and file, on one occasion, with the Commission a registration statement
so as to permit a public offering and sale for 270 days by any such Holder of
its Registrable Securities provided, however, that the provisions of Section
7.5(b) hereof, shall not apply to any such registration request and
registration and all costs incident thereto shall be at the expense of the
Holder or Holder's making such request. (g) Notwithstanding anything to the
contrary contained herein, if the Company shall not have filed a registration
statement for the Registrable Securities of the Initiating Holders or the
Holder(s) referred to in Section 7.5(f) above (the "Paying Holders"), within
the time period specified in Section 7.5(a) below, the Company shall upon the
written notice of election of the Initiating Holders or the Paying Holders, as
the case may be, repurchase (i) any and all Shares and/or Underlying Warrants
at the higher of the Market Price per share of Common Stock or per Underlying
Warrant, as the case may be, on (x) the date of the notice sent to the Company
under Section 7.4(a) or (f), as the case may be, or (y) the expiration of the
period specified in Section 7.5(a) and (ii) any and all Warrants at such Market
Price less the Exercise Price of such Warrant. Such repurchase shall be in
immediately available funds and shall close within five (5) business days after
the expiration of the period specified in Section 7.5(a).
7.5 Covenants of the Company With Respect to Registration. In connection with
any registration under Sections 7.3 and 7.4 hereof, the Company covenants and
agrees as follows: (a) The Company shall use its best efforts to file a
registration statement within sixty (60) days of receipt of any demand
therefor, shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish each Holder
desiring to sell Registrable Securities such number of prospectuses as shall
reasonably be requested. (b) The Company shall pay all costs (excluding fees
and expenses of Holder(s)' counsel and any underwriting or selling
commissions), fees and expenses in connection with all registration statements
filed pursuant to Sections 7.3 and 7.4 hereof including, without limitation,
the Company's legal and accounting fees, printing expenses, blue sky fees and
expenses. If the Company shall fail to comply with the provisions of Section
7.5(a), the Company shall, in addition to any other equitable or other relief
available to the Holder(s), extend the exercise period of the Underwriter's
Warrants by such number of days as shall equal the delay caused by the
Company's failure. (c) The Company will take all necessary action which may be
required in qualifying or registering the Registrable Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s); provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction. (d) The Company shall indemnify the
Holder(s) of the Registrable Securities to be sold pursuant to any registration
statement and each person, if any, who controls such Holders within the meaning
of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from such
registration statement but only to the same extent and with the same effect as
the provisions pursuant to which the Company has agreed to indemnify the
Underwriter contained in Section 7 of the Underwriting Agreement. (e) The
Holder(s) of the Registrable Securities to be sold pursuant to a registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 7 of the Underwriting
Agreement pursuant to which the Underwriter has agreed to indemnify the
Company. (f) For a period of one hundred eighty (180) days after the
effectiveness of any registration statement filed pursuant to Section 7.4
hereof, the Company shall not permit any other registration statement (other
than (1) a registration statement relating to the securities for which the
Company has granted demand registration rights, as described in the Prospectus
included in the Registration Statement, (2) a registration statement relating
to the shares of Common Stock issuable upon exercise of the Warrants issued to
the public pursuant to the Registration Statement, (3) a registration statement
relating to the securities for which the Company has granted piggyback
registration rights, as described in the Prospectus included in the
Registration Statement and (4) a registration statement filed on Forms S-4 or
S-8 to be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 7.4 hereof, without the prior written
consent of the Holders of the Registrable Securities representing a Majority of
such securities.
(g) The Company shall furnish upon request to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(h) The Company shall as soon as practicable after the effective date of any
registration statement filed pursuant to Sections 7.3 and 7.4 hereof, and in
any event within 15 months thereafter, make "generally available to its
security holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of the Act
and covering a period of at least 12 consecutive months beginning after the
effective date of the registration statement. (i) The Company shall deliver
promptly to each Holder participating in the offering requesting the
correspondence and memoranda described below and to the managing underwriters,
copies of all written correspondence between the Commission and the Company,
its counsel or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to the registration statement and permit
each Holder and underwriters to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss
the business of the Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times and as often as any such
Holder or underwriter shall reasonably request. (j) With respect to any
registration under Section 7.4 hereof, the Company shall enter into an
underwriting agreement with the managing underwriter selected for such
underwriting by the Initiating Holders or the Paying Holders, as the case may
be. Such agreement shall be satisfactory in form and substance to the Company,
each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms
as are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may, at
their option, require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such underwriters shall also
be made to and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters, except as they may relate to such Holders and
their intended methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in reference to the
Holders of Registrable Securities, shall mean in excess of fifty percent (50%)
of the then outstanding Underwriter's Warrants, Shares, Underlying Warrants
and/or shares of Common Stock issued upon exercise of the Underlying Warrants
that (i) are not held by the Company, an affiliate, officer, creditor, employee
or agent thereof or any of their respective affiliates, members of their
family, persons acting as nominees or in conjunction therewith and (ii) have
not been resold to the public pursuant to a registration statement filed with
the Commission under the Act.
(l) Nothing contained in this Agreement shall be construed as requiring the
Holder(s) to exercise their Underwriter's Warrants or Underlying Warrants prior
to the initial filing of any registration statement or the effectiveness
thereof.
(m) In addition to the Registrable Securities, upon the written request
therefor, by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including without limitation
restricted shares of Common Stock, options, warrants or any other securities
convertible into shares of Common Stock.
7.6 Restrictive Legends. In the event that the Company fails to maintain the
effectiveness of the Registration Statement, such that the exercise, in part or
in whole, of the Underwriter's Warrants and/or the Underlying Warrants are not,
at the time of such exercise, registered under the Act, any certificates
representing the Shares underlying the Underwriter's Warrants, the Underlying
Warrants underlying the Warrants and/or the shares of Common Stock underlying
the Underlying Warrants, and any of the other securities issuable upon exercise
of the Underwriter's Warrants shall bear the following restrictive legend: The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended ("Act"), and may not be offered or sold
except pursuant to (i) an effective registration statement under the Act, (ii)
to the extent applicable, Rule 144 under the Act (or any similar rule under
such Act relating to the disposition of securities), or (iii) an opinion of
counsel, if such opinion shall be reasonably satisfactory to counsel to the
issuer, that an exemption from registration under such Act is available.
8. Adjustments to Exercise Price and Number of Securities.
8.1 Computation of Adjusted Exercise Price. Except as hereinafter provided, in
the event the Company shall at any time after the date hereof issue or sell any
shares of Common Stock (other than the issuances or sales referred to in
Section 8.7 hereof), including shares held in the Company's treasury and shares
of Common Stock issued upon the exercise of any options, rights or warrants to
subscribe for shares of Common Stock and shares of Common Stock issued upon the
direct or indirect conversion or exchange of securities for shares of Common
Stock, for a consideration per share less than the Market Price in effect
immediately prior to the issuance or sale of such shares, or without
consideration, then forthwith upon such issuance or sale, the Exercise Price
shall (until another such issuance or sale) be reduced to the price (calculated
to the nearest full cent) equal to the quotient derived by dividing (i) an
amount equal to the sum of (a) the total number of shares of Common Stock
outstanding immediately prior to the issuance or sale of such shares,
multiplied by the Exercise Price in effect immediately prior to such issuance
or sale, and (b) the aggregate of the amount of all consideration, if any,
received by the Company upon such issuance or sale, by (ii) the total number of
shares of Common Stock outstanding immediately after such issuance or sale;
provided, however, that in no event shall the Exercise Price be adjusted
pursuant to this computation to an amount in excess of the Exercise Price in
effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock, as provided by Section 8.3
hereof. For the purposes of this Section 8 the term Exercise Price shall mean
the Exercise Price per share of Common Stock set forth in Section 6 hereof, as
adjusted from time to time pursuant to the provisions of this Section 8.
For the purposes of any computation to be made in accordance with this Section
8.1, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if either of such
securities shall be sold to underwriters or dealers for public offering without
a subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting
or purchase thereof by underwriters or dealers or other performing similar
services, or any expenses incurred in connection therewith.
(ii) In case of the issuance or sale (other than as a dividend or other
distribution on any stock of the Company) of shares of Common Stock for a
consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company and shall include any amounts payable to security holders or any
affiliates thereof, including without limitation, pursuant to any employment
agreement, royalty, consulting agreement, covenant not to compete, earnout or
contingent payment right or similar arrangement, agreement or understanding,
whether oral or written; all such amounts being valued for the purposes hereof
at the aggregate amount payable thereunder, whether such payments are absolute
or contingent, and irrespective of the period or uncertainty of payment, the
rate of interest, if any, or the contingent nature thereof; provided, however,
t hat if any Holder(s) does not agree with such evaluation, a mutually
acceptable independent appraiser shall make such evaluation, the cost of which
shall be borne by the Company.
(iii) Shares of Common Stock issuable by way of dividend or other distribution
on any stock of the Company shall be deemed to have been issued immediately
after the opening of business on the day following the record date for the
determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other than shares of
Common Stock into securities including shares of Common Stock shall be deemed
to involve the issuance of such shares of Common Stock for a consideration
other than cash immediately prior to the close of business on the date fixed
for the determination of security holders entitled to receive such shares, and
the value of the consideration allocable to such shares of Common Stock shall
be determined as provided in subsection (ii) of this Section 8.1.
(v) The number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares issued or issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of options,
rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
8.2 Options, Rights, Warrants and Convertible and Exchangeable Securities. In
case the Company shall at any time after the date hereof issue options, rights
or warrants to subscribe for shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock, for a
consideration per share less than the Market Price in effect immediately prior
to the issuance of such options, rights or warrants, or such convertible or
exchangeable securities, or without consideration, the Exercise Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 8.1 hereof, provided that: (a) The aggregate maximum number of shares
of Common Stock, as the case may be, issuable under such options, rights or
warrants shall be deemed to be issued and outstanding at the time such options,
rights or warrants were issued, and for a consideration equal to the minimum
purchase price per share provided for in such options, rights or warrants at
the time of issuance, plus the consideration (determined in the same manner as
consideration received on the issue or sale of shares in accordance with the
terms of the Underwriter's's Warrants), if any, received by the Company for
such options, rights or warrants. (b) The aggregate maximum number of shares of
Common Stock issuable upon conversion or exchange of any convertible or
exchangeable securities shall be deemed to be issued and outstanding at the
time of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of Common Stock in accordance with the terms of the
Underwriter's Warrants) received by the Company for such securities, plus the
minimum consideration, if any, receivable by the Company upon the conversion or
exchange thereof.
(c) If any change shall occur in the price per share provided for in any of the
options, rights or warrants referred to in subsection (a) of this Section 8.2,
or in the price per share at which the securities referred to in subsection (b)
of this Section 8.2 are convertible or exchangeable, such options, rights or
warrants or conversion or exchange rights, as the case may be, shall be deemed
to have expired or terminated on the date when such price change became
effective in respect of shares not theretofore issued pursuant to the exercise
or conversion or exchange thereof, and the Company shall be deemed to have
issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the
conversion or exchange of such convertible or exchangeable securities.
8.3 Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.4 Adjustment in Number of Securities. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 8, the number of Warrant
Securities issuable upon the exercise at the adjusted exercise price of each
Underwriter's Warrant shall be adjusted to the nearest full amount by
multiplying a number equal to the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Securities issuable upon exercise of
the Underwriter's Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price. Notwithstanding
anything contained herein to the contrary, the adjustment to the Exercise Price
provided for in this Section "8" shall be applied solely to the 324,000
Underlying Warrants issuable hereunder and there shall be no adjustment
applicable to the 162,000 shares of Common Stock issuable upon the exercise of
the Underwriter's Warrants. For purpose of this Section "8" the Exercise Price
for the Un derlying Warrants shall be $0.160 per Underlying Warrant.
8.5 Definition of Common Stock. For the purpose of this Agreement, the term
"Common Stock" shall mean (i) the class of stock designated as Common Stock in
the Certificate of Incorporation of the Company as may be amended as of the
date hereof, or (ii) any other class of stock resulting from successive changes
or reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
In the event that the Company shall after the date hereof issue securities
with greater or superior voting rights than the shares of Common Stock
outstanding as of the date hereof, the Holder, at its option, may receive upon
exercise of any Underwriter's Warrant either shares of Common Stock or a like
number of such securities with greater or superior voting rights.
8.6 Merger or Consolidation. In case of any consolidation of the Company with,
or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder
a supplemental warrant agreement providing that the holder of each
Underwriter's Warrant then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Underwriter's Warrant) to
receive, upon exercise of such warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger,
by a holder of the number of shares of Common Stock of the Company for which
such Underwriter's Warrant might have been exercised immediately prior to such
consolidation, merger, sale or transfer. Such supplemental warrant agreement
shall p rovide for adjustments which shall be identical to the adjustments
provided in Section 8. The above provision of this subsection shall similarly
apply to successive consolidations or mergers.
8.7 No Adjustment of Exercise Price in Certain Cases. No adjustment of the
Exercise Price shall be made:
(a) Upon the issuance or sale of the Underwriter's Warrants, Underlying
Warrants, Warrants or the shares of Common Stock issuable upon the exercise of
(i) the Underwriter's Warrants, (ii) the Underlying Warrants, or (iii) the
Warrants; or
(b) If the amount of said adjustment shall be less than two cents (2) per
Warrant Security, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least two
cents (2) per Warrant Security.
8.8 Dividends and Other Distributions. In the event that the Company shall at
any time prior to the exercise of all Underwriter's Warrants declare a dividend
(other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another, or any other thing of value, the
Holders of the unexercised Underwriter's Warrants shall thereafter be entitled,
in addition to the shares of Common Stock or other securities and property
receivable upon the exercise thereof, to receive, upon the exercise of such
Underwriter's Warrants, the same property, assets, rights, evidences of
indebtedness, securities or any other thing of value that they would have been
entitled to receive at the time of such dividend or distribution as if the
Underwriter's Warrants had been exercised immediately prior to such dividend or
distribut ion. At the time of any such dividend or distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this subsection 8.8.
9. Exchange and Replacement of Warrant Certificates. Each Warrant Certificate
is exchangeable without expense, upon the surrender thereof by the registered
Holder at the principal executive office of the Company, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Warrant Securities in such denominations as shall
be designated by the Holder thereof at the time of such surrender. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of any Warrant Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Underwriter's Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be required to
issue fractional shares of Common Stock or Underlying Warrants upon the
exercise of Underwriter's Warrants. Underwriter's Warrants may only be
exercised in such multiples as are required to permit the issuance by the
Company of one or more whole shares of Common Stock and/or Underlying Warrants.
If one or more Underwriter's Warrants shall be presented for exercise in full
at the same time by the same Holder, the number of whole shares of Common Stock
or Underlying Underwriter's Warrants which shall be issuable upon such exercise
thereof shall be computed on the basis of the aggregate number of shares of
Common Stock and/or Underlying Warrants purchasable on exercise of the
Underwriter's Warrants so presented. If any fraction of a share of Common
Stock or Underlying Warrants would, except for the provisions provided herein,
be issuable on the exercise of any Underwriter's Warrant (or specified portion
ther eof), the Company shall pay an amount in cash equal to such fraction
multiplied by the then current market value of a share of Common Stock or
Underlying Warrants, determined as follows:
(1) If the Common Stock or Underlying Warrant, as the case may be, is listed,
or admitted to unlisted trading privileges on the NYSE or the AMEX, or is
traded on the NNM, the current market value of a share of Common Stock or
Underlying Warrant, as the case may be, shall be the closing sale price of the
Common Stock or the Underlying Warrant, as the case may be, at the end of the
regular trading session on the last business day prior to the date of exercise
of the Underwriter's Warrants on whichever of such exchanges or NNM had the
highest average daily trading volume for the Common Stock or the Underlying
Warrant, as the case may be, on such day; or
(2) If the Common Stock or the Underlying Warrant, as the case may be, is not
listed or admitted to unlisted trading privileges, on either the NYSE or the
AMEX and is not traded on NNM, but is quoted or reported on Nasdaq, the current
market value of a share of Common Stock or the Underlying Warrant, as the case
may be, shall be the average of the Underwriter closing bid and asked prices
(or the last sale price, if then reported by Nasdaq) of the Common Stock or the
Underlying Warrant, as the case may be, at the end of the regular trading
session on the last business day prior to the date of exercise of the
Underwriter's Warrants as quoted or reported on Nasdaq, as the case may be; or
(3) If the Common Stock or the Underlying Warrant, as the case may be, is not
listed, or admitted to unlisted trading privileges, on either of the NYSE or
the AMEX, and is not traded on NNM or quoted or reported on Nasdaq, but is
listed or admitted to unlisted trading privileges on the BSE or another
national securities exchange (other than the NYSE or the AMEX), the current
market value of a share of Common Stock or Underlying Warrant, as the case may
be, shall be the closing sale price of the Common Stock or the Underlying
Warrant, as the case may be, at the end of the regular trading session on the
last business day prior to the date of exercise of the Underwriter's Warrants
on whichever of such exchanges has the highest average daily trading volume for
the Common Stock or the Underlying Warrant, as the case may be, on such day; or
(4) If the Common Stock or the Underlying Warrant, as the case may be, is not
listed or admitted to unlisted trading privileges on any national securities
exchange, or listed for trading on NNM or quoted or reported on Nasdaq, but is
traded in the over-the-counter market, the current market value of a share of
Common Stock or the Underlying Warrant, as the case may be, shall be the
average of the last reported bid and asked prices of the Common Stock or the
Underlying Warrant, as the case may be, reported by the National Quotation
Bureau, Inc. on the last business day prior to the date of exercise of the
Underwriter's Warrants; or
(5) If the Common Stock or the Underlying Warrant, as the case may be, is not
listed, admitted to unlisted trading privileges on any national securities
exchange, or listed for trading on NNM or quoted or reported on Nasdaq, and bid
and asked prices of the Common Stock or the Underlying Warrant, as the case may
be, are not reported by the National Quotation Bureau, Inc., the current market
value of a share of Common Stock or the Underlying Warrant, as the case may be,
shall be an amount, not less than the book value thereof as of the end of the
most recently completed fiscal quarter of the Company ending prior to the date
of exercise, determined in accordance with generally acceptable accounting
principles, consistently applied.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Underwriter's Warrants and
the Underlying Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the
Underwriter's Warrants and payment of the Exercise Price therefor, all shares
of Common Stock and other Securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder. The Company further covenants and agrees
that upon exercise of the Underlying Warrants underlying the Underwriter's
Warrants and payment of the respective Underlying Warrant exercise price
therefor, all shares of Common Stock and other securities issuable upon such
exercises shall be duly and validly issued, fully paid, non- assessable and not
subject to the preemptive rights of any stockholder. As long as the
Underwriter's Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Underwriter's Warrants and Underlying Warrants and all Underlying Warrants
underlying the Underwriter's Warrants to be listed (subject to official notice
of issuance) on all securities exchanges on which the Common Stock or the
Underlying Warrants issued to the public in connection herewith may then be
listed and/or quoted on NNM.
12. Notices to Warrant Holders. Nothing contained in this Agreement shall be
construed as conferring upon the Holders the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Underwriter's Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable other than in cash, or a cash dividend or distribution payable other
than out of current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially
all of its property, assets and business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer book, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. Underlying Warrants.
The form of the certificate representing Underlying Warrants (and the form of
election to purchase shares of Common Stock upon the exercise of Underlying
Warrants and the form of assignment printed on the reverse thereof) shall be
substantially as set forth in Exhibit "A" to the Warrant Agreement. Each
Underlying Warrant shall entitle the Holder to purchase one fully paid and
non-assessable share of Common Stock at an initial purchase price of $8.00 from
______________, 1998 until 5:00 P.M. New York time on _____________, 2002 at
which time the Underlying Warrants shall expire. The exercise price of the
Underlying Warrants and the number of shares of Common Stock issuable upon the
exercise of the Underlying Warrants are subject to adjustment, whether or not
the Underwriter's Warrants have been exercised and the Underlying Warrants have
been issued, in the manner and upon the occurrence of the events set forth in
Section 8 of the Warrant Agreement, which is hereby incorporated here in by
reference and made a part hereof as if set forth in its entirety herein.
Subject to the provisions of this Agreement and upon issuance of the Underlying
Warrants, each registered holder of such Underlying Warrant shall have the
right to purchase from the Company (and the Company shall issue to such
registered holders) up to the number of fully paid and non-assessable shares of
Common Stock (subject to adjustment as provided herein and in the Warrant
Agreement), free and clear of all preemptive rights of stockholders, provided
that such registered holder complies with the terms governing exercise of the
Underlying Warrant set forth in the Warrant Agreement, and pays the applicable
exercise price, determined in accordance with the terms of the Warrant
Agreement. Upon exercise of the Underlying Warrants, the Company shall
forthwith issue to the registered holder of any such Underlying Warrant in his
name or in such name as may be directed by him, certificates for the number of
sha res of Common Stock so purchased. Except as otherwise provided herein and
in Section 6.1 hereof, the Underlying Warrants shall be governed in all
respects by the terms of the Warrant Agreement except that any notice of
redemption that the Company may issue with respect to the Warrants shall not
be applicable to the Underlying Warrants. The Underlying Warrants shall be
transferable in the manner provided in the Warrant Agreement, and upon any such
transfer, a new Underlying Warrant Certificate shall be issued promptly to the
transferee. The Company covenants to, and agrees with, the Holder(s) that
without the prior written consent of the Holder(s), which will not be
unreasonably withheld, the Warrant Agreement will not be modified, amended,
canceled, altered or superseded, and that the Company will send to each Holder,
irrespective of whether or not the Underwriter's Warrants have been exercised,
any and all notices required by the Warrant Agreement to be sent to holders of
Warrants.
14. Notices.
All notices, requests, consents and other communications hereunder shall be in
writing and shall be deemed to have been duly made and sent when delivered, or
mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Underwriter's Warrants, to the address
of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 hereof or to such
other address as the Company may designate by notice to the Holders.
15. Supplements and Amendments. The Company and the Underwriter may from time
to time supplement or amend this Agreement without the approval of any Holders
of Warrant Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Underwriter may deem necessary or desirable and which the Company and the
Underwriter deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
16. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of business on
___________, 2002. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on ___________, 2007.
18. Governing Law; Submission to Jurisdiction. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws. The Company, the Underwriter and
any other registered Holders hereby agree that any action, proceeding or claim
against it arising out of, or relating in any way to, this Agreement shall be
brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and irrevocably
submits to such jurisdiction, which jurisdiction shall be exclusive. The
Company, the Underwriter and any other registered Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, the Underwriter a
nd the Holders (at the option of the party bringing such action, proceeding or
claim) may be served by transmitting a copy thereof, by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
set forth in Section 14 hereof. Such mailing shall be deemed personal service
and shall be legal and binding upon the party so served in any action,
proceeding or claim. The Company, the Underwriter and any other registered
Holders agree that the prevailing party(ies) in any such action or proceeding
shall be entitled to recover from the other party(ies) all of its'/their
reasonable legal costs and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
19. Entire Agreement; Modification. This Agreement (including the Underwriting
Agreement and the Warrant Agreement to the extent portions thereof are referred
to herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement are for
convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be construed
to give to any person or corporation other than the Company and the Underwriter
and any other registered Holder(s) of the Warrant Certificates or Warrants
Securities any legal or equitable right, remedy or claim under this Agreement;
and this Agreement shall be for the sole benefit of the Company and the
Underwriter and any other registered Holders of Warrant Certificates or Warrant
Securities.
23. Counterparts. This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
[SEAL]
XETAL, INC.
By:
▇▇. ▇▇▇ ▇▇▇▇▇, Chief Executive Officer
Attest:
▇▇. ▇▇▇ ▇▇▇▇▇, Secretary
WORTHINGTON CAPITAL GROUP, INC
By:
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _______________, 2002
No. RW-101 Warrants to Purchase
162,000 Shares of Common Stock and
324,000 Underlying Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Worthington Capital Group, Inc.,
or registered assigns, is the registered holder of Warrants to purchase
initially, at any time from _________, 1998 until 5:00 p.m. New York time on
___________, 2002 (the "Expiration Date"), up to 162,000 fully-paid and
non-assessable shares of common stock, $.001 par value ("Common Stock") of
Xetal, Inc., a Utah corporation (the "Company"), and 324,000 Underlying
Warrants (each such Underlying Warrant entitling the owner to purchase one
fully-paid and non-assessable share of Common Stock) at the initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $8.00
per share of common stock and $0.160 per Underlying Warrant upon surrender of
this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in
the Underwriter's Warrant Agreement dated as of ________________, 1997 between
the Company and Worthington Capital Group, Inc. (the "Underwriter's Warrant
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of
the Company or by surrender of this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Underwriter's Warrant
Agreement, which Underwriter's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the
rights of the holder as set forth in the Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Underwriter's Warrant Agreement, without any charge except for any tax or other
governmental charge imposed in connection with such transfer. Upon the exercise
of less than all of the Warrants evidenced by this Warrant Certificate, the
Company shall forthwith issue to the holder hereof a new Warrant Certificate
representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in the
Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of ____________, 1997
[SEAL] XETAL, INC.
By:
▇▇. ▇▇▇ ▇▇▇▇▇, Chief Executive Officer
By:
▇▇▇▇▇ ▇▇▇▇▇, President
Attest:
▇▇. ▇▇▇ ▇▇▇▇▇, Secretary
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
Warrant Securities
and herewith tenders in payment for such securities a certified or official
bank check payable in New York Clearing House Funds to the order of Xetal, Inc.
in the amount of $ , all in accordance with the terms of Section
3.1 of the Underwriter's Warrant Agreement dated as of ___________________,
1997 between Xetal, Inc. and Worthington Capital Group, Inc. The undersigned
request that a certificate for such Warrant Securities be registered in the
name of whose address is and that
such Certificate be delivered to whose address is
Signature
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate)
(Insert Social Security or Other Identifying Number of Holder)
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and
unto
(Please print name and address of transferee)
Warrant Certificate, together with all right, title and interest therein,
and does hereby reasonably constitute and appoint , as
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Date:
Signature:
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate)
(Insert Social Security or Other Identifying Number of Assignee)
EXHIBIT A
No. W VOID AFTER ___________, 2002
WARRANTS
WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
XETAL, INC.
CUSIP
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Warrants (the "Warrants") specified above. Each Warrant initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Certificate and the Warrant Agreement (as hereinafter defined), one fully
paid and nonassessable share of Common Stock, $.001 par value, of XETAL, INC.,
a Utah corporation (the "Company"), at any time between _____________, 1998,
(the "Initial Warrant Exercise Date"), and the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of American Stock Transfer and Trust Company, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $5.00 subject to adjustment (the "Purchase Price"),
in lawful money of the United States of America in cash or by certified or bank
check made payable to the Warrant Agent for the account of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated
_______________, 1997, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all of the Warrants represented hereby, the Company
shall cancel this Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant Certificates of like
tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
_______________, 2002. If such date shall in the State of New York be a
holiday or a day on which the banks are authorized to close, then the
Expiration Date shall mean 5:00 p.m. (New York time) the next following day
which in the State of New York is not a holiday or a day on which banks are
authorized to close. The Company shall not extend the Expiration Date nor
reduce the Purchase Price.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement under the
Federal securities laws, use its best efforts to cause the same to become
effective, use its best efforts to keep such registration statement current, if
required under the Act, while any of the Warrants are outstanding, and deliver
a prospectus which complies with Section 10(a)(3) of the Act to the Registered
Holder exercising this Warrant. This Warrant shall not be exercisable by a
Registered Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment and payment of any
tax or other charge imposed in connection therewith or incident thereto, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.05 per
Warrant, at any time commencing two years after the Initial Warrant Exercise
Date, provided that (i) the closing sale price for the Common Stock as reported
by the National Association of Securities Dealers Automated Quotation System
("Nasdaq") or the National Quotation Bureau, Inc., if the Common Stock is then
traded in the over-the-counter market or (ii) the closing sale price, if the
Common Stock is then traded on Nasdaq/NM or a national securities exchange,
shall have equaled or exceeded for each of the twenty (20) consecutive trading
days ending on the tenth (10) day prior to the Notice of Redemption, as defined
below, $7.50 per share (subject to adjustment in the event of any stock splits
or other similar events). Notice of redemption (the "Notice of Redemption")
shall be given not later than the thirtieth day before the date fixed for
redemption, all as provided in the Warrant Agreement. On and after the close
of business on the day immediately preceding the date fixed for redemption, the
Registered Holder shall have no rights with respect to the Warrants except to
receive the $.05 per Warrant upon surrender of this Warrant Certificate.
Under certain circumstances, the Underwriter shall be entitled to
receive an aggregate of seven percent (7%) of the Purchase Price of the
Warrants represented hereby in accordance with Section 4(b) of the Warrant
Agreement.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to conflicts of
laws.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: _____________, 1997
[SEAL] XETAL, INC.
By:
▇▇. ▇▇▇ ▇▇▇▇▇, Chief Executive Officer
By:
▇▇. ▇▇▇ ▇▇▇▇▇, Secretary
COUNTERSIGNED:
AMERICAN STOCK TRANSFER
AND TRUST COMPANY
as Warrant Agent
By:
Name:
Title:
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the exercise of such
Warrants, and requests that certificates for such securities shall be issued in
name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
(please print or type name and address)
and be delivered to
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1.The exercise of this Warrant was solicited by Worthington Capital Group, Inc.
______
2.The exercise of this Warrant was not solicited.
______
Dated: X
Address
Social Security or
Taxpayer Identification Number
Signature Guaranteed
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, , hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
(please print or type name and address)
of the Warrants represented by this
Warrant Certificate, and hereby irrevocably constitutes and appoints Attorney
to transfer this Warrant Certificate on the of the Company, with full power of
substitution in the premises.
Dated: X Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, PACIFIC STOCK EXCHANGE, MIDWEST STOCK EXCHANGE OR
BOSTON STOCK EXCHANGE.
