Exhibit 1.0
Chipcard, Inc.
1,000,000 Units
Each Unit Consisting of One Share of Common Stock
and One Redeemable Common Stock Purchase Warrant
UNDERWRITING AGREEMENT
May __, 2001
The Thornwater Company, L.P.
As Representative of the Underwriters
named in Schedule I hereto
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Chipcard, Inc., a Delaware corporation (the "Company"), hereby confirms
its agreement with The Thornwater Company, L.P. (being referred to herein
variously as "you" or the "Representative") and the other underwriters named in
Schedule I hereto (the "Representative" and the other underwriters being
collectively called the "Underwriters") as follows:
1. Introductory. The Company proposes to issue and sell, severally and
not jointly, to the Underwriters 1,000,000 units (the "Firm Units"), each Firm
Unit consisting of one share of Common Stock, $0.01 par value, of the Company
(the "Common Stock") and one Redeemable Common Stock Purchase Warrant of the
Company (the "Redeemable Warrants"). Subsequent to the sale and issuance of the
Firm Units in accordance with the terms of this Agreement, the shares of Common
Stock and the Redeemable Warrants will be immediately separately transferable. A
Redeemable Warrant entitles the holder of such warrant to exercise the
Redeemable Warrants for one (1) share of Common Stock at an initial exercise
price of $8.40 per share commencing on the Effective Date (as hereinafter
defined) and ending at 5:00 p.m., New York time, on ________ __, 2001 (five (5)
years after the Effective Date). In addition, solely for the purpose of covering
over-allotments, the Company proposes to grant to the Representative an option
to purchase from it up to an additional 150,000 units (the "Additional Units"
and collectively with the Firm Units, the "Units"), each Additional Unit
consisting of one share of Common Stock (the "Additional
Stock") and one Redeemable Warrant (the "Additional Warrants"). The Common Stock
to be sold by the Company, excluding the Additional Stock, is herein called the
"Stock". The Units and the components thereof are more fully described in the
Prospectus referred to below.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Underwriters:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and amendments thereto,
on Form SB-2 (File No. ________), including any related preliminary prospectus
("Preliminary Prospectus"), for the registration of the Units, the Stock, the
Redeemable Warrants, the Additional Stock and the Additional Redeemable Warrants
under the Securities Act of 1933, as amended (the "Act"). The Company will not,
before the registration statement becomes effective (the "Effective Date"), file
any other amendment to said registration statement to which you shall reasonably
object in writing after being furnished with a copy thereof. Copies of such
registration statement and all amendments thereto, and all forms of the related
Preliminary Prospectus contained therein, previously filed by the Company with
the Commission, have heretofore been delivered to you. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, exhibits and all other documents filed as
a part thereof and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430A of the General Rules and Regulations of
the Commission under the Act (the "Regulations")) is herein called the
"Registration Statement". The prospectus in the form filed with the Commission
pursuant to Rule 424(b) of the Regulations is herein called the "Prospectus".
(b) The Company has not received from the Commission or any "Blue
Sky" or securities authority of any jurisdiction an order preventing or
suspending the use of any Preliminary Prospectus relating to the proposed
offering of the Units and Additional Units or has the Commission or any "Blue
Sky" or securities authority, to the Company's knowledge, instituted proceedings
for that purpose. Each Preliminary Prospectus, at the time of filing thereof,
contained all material statements which are required to be stated therein in
accordance with the Act and the Regulations, and conformed in all material
respects with the requirements of the Act and the Regulations and did not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the representation and warranty in this clause (b) does
not apply to the section of the Prospectus captioned "Underwriting" nor to any
statements or omissions in the Registration Statement or Prospectus based upon
and made in conformity with written information furnished to the Company by the
Representative for inclusion therein. The Registration Statement at the time it
becomes effective and the Prospectus at the time it is filed with the Commission
pursuant to Rule 424(b) and on the Closing Date (and the Additional Closing
Date, if any, determined as hereinafter provided in Section 3) will contain all
material statements which are required to be stated therein
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in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations, and the
Registration Statement and the Prospectus will not, on such dates, include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representations or warranties are made with respect to statements or omissions
made in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriters by or on behalf of such
Underwriters expressly for use in the Registration Statement or Prospectus or
any amendment or supplement thereto.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of California. The
Company has no subsidiaries. The Company is duly qualified and in good standing
as foreign corporations in all jurisdictions where the character or location of
their properties (owned or leased) or the nature of their business makes such
qualification necessary, except where the failure so to qualify would not have a
material adverse effect on the business, properties, results of operations,
condition (financial or otherwise), affairs or prospects (a "Material Adverse
Effect") of the Company. The Company has all requisite corporate power and
authority, and all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental regulatory officials and
bodies, to own their respective properties and conduct their respective
businesses as described in the Prospectus, and the Company has all such power,
authority, authorizations, approvals, orders, licenses, certificates and permits
to enter into this Agreement and to carry out the provisions and conditions
hereof. The Company own, or possess adequate rights to use, all patents,
trademarks, service marks and other rights necessary for the conduct of their
business as described in the Prospectus and neither the Company, nor any officer
or director of the Company has received any notice of conflict with the asserted
rights of others in any respect which would have a Material Adverse Effect upon
the Company and none knows any basis therefor. The Company has no subsidiaries.
(d) The Company has or will have good and marketable title in fee
simple to, or valid and enforceable leasehold estates in, all items of real
property and personal property which are stated in the Prospectus to be owned or
leased by them, in each case free and clear of all liens, encumbrances, claims,
security interests, subleases and defects, other than those referred to in the
Prospectus and those which do not have a Material Adverse Effect upon the
Company. The Company has the right to operate all of its facilities in their
present locations and the operation of such facilities does not violate in any
material respect the provisions of any lease with respect thereto which the
Company or any third party is a party.
(e) There is no litigation or governmental proceeding pending or, to
the knowledge of the Company threatened against, or involving the properties or
business of, the Company, nor are there any actions, suits or proceedings
related to environmental matters or
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related to discrimination on the basis of age, sex, religion or race and no
labor disturbance by the employees of the Company which could have a Material
Adverse Effect upon the Company.
(f) To the Company's reasonable knowledge, there is no document or
contract of a character required to be described in the Prospectus or to be
filed as an exhibit to the Registration Statement which is not described or
filed as required.
(g) The financial statements together with the related notes of the
Company included in the Registration Statement and Prospectus present fairly the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved. The
consolidated capitalization of the Company, as set forth under the caption
"Capitalization" in the Prospectus, was as so described on the date of which it
is set forth therein.
(h) B.D.O. ▇▇▇▇▇▇▇, LLP, whose reports are filed with the Commission
as a part of the Registration Statement, are independent accountants with
respect to the Company as required by the Act and the Regulations.
(i) Except as described in the Prospectus, the Company, does not
own, directly or indirectly, any shares of stock or any other securities of any
corporation nor does the Company have any equity interest in any firm,
partnership, joint venture, association or other entity.
(j) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and the Prospectus, there has been no
material adverse change in the business, properties, results of operations,
condition (financial or otherwise), affairs or prospects of the Company in; and
the outstanding debt, the property and the business of the Company form in all
material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(k) No default exists, and no event has occurred which with notice
or lapse of time, or both, would constitute a default, in the due performance
and observance of any term, covenant or condition of any indenture, mortgage,
deed of trust, note, bank loan or credit agreement or any other agreement or
instrument to which the Company or the Subsidiary is a party or by which either
of them or any of their property may be bound or affected, which default would
have a Material Adverse Effect upon the Company or the Subsidiary.
(l) The Company nor the Subsidiary is not in breach of any term or
provision of its Certificate of Incorporation, by-laws or other charter
documents and, to the best of the Company's knowledge, in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation, which violation is a Material Adverse Effect upon the Company. The
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Company, to the best of the Company's knowledge, is not in violation of any
laws, ordinances, governmental rules or regulations to which either of them is
subject, which violation is a Material Adverse Effect upon the Company, taken as
a whole. The Company has not failed to obtain any licenses, permits, franchises
or other governmental authorizations materially necessary to the ownership of
its property or to the conduct of its business, where the failure to do so is a
Material Adverse Effect upon the Company.
(m) Neither the execution and delivery of this Agreement, the
Redeemable Warrant Agreement, the Representative's Warrant Agreement (as defined
in Section 3(h) hereof) [and the Financial Consulting Agreement, as defined in
Section 3,] and the consummation of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or thereof
will conflict with, or result in a breach of any of the terms, provisions or
conditions of the Certificate of Incorporation, by-laws or other charter
documents of the Company. The execution and delivery of this Agreement, the
Redeemable Warrant Agreement, the Representative's Warrant Agreement and the
Financial Consulting Agreement, the consummation of the transactions herein or
therein contemplated, and compliance with the terms and provisions hereof or
thereof will not conflict with, or result in a breach of, or constitute a
default under any of the terms, provisions or conditions of any agreement or
instrument to which the Company is a party or by which either of them or any of
their properties is bound, except where such conflict, breach or default would
not have a Material Adverse Effect upon the Company, or violate any franchise,
license, permit, judgment, decree, order, statute, rule or regulation of any
government, governmental authority or court having jurisdiction over the
Company, except where such violation would not have a Material Adverse Effect
upon the Company.
(n) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Redeemable Warrant Agreement, the Representative's Warrant Agreement and the
Financial Consulting Agreement, and this Agreement, the Redeemable Warrant
Agreement, the Representative's Warrant Agreement, [and the Financial Consulting
Agreement,] have been duly authorized, executed and delivered by the Company and
constitute legal, valid and binding agreements of the Company and are
enforceable against the Company in accordance with their respective terms except
as enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally, and except insofar as
the enforceability of the indemnification and contribution terms may be limited
by applicable law or public policy.
(o) All of the issued shares of Common Stock are duly and validly
issued and outstanding, fully paid and nonassessable; the Stock and the
Additional Stock, when issued and delivered in accordance with this Agreement,
will be duly and validly issued and outstanding, fully paid and nonassessable
and free of preemptive rights. The Company's capital stock conforms in all
material respects to all statements in relation thereto contained in the
Registration Statement and Prospectus.
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(p) The Redeemable Warrants, the Additional Redeemable Warrants and
the warrants that will be issued pursuant to the terms of the Representative's
Warrant Agreement (the "Representative's Warrants") have been duly and validly
authorized by the Company and upon delivery to you against payment therefore and
otherwise in accordance with this Agreement, the Redeemable Warrant Agreement
and the Representative's Warrant Agreement, as the case may be, will be duly
issued and legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally.
(q) The Common Stock underlying the Redeemable Warrants (the
"Redeemable Warrant Stock"), the Additional Redeemable Warrants (the "Additional
Redeemable Warrant Stock") and the Representative's Warrants (the
"Representative's Warrant Stock") has been duly authorized and reserved for
issuance upon the representative's exercise of the Redeemable Warrants, the
Additional Redeemable Warrants and the Representative's Warrants, and, when
issued upon payment of the exercise price therefor, will be validly issued,
fully paid and nonassessable shares of Common Stock.
(r) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has (i) issued any
securities except securities issued under the Company's employee benefit plans
and as provided herein or in the Registration Statement, or incurred any
liability or obligation, direct or contingent, for borrowed money, (ii) entered
into any material transaction not in the ordinary course of business, (iii)
entered into any transaction with an affiliate of the Company, or (iv) declared
or paid any dividend on its shares of Common Stock.
(s) The Company has obtained from the written agreement of its
stockholders that for a period of one year from the date of the Prospectus,
they will not, without your prior written consent, sell, contract to sell, or
grant any option for the sale of or otherwise dispose of, directly or
indirectly, any shares of Common Stock of the Company owned by them.
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(t) No consent, authorization or approval is required to be obtained
by the Company from any Federal, state or local governmental agency or body in
order to consummate the transactions contemplated herein or in the Registration
Statement, except such additional steps as may be necessary to qualify the Units
and the components of the Units under "Blue Sky" or securities laws of any
jurisdiction.
(u) Except as provided in the Registration Statement, no person
holds a right to require or participate in the registration under the Act of any
securities of the Company to be effected by the Registration Statement, which
right has not been duly waived by the holder thereof as of the date hereof. The
Company does not have outstanding, and at the Closing Date and the Additional
Closing Date, if any, will not have outstanding, any options to purchase, or any
rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its Common Stock or any such warrants, convertible securities or obligations,
except as referred to in the Prospectus.
(v) The Company has timely filed all Federal, state, and local tax
returns which are required to be filed and has paid all taxes shown on such
returns and all assessments received by it to the extent that the same have
become due.
(w) To the knowledge and belief of the Company's officers and
directors, neither the Company, nor any officer, director or employee of
the Company has made any payment of funds of the Company or purchased any
property with Company funds in a manner prohibited by law, and no funds of the
Company or property purchased with Company funds have been set aside to be used
for any payment prohibited by law.
(x) Except as set forth in the Registration Statement and
Prospectus, the Company does not know of any claims for services in the nature
of a finders fee, brokerage fee or otherwise with respect to this offering for
which the Company may be responsible.
(y) The Company has obtained from ________________________________
(the "Key Employees") new or modified employment agreements upon terms agreeable
to the Company and the Representative, including, without limitation, the term,
compensation, arrangement and restrictive covenants. Prior to the one-year
anniversary of the Closing, the Company will obtain key man life insurance upon
the life of ▇▇▇▇▇ ▇▇▇ in a face amount mutually agreeable to the Company and
the Representative.
(z) Application for quotation of the Common Stock on the Nasdaq
SmallCap Market has been approved, subject to notice of issuance.
3. Purchase, Sale and Delivery of the Stock and Additional Stock.
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(a) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell, severally and not jointly, to the Underwriters, and the
Underwriters, severally and not jointly, agree to purchase from the Company, at
a purchase price of $7.452 per Unit, the number of Firm Units set forth opposite
their respective names in Schedule I totalling not less than 1,000,000 units.
(b) Payment for the Firm Units shall be made by wire transfer of
same funds payable to the order of the Company at the offices of The Thornwater
Company, L.P., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other place as
shall be agreed upon between us. Such delivery and payment shall be made at
10:00 A.M., New York time, on not later than the third business day following
the Effective Date; provided, however, that such date may be extended for not
more than an additional three business days by the Representative or in
accordance with the provisions of Section 9(c) hereof. The hour and date of
such delivery and payment are herein called the "Closing Date".
(c) Certificates evidencing the Stock and Redeemable Warrants
representing the Firm Units shall be registered in such name or names and in
such authorized denominations as you may request in writing at least two full
business days prior to the Closing Date. The Company will permit you to examine
and package said certificates at least one full business day prior to the
Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to you the option to purchase all or a portion of the
Additional Units as may be necessary to cover over-allotments at the same
purchase price per Unit to be paid by the Underwriters to the Company for the
Firm Units as determined in this Section 3. This option may be exercised only to
cover over-allotments in the sale of Additional Units by the Underwriters. This
option may be exercised at any time on or before the forty-fifth day following
the effective date of the Registration Statement by written notice by the
Representative to the Company. Such notice shall set forth the aggregate number
of Additional Units as to which the option is being exercised, the name or names
in which the shares of Additional Stock and Additional Redeemable Warrants
representing the Additional Units are to be registered, the denominations in
which the Additional Stock and Additional Redeemable Warrants representing the
Additional Units are to be issued, and the date and time, as reasonably
determined by you, when the Additional Stock and Additional Redeemable Warrants
representing the Additional Units are to be delivered (such date and time being
herein sometimes referred to as the "Additional Closing Date"); provided,
however, that the Additional Closing Date shall not be earlier than the Closing
Date nor earlier than the second business day after the date on which the option
shall have been exercised nor later than the eighth business day after the day
on which the option shall have been exercised.
(e) Payment for the Additional Units shall be made by wire transfer
of same funds payable to the order of the Company at the offices of The
Thornwater Company, LP, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other
place as shall be agreed upon between us.
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(f) Certificates evidencing the Additional Stock and Additional
Redeemable Warrants representing the Additional Units shall be registered in
such name or names and in such authorized denominations as you may request in
writing at least two full business days prior to the Additional Closing Date.
The Company will permit you to examine and package said certificates for
delivery at least one full business day prior to the Additional Closing Date.
(g) The Company shall not be obligated to sell or deliver any shares
of Stock, Redeemable Warrants, Additional Stock or Additional Redeemable
Warrants, except upon tender of payment by the Representative for all the Firm
Units or Additional Units, as the case may be, agreed to be purchased from it
hereunder.
(h) On the Closing Date, the Company shall issue and sell to the
Representative, at a purchase price of $0.01 per Warrant, the Representative's
Warrants. The Representative's Warrants shall be exercisable for a period of
four (4) years commencing one (1) year from the Effective Date at an initial
exercise price equal to one hundred and twenty percent (120%) of the initial
public offering price of the Units. The Representative's Warrants shall be
issued pursuant to the terms and provisions of the Representative's Warrant
Agreement substantially in the form of the Representative's Warrant Agreement
filed as Exhibit ___ to the Registration Statement (the "Representative's
Warrant Agreement").
4. Public Offering. The several Underwriters agree, subject to the
terms and provisions of this Agreement, to offer the Units to the public as soon
as practicable after the Effective Date, at the initial offering price of $8.00
per Unit and upon the terms described in the Prospectus. The Representative may,
from time to time, decrease the public offering price, after the initial public
offering, to such extent as the Representative may determine, however, such
decreases will not affect the price payable to the Company hereunder.
5. Covenants of the Company.
The Company covenants that it will:
(a) Use its best efforts to cause the Registration Statement to
become effective and will notify you immediately, and confirm the notice in
writing, (i) when the Registration Statement, or any post-effective amendment
thereto, shall have become effective, (ii) of the issuance by the Commission of
any stop order or of the initiation or the threatening of any proceedings for
that purpose, and (iii) of the receipt of any comments by the Commission. The
Company will prepare and timely file with the Commission under Rule 424(b) of
the Regulations a Prospectus containing information previously omitted on the
Effective Date in reliance of Rule 430A of the Regulations. The Company will use
its best efforts to prevent the issuance of any stop order or any order
preventing or suspending the use of the Registration Statement or Prospectus
and, if such order is issued, to obtain the lifting thereof as promptly as
possible.
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(b) During the time when a prospectus is required to be delivered
under the Act, comply so far as it is able with all requirements imposed upon it
by the Act, as now and hereafter amended, and by the Regulations, as from time
to time in force, so far as necessary to permit the continuance of sales or of
dealings in the Stock, the Redeemable Warrants, the Additional Stock and the
Additional Redeemable Warrants in accordance with the provisions hereof and the
Prospectus. If at any time when a prospectus relating to the Stock, the
Redeemable Warrants, the Additional Stock or the Additional Redeemable Warrants
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 your
counsel, the Registration Statement or 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 it is necessary at any time to amend or supplement the
Registration Statement or Prospectus to comply with the Act, the Company will
notify you promptly and prepare and file with the Commission an appropriate
amendment or supplement (in form reasonably satisfactory to you).
(c) Deliver to you such number of copies of each Preliminary
Prospectus as you may reasonably request and, deliver to you two signed copies
of the Registration Statement, including exhibits, and all post-effective
amendments thereto and such number of copies of the Prospectus, the Registration
Statement and amendments and supplements thereto, if any, without exhibits, as
you may reasonably request for the purposes contemplated by the Act.
(d) Endeavor in good faith, in cooperation with you, at or prior to
the time the Registration Statement becomes effective, to qualify the Units, the
Stock, the Redeemable Warrants, the Additional Stock and the Additional
Redeemable Warrants for offering or sale of the Units and the Additional Units
of such jurisdictions as you may reasonably designate; provided that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Company would be subject to service of general process or would be required
to become qualified to do business as a foreign corporation doing business in
such jurisdiction. In each jurisdiction where the qualification of the Units,
the Stock, the Redeemable Warrants, the Additional Stock and the Additional
Redeemable Warrants shall be effected, the Company will, unless you agree that
such action is not at the time necessary or advisable, file and make such
statements or reports at such times as are or may be reasonably required by the
laws of such jurisdiction.
(e) The Company will make generally available to its security
holders and to the Representative as soon as practicable, but not later than 45
days after the end of the 12-month period beginning at the end of the fiscal
quarter of the Company during which the Effective Date occurs (or 90 days, if
such 12-month period coincides with the Company's fiscal year), an earnings
statement of the Company, which will be in reasonable detail, but need not be
audited, and will cover a period of twelve months commencing after the Effective
Date. Such earnings statement shall comply with the requirement of Section 11(a)
of the Act and Rule 158 of the Rules
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and Regulations. During the period of five years commencing on the Effective
Date, the Company will furnish to its stockholders (A) within 75 days after the
end of the first three fiscal quarters of each fiscal year, quarterly reports
containing unaudited financial information and (B) within 120 days after the end
of each fiscal year, an annual report containing audited financial information.
(f) For a period of 90 days after the date of the Prospectus, not
issue, sell, contract to sell, grant an option for the sale of or otherwise
dispose of, directly or indirectly, any shares of Common Stock of the Company
(or any shares of securities convertible into or exercisable for such Common
Stock) other than the Units being sold by the Company and securities issued
pursuant to the Company's employee benefit plans or as otherwise referred to in
the Prospectus, without your prior written consent.
(g) For a period of five years from the effective date of the
Registration Statement, furnish you the following:
(i) as soon as practicable after they have been filed with the
Commission, two copies of each annual, quarterly and current
report on Form 10-K, Form 10-Q or Form 8-K (to the extent the
Company shall be required to file such reports pursuant to the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively the "Exchange Act") and, as
soon as practicable after they have been sent by the Company to
its security holders, two copies of any communications sent by it
to its public security holders generally;
(ii) as soon as practicable, two copies of every press release
and every material news items and article in respect of the
Company or its affairs which was released by the Company; and
(iii) such additional non-confidential documents and information
with respect to the Company and its affairs as you may from time
to time reasonably request.
(h) Apply the net proceeds from the offering received by the Company
in the manner set forth under "Use of Proceeds" in the Prospectus, including
that the net proceeds will only be used in connection with the business as
described in the Prospectus, and comply with Rule 463 under the Act.
(i) Furnish to you as early as practicable prior to the Closing Date
and Additional Closing Date, as the case may be, but no later than two full
business days prior thereto, a copy of the latest available unaudited interim
financial statements of the Company, if any, which
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have been reviewed by the Company's independent auditors, as stated in their
letters to be furnished pursuant to Section 7(f) hereof.
(j) Not file any amendment or supplement to the Registration
Statement or Prospectus after the effective date of the Registration Statement
to which you shall reasonably object in writing after being furnished a copy
thereof.
(k) If any action or proceeding shall be brought by you in order to
enforce any right or remedy under this Agreement, the Company hereby consents
to, and agrees that it will submit to, the jurisdiction of the courts of the
State of New York and of any Federal court sitting in the United States District
Court for the Southern District of New York. The Company agrees that process in
any such action or proceeding may be served in that manner provided by New York
law for service on foreign corporations.
(l) Comply with all registration, filing and reporting requirements
of the Exchange Act which may from time to time be applicable to the Company.
(m) Make all filings required, including registration under the
Exchange Act, to obtain and keep the listing of its Common Stock in The Nasdaq
SmallCap Market, and effect and maintain such listing for the Common Stock for
at least five (5) years from the date of this Agreement.
(n) Use its best efforts to be included in Standard & Poors
Corporations Manual as soon as possible following the Closing Date and to
continue to be included in both of such Manuals for at least five (5) years from
the effective date of the Registration Statement.
(o) Not later than three months following the date of this
Agreement, cause to be delivered to you and to your counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇, four (4) bound volumes containing therein all filings, including
exhibits, and correspondence to and from the Commission, the National
Association of Securities Dealers, Inc, ("NASD") and all states or other
jurisdictions concerning the offering of the Stock, underwriting documents and
closing documents, plus any other relevant material.
(p) Unless waived by you, you shall have the right to designate a
non-voting advisor acceptable to the Company to the Board for a period of three
years after the Closing Date. Said designee, shall attend meetings of the Board
and shall be entitled to receive reimbursement for all reasonable costs incurred
in attending such meetings, including but not limited to, food, lodging and
transportation.
12
(q) For a period of three (3) years from the Closing Date, there
will be no less than four (4) formal, "in person" or "telephonic" meetings, of
the Company's Board of Directors in each such year at which meetings the Advisor
shall be permitted to attend or participate, as the case may be in accordance
with the provisions of Section 5(p); said meetings shall be held quarterly each
year and ten (10) days' advance notice of such meetings shall be given to the
Advisor. The Advisor shall receive notice of special meetings of the Board of
Directors at the same time and manner as the members of the Board.
(r) Indemnify and hold the Representative and the Advisor harmless,
to the full extent allowed by applicable laws, against any and all claims,
actions, awards and judgments arising solely out of the attendance and
participation of the Advisor at any meeting described in Section 5(p) of this
Agreement. In the event the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, the Company
agrees, if possible, to include the Representative and the Advisor as an insured
under such policy.
(s) Establish and maintain during the period that the Common Stock
is listed on The Nasdaq SmallCap or National Markets an independent audit
committee and other required committees of the Company's Board of Directors.
[(t) On the Closing Date, enter into a three (3) year financial
consulting agreement with the Representative (the "Financial Consulting
Agreement") pursuant to which the
13
Representative will provide the Company with investment banking and financial
consulting services at a fee of $3,333.33 per month over a 36-month period,
with the total fee of $120,000 payable in advance on the Closing Date.]
6. Payment of Expenses.
(a) The Company hereby agrees to pay, whether or not the
transactions contemplated hereunder are consummated, all expenses (other than
fees of your counsel, except as provided in (iii) below) in connection with (i)
the preparation, printing, filing and mailing of the Registration Statement and
the Prospectus, including the cost of all copies thereof and of the Preliminary
Prospectus and of the Prospectus and any amendments or supplements thereto
supplied to you in quantities as herein above stated, (ii) the issuance,
transfer and delivery of the Firm Units and the Additional Units, including any
transfer or other taxes payable thereon, but not including the underwriting
discounts and commissions thereon, (iii) the qualification of the Units, the
Stock, the Redeemable Warrants, the Additional Stock and the Additional
Redeemable Warrants, under state or foreign securities or Blue Sky laws,
including the costs of printing and mailing the "Blue Sky Survey" and the
reasonable fees of counsel to the Underwriters counsel (which amount shall not
exceed $25,000 without the consent of the Company and for which counsel will
notify the Company as soon as practicable when said fees reach $15,000), of
which $10,000 has been paid prior to the date hereof, and disbursements in
connection therewith, (iv) filing fees payable to the NASD,
14
(b) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 6, it will pay to the
Representative a non-accountable expense allowance equal to two and one half
percent (2 1/2 %) of the gross proceeds received by the Company from the sale of
the Firm Units and the Additional Units, by certified or bank cashier's
check or, at the election of the Representative, by deduction from the proceeds
of the offering contemplated herein.
7. Conditions of Your Obligations. The obligation of the several
Underwriters hereunder to purchase and pay for the Firm Units and the Additional
Units, as provided herein, shall be subject to the continuing accuracy in all
material respects of the representations and warranties of the Company as of the
date hereof and as of the Closing Date (or the Additional Closing Date, as the
case may be), to the performance by the Company in all material respects of its
obligations hereunder and to the following conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M., New York City time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you and, at the Closing
Date and Additional Closing Date, no stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, shall have been issued
or proceeding therefor initiated or threatened by the Commission.
(b) At the Closing Date and the Additional Closing Date, as the case
may be, you shall have received the favorable opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, counsel for the Company, dated the Closing Date or the Additional
Closing Date, as the case may be, addressed to the Underwriters substantially in
the form of Attachment A hereto.
(c) On or prior to the Closing Date and the Additional Closing Date,
as the case may be, you shall have been furnished such documents, certificates
and opinions as you may reasonably require for the purpose of enabling you to
review the matters referred to in subsection (b) of this Section 7, and in order
to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(d) Prior to the Closing Date and the Additional Closing Date, as
the case may be, (i) there shall have been no material adverse change in the
business, properties, results of operations, condition (financial or otherwise),
affairs or prospects, of the Company from that as of the latest date 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 from the latest date as of which the financial
condition of the Company is set forth in the Registration Statement and
Prospectus, other than transactions referred
15
to or contemplated therein or to which you have given your written consent;
(iii) the Company shall not be in default (nor shall an event have occurred
which, with notice, or lapse of time or both would constitute a default or
acceleration) under any provision of, any agreement, understanding or instrument
relating to any indebtedness; (iv) no material amount of the consolidated assets
of the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; and (v) no action, suit or proceeding, at
law or in equity, shall have been pending or, to the knowledge of the Company,
threatened against the Company or affecting any of its properties or business
before or by any court or federal, state or other jurisdictional commission,
board or other administrative agency wherein an unfavorable decision, ruling or
finding would materially adversely affect the business, operations, prospects or
consolidated financial condition or income of the Company except as set forth in
the Registration Statement and Prospectus.
(e) At the Closing Date and Additional Closing Date, as the case may
be, you shall have received a certificate of the President and the principal
financial or accounting officer of the Company, dated the Closing Date and
Additional Closing Date, as the case may be, (i) to the effect that the
conditions set forth in subsections (a) and (d) above have been satisfied and
(ii) as to the accuracy, as of the Closing Date and Additional Closing Date, as
the case may be, of the representations and warranties of the Company set forth
in Section 2 hereof.
(f) At the time this Agreement is executed and at the Closing Date
and Additional Closing Date, as the case may be, you shall have received a
letter, addressed to you in form and substance satisfactory to you in all
respects (including the non-material nature of the changes or decreases, if any,
referred in to clause (iii) below), from BDO ▇▇▇▇▇▇▇ LLP, dated as of the date
of this Agreement and as of the Closing Date and Additional Closing Date, as the
case may be:
(i) confirming that they are independent accountants with respect
to the Company within the meaning of the Act and the applicable
published Regulations;
(ii) stating that in their opinion, the financial statements of
the Company included in the Registration Statement examined by
them comply as to form in all material respects with the
applicable accounting requirements of the Act and the published
Regulations;
(iii) stating that, on the basis of procedures (but not an audit
in accordance with generally accepted auditing standards), which
included a reading of the latest available unaudited interim
financial statements of the Company and its consolidated related
party (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 boards of
16
directors of the Company and its consolidated related party and
committees of such boards and inquiries to certain officers and
other employees of the Company and its consolidated related party
responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to their
attention that would cause them to believe that (A) the unaudited
financial statements of the Company and its consolidated related
company included in the Registration Statement (i) do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and Regulations, or (ii) were
not fairly presented in conformity with generally accepted
accounting principles on a basis substantially consistent with
that of the audited financial statements included in the
Registration Statement; (B) at the date of the latest available
interim financial statements and at a specified date not more
than five business days prior to the date of such letter, there
was any change in long-term debt or capital stock of the Company
and its consolidated related company as compared with the amounts
shown in the [ ] balance sheet of the Company and its
consolidated related company included in the Registration
Statement and Prospectus, other than as set forth in or
contemplated by the Registration Statement and Prospectus, or, if
there was any change, setting forth the amount of such change; or
(C) during the period from [ ] to a specified date not
more than five days prior to the date of such letter, there was
any decrease in revenues or any increase in operating loss, net
loss or pro forma net loss per share of the Company, as compared
with the corresponding period in the preceding year, other than
as set forth in or contemplated by the Registration Statement and
Prospectus, or, if there was any decrease or increase,
respectively, setting forth the amount of such decrease or
increase; and
(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of dollar amounts and shares and
other information pertaining to the Company set forth in the
Prospectus, which have been specified by you prior to the date of
this Agreement, to the extent that such amounts, numbers,
percentages and other information may be derived from the general
accounting records of the Company and excluding any questions
requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter, and found them to be
in agreement.
17
(g) All proceedings taken in connection with the sale of the Firm
Units and the Additional Units as herein contemplated shall have been reasonably
satisfactory in form and substance to you and your counsel.
(h) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and warranties
contained herein, the performance of covenants prior to the Closing Date and the
Additional Closing Date, as the case may be, and related matters as the
Representative may reasonably have requested; and you shall have received from
counsel to the Underwriters, a favorable opinion, dated as of the Closing Date
and the Additional Closing Date, as the case may be, with respect to such of the
matters set forth under subsection (b) of this Section 7, and with respect to
such other related matters, as you may reasonable require.
(i) There shall have been duly tendered to you certificates
representing all the Stock and the Additional Stock, as the case may be, agreed
to be sold by the Company on the Closing Date and the Additional Closing Date,
as the case may be.
(j) No order suspending the sale of the Firm Units or the Additional
Units, as the case may be, in any jurisdiction designated by you pursuant to
subsection (d) of Section 5 hereof, shall have been issued on the Closing Date
or the Additional Closing Date, as the case may be, and no proceedings for that
purpose shall have been instituted or to your knowledge or that of the Company
shall be contemplated.
Any certificate signed by any duly authorized officer of the Company
in such capacity and delivered to you or your counsel shall be deemed a
representation and warranty by the Company to you as to the statements made
therein. If any condition to your obligations hereunder to be fulfilled prior to
or at the Closing Date or the Additional Closing Date, as the case may be, is
not so fulfilled, you may terminate this Agreement or, if you so elect, waive
any such conditions which have not been fulfilled or extend the time for their
fulfillment.
8. Indemnification.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each of the Underwriters, each of the officers and
directors of the Underwriters and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever) (collectively,
"Damages") arising out of or based upon (i) the inaccuracy or breach of any
representation or warranty of the Company or the breach of any covenant made by
the Company in this Agreement or (ii) any untrue statement or alleged untrue
statement of a material fact contained (x) in any Preliminary Prospectus, the
Registration Statement
18
or the Prospectus (as from time to time amended and supplemented) or (y) in any
application or other document (in this Section 8, collectively called
"Application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Stock or the Additional Stock under the "Blue Sky" or
securities laws thereof or filed with the Commission or any securities exchange,
such as the Nasdaq SmallCap Market, or (iii) the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading; unless such statement or omission was
made in the section of the Prospectus captioned "Underwriting" or was made in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by or on behalf of any Underwriter
expressly for use in the Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in any Application or in
any communication to the Commission, as the case may be, or unless the Damages
arise from any failure by any of the Underwriters to be registered or to be in
good standing as a broker dealer in any jurisdiction in which Units are offered
or sold or to comply with the provisions of state and federal securities laws,
or any actions taken in connection with the offer or sale of the Units hereunder
by any of the Underwriters or its employees or agents not included in the
Prospectus. With respect to any Damages arising out of or based upon any untrue
statement or alleged untrue statement made in, or omission or alleged omission
from, any Preliminary Prospectus, the indemnity agreement contained in this
Section 8(a) with respect to such Preliminary Prospectus shall not inure to the
benefit of the Underwriters (or the benefit of any person controlling any
Underwriter), if the Prospectus (or the Prospectus as amended or supplemented if
the Company shall have made any amendments thereof or supplements thereto which
shall have been furnished to you prior to the time of confirmation of such sale)
does not contain such statement, alleged statement, omission or alleged
omission, a sufficient number of copies of such Prospectus were provided to the
Underwriters and a copy of such Prospectus shall not have been sent or given to
the person asserting such Damages at or prior to the written confirmation of
such sale to such person.
(b) Subject to the conditions set forth below, each Underwriter,
severally and not jointly, agrees to indemnify and hold harmless the Company,
each of the directors of the Company, each of the officers of the Company who
shall have signed the Registration Statement and each other person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act for all Damages with respect to statements or
omissions, or alleged statements or omissions, if any, made in the section of
the Prospectus captioned "Underwriting" or made in any Preliminary Prospectus,
Registration Statement or Prospectus or any amendment or supplement thereto or
any Application in reliance upon, and in conformity with, written information
furnished to the Company with respect to the Underwriters by or on behalf of any
Underwriter for use in any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto or in any application, as the
case may be, or that arise from any failure by any of the Underwriters to be
registered or to be in good standing as a broker dealer in any jurisdiction in
which Units are offered or sold or to comply with the provisions of state and
federal securities laws, or any actions taken in connection with the offer
19
or sale of the Units hereunder by any of the Underwriters or its employees or
agents not included in the Prospectus.
(c) If any action is brought against an indemnified party under
subsection (a) or (b) above (the "Indemnified Party") in respect of which
indemnity may be sought against the indemnifying party under subsection (a) or
(b) above (the "Indemnifying Party"), such Indemnifying Party shall promptly
notify in writing the party or parties against whom indemnification is to be
sought of the institution of such action and the Indemnifying Parties shall
assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such Indemnified Party) and payment of expenses.
Such Indemnified Party shall have the right to employ it 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 unless the employment of such counsel shall have been
authorized in writing by the Indemnifying Parties in connection with the defense
of such action or the Indemnifying Parties shall not have employed counsel to
have charge of the defense of such action or such Indemnified Party or parties
shall have reasonably concluded that there may be defenses available to the
Indemnifying Parties which are different or additional to those available to the
Indemnifying Parties (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 reasonable fees and expenses shall be
borne by the Indemnifying Parties. Anything in this paragraph to the contrary
notwithstanding, the Indemnifying Party shall not be liable for the reasonable
fees and expenses of more than one counsel or for any settlement of any such
claim or action effected without its written consent. The Indemnifying Party
agrees promptly to notify the Indemnified Party of the commencement of any
litigation or proceedings against the Indemnifying Party or any of its officers
or directors in connection with the issue and sale of the Stock and the
Additional Stock or in connection with such Preliminary Prospectus, Registration
Statement or Prospectus, or any amendment or supplement thereto, or any such
Application.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an Indemnified Party in respect of
any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each Indemnifying Party shall contribute to the amount
paid or payable to such Indemnified Party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Stock and
Additional Stock. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the Indemnified
Party failed to give the notice required above in this Section 8, then each
Indemnifying Party shall contribute to such amount paid or payable by such
Indemnified Party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to
20
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (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
subsection (d), (i) the Underwriters shall not be required to contribute any
amount in excess of the amount by which the total price at which the Stock and
Additional Stock underwritten by the Underwriters and distributed to the public
were offered to the public exceeds the amount of any damages which the
Underwriters have otherwise been required to pay by reason of such untrue
statement or omission and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11 of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or their
obligations to purchase the Firm Units hereunder, then such Firm Units to which
the default relates shall be purchased by the non-defaulting Underwriters in
proportion to their respective commitments hereunder.
21
(b) In the event that the Firm Units to which the default relates is
to be purchased by the non-defaulting Underwriters, or is to be purchased by
another party or parties as aforesaid, you or the Company shall have the right
to postpone the Closing Date for a reasonable period but not in any event
exceeding five (5) business days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus or in
any other documents and arrangements, and the Company agrees to file promptly
any amendment to the Registration Statement or the Prospectus which in the
opinion of counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 9 with like effect as if it had originally been a party to
this Agreement with respect to such Firm Units.
10. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and the Additional Closing Date, and such
representations, warranties and agreements of you and the Company, including the
indemnity and contribution agreements contained in Section 8 hereof, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of you or any controlling person, or by or on behalf of the
Company or any controlling person, and shall survive termination of this
Agreement and/or delivery of the Firm Units and the Additional Units to you.
11. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 9:30 A.M., New York
Time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by you
of the Units, whichever is earlier. The time of the initial public offering, for
the purpose of this Section 11, shall mean the time, after the Registration
Statement becomes effective, of the release by you for publication of the first
newspaper advertisement which is subsequently published relating to the Units or
the time, after the Registration Statement becomes effective, when the Units is
first released by you for offering by the Underwriters or dealers by letter or
telegram, whichever shall first occur. You or the Company may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as noted below, by giving the notice indicated below in Section
11(d) before the time this Agreement becomes effective.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the Additional Closing Date, as the case may be,
if, after the date of this Agreement, any domestic or international event or act
or occurrence has materially disrupted or, in the exercise of your reasonable
judgment, will in the immediate future materially disrupt,
22
securities markets in the United States; or trading on the New York Stock
Exchange 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 New York Stock Exchange by the New York Stock Exchange or
by order of the Commission or any other governmental authority having
jurisdiction; or the United States shall have become involved in a war or major
hostilities; or a banking moratorium has been declared by a New York or Federal
authority; or the Company shall have sustained a material loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not said loss shall have been insured, will, in your
opinion, interfere materially and adversely with the conduct of the business and
operations of the Company; or there shall have been such material adverse change
in the condition or prospects of the Company or the market for its and similar
securities as in your judgment would make it inadvisable to proceed with the
offering, sale and delivery of the Firm Units or the Additional Units, as the
case may be.
(c) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 11, the Company shall
be notified promptly by you by telephone or telegram, confirmed by letter. If
the Company elects to prevent this Agreement from becoming effective, you shall
be notified promptly by the Company by telephone or telegram, confirmed by
letter.
(d) Anything in this Agreement to the contrary notwithstanding if
this Agreement shall not become effective by reason of an election of the
Company pursuant to this Section 11, or if this Agreement shall not be carried
out within the time specified herein 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, the sole liability of the Company to you, in
addition to the obligations assumed by the Company pursuant to Section 6 hereof,
will be to reimburse you for such reasonable out-of-pocket expenses (including
the fees and disbursements of your counsel) as shall have been incurred in
connection with this Agreement and the proposed purchase of the Firm Units and
the Additional Units, and upon demand the Company will pay the full amount
thereof to you. If this Agreement shall not become effective by reason of an
election by you pursuant to this Section 11 or if this Agreement shall be
terminated or otherwise not carried out within the time specified herein for any
reason other than the failure on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement by it or them to be
performed or satisfied, the Company shall have no liability to you other than
for obligations assumed by the Company pursuant to Section 6 hereof; provided,
however, that you may retain any sums heretofore paid to you by the Company as
provided in Section 3 hereof to the extent that such sums are for your
accountable out-of-pocket expenses (including the fees and disbursements of your
counsel) as shall have been incurred in connection with this Agreement and the
proposed purchase of the Firm Units and the Additional Units.
Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 8 shall not be
23
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
12. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered or telegraphed and confirmed to The Thornwater
Company, LLP, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
President, with a copy to ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.; and if sent to the
Company, shall be mailed, delivered or telegraphed and confirmed to Chipcards,
Inc., Citicorp Center, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
13. Parties. This Agreement shall be binding upon, you, the Company,
and the controlling persons, directors and officers referred to in Section 8
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
14. Construction. This Agreement shall be construed in accordance with
the laws of the State of New York.
If the foregoing correctly sets forth the understanding between you 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,
CHIPCARDS, INC.
By:
------------------------------
Accepted as of the date
first above written:
THE THORNWATER COMPANY, LP
As Representative of the Underwriters
named in Schedule I hereto
By:
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24
SCHEDULE I
Underwriters Number of Firm Units
------------ --------------------
TOTAL
