EXHIBIT 1.1
2,500,000 Shares
NEXAR TECHNOLOGIES, INC.
Common Stock
UNDERWRITING AGREEMENT
March ___, 1997
Sands Brothers & Co., Ltd.
Credit Lyonnais Securities (USA) Inc.
As Representatives of the Several Underwriters
c/o Sands Brothers & Co., Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Nexar Technologies, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the underwriters named in Schedule A (the
"Underwriters") of this Underwriting Agreement (the "Agreement"), for whom you
are acting as representatives (in such capacities, the "Representatives"),
2,500,000 shares (the "Firm Shares") of Common Stock, par value $0.01 per share
of the Company (the "Common Stock"). In addition, the Company has agreed to
grant to the Underwriters an option (which may be exercised by the
Representatives as provided in Section 3 hereof) to purchase an additional
375,000 shares of Common Stock (the "Option Shares") as provided in Section 3
hereof. The Firm Shares and the Option Shares are hereinafter collectively
referred to as the "Shares." If you are the only Underwriters, all references
herein to the Representatives shall be deemed to be to the Underwriters.
The Company also proposes to issue and sell to Sands Brothers & Co.,
Ltd. (for its own account and not as one of the Representatives of the Several
Underwriters and hereinafter, "Sands Brothers") or, at your discretion, to your
bona fide officers or shareholders, as described below, warrants (the "Sands
Brothers Warrants") to purchase an aggregate of 250,000 shares of Common Stock
(subject to adjustment) at an exercise price of $_________ per share, which sale
will be consummated in accordance with the terms and conditions of the form of
Warrant Agreement filed as an exhibit to the Registration Statement. The shares
of Common Stock issuable upon exercise of the Sands Brothers Warrants are
hereinafter sometimes referred to as the "Warrant Shares." The Shares, the Sands
Brothers Warrants and the Warrant Shares (collectively, the "Securities") are
more fully described in the Registration Statement and the Prospectus, as
defined below.
You have advised the Company that you and the other Underwriters desire
to purchase, severally, the Firm Shares and that you have been authorized by the
Underwriters to execute this agreement on their behalf. The Company confirms the
agreements made by it with respect to the purchase of the Firm Shares by the
several Underwriters on whose behalf you are signing this Agreement, as follows:
1. Purchase and Sale of Firm Shares. (a) Subject to the terms and
conditions of this Agreement, and upon the basis of the representations,
warranties, and agreements herein contained, the Company agrees to issue and
sell to the Underwriters, and each such Underwriter agrees, severally and not
jointly, to buy from the Company at $_________ for each Firm Share, at the place
and time hereinafter specified, the number of Firm Shares set forth opposite the
names of the Underwriters in Schedule A attached hereto plus any additional Firm
Shares which such Underwriters may become obligated to purchase pursuant to the
provisions of Section 9 hereof.
2. Payment and Delivery; Sands Brothers Warrants.
(a) Delivery to the Underwriters of and payment for the Firm
Shares shall take place at 10:00 a.m., New York Time, on the third full business
day (or, if the Firm Shares are priced, as contemplated in Rule 15c6-1(c) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after 4:30
p.m., New York Time, the fourth full business day) following the date of the
initial public offering, at the offices of the Sands Brothers, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such time on such other date, as may be agreed
upon by the Company and the Underwriters (such date hereinafter is referred to
as the "Closing Date").
(b) The Company will make the certificates for the Shares to
be purchased by the Underwriters hereunder available to you for inspection at
least 24 hours prior to the Closing Date or the Option Closing Date (which are
collectively referred to herein as the "Closing Dates"). The certificates shall
be in such names and denominations as you may request, at least two (2) full
business days prior to the Closing Dates. Time shall be of the essence and
delivery at the time and place specified in this Agreement is a further
condition to the obligations of each Underwriter.
Definitive certificates in negotiable form for the Firm
Shares to be purchased by the Underwriters hereunder will be delivered by the
Company to you for the accounts of the several Underwriters against payment of
the respective purchase prices therefor by the several Underwriters, by federal
wire transfer to the Company. The Representatives' written confirmation of the
effectuation of such federal wire transfer, detailing the specific federal wire
number, shall be satisfactory evidence that payment of the purchase price for
the Firm Shares has been made for purposes of the Closing Date and, upon
presentation of such confirmation, the Company shall be required to deliver
certificates in negotiable form for the Firm Shares at such time.
In addition, in the event the Underwriters (or the
Representatives, individually ) exercise the option to purchase from the Company
all or any portion of the Option Shares pursuant to the provisions of Section 3
hereof, payment for such securities
-2-
shall be made to the Company by the effectuation of a federal wire transfer at
the date of delivery of such securities as required by the provisions of Section
3 hereof.
It is understood that you, individually and not as one of
the Representatives of the several Underwriters, may (but shall not be obligated
to) make any and all payments required pursuant to this Section 2 on behalf of
any Underwriters whose check or checks shall not have been received by the
Representatives at the time of delivery of the Firm Shares to be purchased by
such Underwriter or Underwriters. Any such payment by you shall not relieve any
such Underwriter or underwriters of any of its or their obligations hereunder.
It is also understood that the Representatives individually rather than all of
the Underwriters may (but shall not be obligated to) purchase the Option Shares
(as hereinafter defined).
It is understood that the several Underwriters propose to
offer the Firm Shares to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement becomes effective.
The cost of original issue tax stamps, if any, in
connection with the issuance and delivery of the Shares by the Company to the
Underwriters shall be borne by the Company. The Company will pay and save each
Underwriter and any subsequent holder of the Shares harmless from and any and
all liabilities with respect to or resulting from any failure or delay in paying
Federal and state stamp and other transfer taxes, if any, which may be payable
or determined to be payable in connection with the original issuance or sale to
such Underwriter of Shares sold by such entity.
(c) On the Closing Date, the Company will sell the Sands
Brothers Warrants to Sands Brothers, for its own account and not as a
Representatives of the several Underwriters, or to its designees. The Sands
Brothers Warrants will be in the form of, and in accordance with, the provisions
of the Sands Brothers' Common Stock Purchase Warrant attached as an exhibit to
the Warrant Agreement. The aggregate purchase price for the Sands Brothers
Warrants is $100.00. The Sands Brothers Warrants will be restricted from sale,
transfer, assignment or hypothecation for a period of one year from the
Effective Date, except to bona fide officers and shareholders of Sands Brothers.
Payment for the Sands Brothers Warrants will be made to the Company by check or
checks payable to its order on the Closing Date against delivery of the
certificates representing the Sands Brothers Warrants. The certificates
representing the Sands Brothers Warrants will be in such denominations and such
names as Sands Brothers may request not less than 24 hours prior to the Closing
Date.
3. Option to Purchase Option Shares.
(a) For the purposes of covering any overallotments in
connection with the distribution and sale of the Firm Shares as contemplated by
the Prospectus, the Company hereby grants an option to the several Underwriters
(which may be exercised, at its option, by Sands Brothers as one of the
Representatives, individually) to purchase all or any part of the Option Shares
from the Company. This option may be exercised in whole or in part at anytime
and from time to time within 45 days after the effective date of the
-3-
Registration Statement upon written notice (each, an "Option Share Notice") by
Sands Brothers to the Company setting forth the aggregate number of Option
Shares to be purchased, the names and denominations in which the certificates
for such Option Shares are to be registered and the time and date for such
purchase. Such time and date shall be determined by Sands Brothers but shall be
at least two and no more than five full business days before the date specified
for closing in the Option Share Notice (each an "Option Closing Date"). Delivery
of the Option Shares against payment therefor shall take place at the offices of
Sands Brothers, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The number of Option
Shares to be purchased by each Underwriter, if any, shall bear the same
percentage to the total number of Option Shares being purchased by the several
Underwriters pursuant to this subsection (a) as the number of Firm Shares such
Underwriter is purchasing bears to the total number of Firm Shares being
purchased pursuant to subsection (a) of Section 1, as adjusted, in each case by
the Representatives in such manner as the Representatives may deem appropriate.
The purchase price to be paid for the Option Shares will be the same price per
Option Share as the price per Firm Share set forth in Section 1 hereof.
(b) Payment for any Option Shares purchased will be made to
the Company by the effectuation of a federal wire transfer, against receipt of
the certificates for such securities by the Representatives for the respective
accounts of the several Underwriters registered in such names and in such
denominations as the Representatives may request. The Representatives' written
confirmation of the effectuation of such federal wire transfer, detailing the
specific federal wire number, shall be satisfactory evidence that payment of the
purchase price for the Option Shares has been made for purposes of the Option
Closing Date and, upon presentation of such confirmation, the Company shall be
required to deliver certificates in negotiable form for the Option Shares at
such time.
(c) The obligation of the Underwriters to purchase and pay for
any of the Option Shares is subject to the accuracy and completeness (as of the
date hereof and as of the Option Closing Date) in all material respects of the
representations and warranties of the Company herein, to the accuracy and
completeness of the statements of the Company or its officers made in any
certificate or other document to be delivered by the Company pursuant to this
Agreement, to the performance in all material respects by the Company of its
obligations hereunder, to the satisfaction by the Company of the conditions, as
of the date hereof and as of the Option Closing Date, and to the delivery to the
Underwriters of opinions, certificates and letters dated the Option Closing Date
substantially similar in scope to those specified in Section 5, 6(b), (c), (d)
and (e) hereof, but with each reference to "Firm Shares," and "Closing Date" to
be, respectively, to the Option Shares and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) Each of the Company and its subsidiary, Intelesys
Corporation (the "Subsidiary"), is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
power and authority, corporate and other, to own or lease and operate its
properties and to conduct its business as described in the
-4-
Registration Statement. Each of the Company and the Subsidiary is duly licensed
or qualified to do business as a foreign corporation and is in good standing in
all jurisdictions in which the nature of its activities conducted by each of
them or the character of the assets owned or leased by each of them makes such
license or qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not materially and adversely effect
the financial condition, results of operations, business or properties of the
Company and its Subsidiary, when taken as a whole. Except as set forth in the
Prospectus, the Company (i) does not own, and at the Closing Date and, if later,
the Option Closing Date will not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any corporation, firm, partnership, joint venture,
association or other entity and (ii) is not, and at the Closing Date and, if
later, the Option Closing Date will not be, engaged in any discussions or a
party to any agreement or understanding, written or oral, regarding the
acquisition of an interest in any corporation, firm, partnership, joint venture,
association or other entity. Complete and correct copies of the certificate of
incorporation, the bylaws or other organizational documents of the Company and
the Subsidiary and all amendments thereto have been delivered to the
Representatives, and, except for the filing of the Company's First Restated
Certificate of Incorporation in substantially the form filed as an exhibit to
the Registration Statement, no changes therein will be made subsequent to the
date hereof and prior to Closing Date or, if later, the Option Closing Date.
(b) The Company has full corporate power and authority to
enter into this Agreement and the Warrant Agreement, to issue and sell the
Shares and the Sands Brothers Warrants and to perform its respective obligations
thereunder. This Agreement has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company, and the Sands
Brothers' Warrant Agreement, when executed and delivered by the Company on the
Closing Date, will be valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, in each case
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally. The execution, delivery and performance of this Agreement
and the Warrant Agreement by the Company, the consummation by the Company of the
transactions herein and therein contemplated and the compliance by the Company
with the terms of this Agreement and the Warrant Agreement do not and will not,
with or without the giving of notice or the lapse of time, or both, (i) result
in any violation of the certificate of incorporation, by-laws or other
organizational documents of the Company or the Subsidiary; (ii) result in a
breach of or conflict with any of the terms or provisions of, or constitute a
default under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or the Subsidiary pursuant
to any indenture, mortgage, note, contract, commitment or other agreement or
instrument to which the Company is a party or by which the Company or the
Subsidiary or any of their respective properties or assets is or may be bound or
affected; (iii) violate any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business which, in the
case of clause (ii) or (iii), would have a material adverse effect on the
financial condition, results of operations, business or properties of the
Company and the Subsidiary,
-5-
when taken as a whole or the ability of the Company to consummate the
transactions contemplated hereby.
(c) The Company has prepared in conformity with the
requirements of the Securities Act of 1933 (the"Act") and the rules and
regulations (the "Regulations") of the Securities and Exchange Commission (the
"Commission") and filed with the Commission a registration statement (File No.
333-18489) on Form S-1 and has filed one or more amendments thereto, covering
the registration of the Shares under the Act, including the related preliminary
prospectus or preliminary prospectuses (each thereof being herein called a
"Preliminary Prospectus") and a proposed final prospectus. Each Preliminary
Prospectus was endorsed with the legend required by Item 501(c)(5) of Regulation
S-K of the Regulations. Such registration statement, as amended at the time it
becomes effective, including all financial schedules and exhibits thereto, and
all exhibits and any information deemed to be included by Rule 430A and the
final prospectus included therein are herein, respectively, called the
"Registration Statement" and the "Prospectus," except that, (i) if the
prospectus filed by the Company pursuant to Rule 424(b) of the Regulations
differs from the Prospectus, the term "Prospectus" will also include the
prospectus filed pursuant to Rule 424(b), and (ii) if the Registration Statement
is amended or such Prospectus is supplemented after the effective date of the
Registration Statement (the "Effective Date") and prior to the Option Closing
Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus" shall include the Registration Statement as amended or
supplemented.
(d) Neither the Commission, nor to the best of the Company's
knowledge, any state regulatory authority has issued any order preventing or
suspending the use of any Preliminary Prospectus or has instituted or, to the
Company's knowledge, threatened to institute any proceedings with respect to
such an order.
(e) The Registration Statement when it becomes effective, the
Prospectus when it is filed with the Commission pursuant to Rule 424(b), and
both documents as of the Closing Date, as the case may be, will comply in all
material respects as to form with the Act and the Regulations and will in all
material respects conform to the requirements of the Act and the Regulations,
and neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, on such dates, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that this representation and
warranty does not apply to statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of the Underwriters in connection with the Registration Statement or Prospectus
or any amendment or supplement thereto by the Underwriters expressly for use
therein.
(f) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the accountants who have certified
certain of the financial statements filed and to be filed with the Commission as
part of the Registration Statement and the Prospectus, are independent public
accountants within the meaning of the Act and Regulations. The financial
statements and schedules and the notes thereto and the selected financial
statements and summary financial statements filed as part
-6-
of the Registration Statement and included in the Prospectus present fairly in
all material respects the financial position of the Company as of the dates
thereof, and the results of operations and changes in financial position of the
Company for the periods indicated therein, in conformity with generally accepted
accounting principles (which, as applied to the Company for the periods
involved, are substantially identical in all material respects) applied on a
consistent basis throughout the periods involved except as otherwise stated in
the Registration Statement and the Prospectus.
(g) The Company had at the date or dates indicated in the
Prospectus a duly authorized and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. Based on the assumptions stated in
the Registration Statement and the Prospectus, the Company will have on the
Closing Date referred to below the adjusted stock capitalization set forth
therein. Except as disclosed in the Registration Statement or the Prospectus, on
the Effective Date and on the Closing Date referred to below, there will be no
options to purchase, warrants or other rights to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of the Company's capital stock or any such warrants,
convertible securities or obligations. Except as set forth in the Registration
Statement, no holders of any of the Company's securities have any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act.
(h) The descriptions in the Registration Statement and the
Prospectus of contracts and other documents are accurate and present fairly the
information required to be disclosed, and there are no contracts or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement under the
Act or the Regulations which have not been so described or filed as required.
(i) The Company's parent, Palomar Medical Technologies, Inc.
has filed with the appropriate federal, state and local governmental agencies,
and all foreign countries and political subdivisions thereof, all tax returns,
including, without limitation, franchise tax and sales tax returns, which are
required to be filed with respect to the Company, which consolidated returns are
complete and correct in all material respects and has paid all taxes shown on
such returns and all assessments received by it to the extent that the same have
become due. All payroll withholdings required to be made by the Company or the
Subsidiary with respect to employees have been made. The Company has not
executed or filed with any taxing authority, foreign or domestic, any agreement
extending the period for assessment or collection of any income taxes and is not
a party to any pending action or proceeding by any foreign or domestic
governmental agency for assessment or collection of taxes; and no claims for
assessment or collection of taxes have been asserted against the Company. The
Company has no tax deficiency which has been or, to the Company's knowledge,
might be asserted or threatened against the Company or its business, properties,
business prospects, condition (financial or otherwise), net worth or results of
operations.
(j) The outstanding shares of Common Stock and outstanding
options and warrants to purchase shares of Common Stock have been duly
authorized and validly issued. The outstanding shares of Common Stock are fully
paid and nonassessable. The
-7-
outstanding options and warrants to purchase Common Stock constitute the valid
and binding obligations of the Company, enforceable in accordance with their
terms, in each case subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and except that rights to indemnification and
contribution thereunder and under this Agreement may be limited by United States
or state securities laws or public policy relating thereto. None of the
outstanding shares of Common Stock or options or warrants to purchase shares of
Common Stock has been issued in violation of the preemptive rights of any
shareholder of the Company. None of the holders of the outstanding Common Stock
is subject to personal liability solely by reason of being such a holder. The
offers and sales of the outstanding Common Stock and outstanding options and
warrants to purchase Common Stock were at all relevant times either registered
under the Act, the applicable state securities or Blue Sky laws or exempt from
such registration requirements. The authorized Common Stock and outstanding
options and warrants to purchase Common Stock conform in all material respects
to the descriptions thereof contained in the Registration Statement and
Prospectus.
(k) The issuance and sale of the Shares have been duly
authorized and, when issued and delivered against payment therefor as
contemplated by this Agreement, the Shares will be validly issued, fully paid
and nonassessable. The holders of the Shares will not be subject to personal
liability solely by reason of being such holders and none of the Shares will be
subject to preemptive rights of any shareholder of the Company.
(l) The issuance and sale of the Sands Brothers Warrants have
been duly authorized and, when issued, paid for and delivered pursuant to the
terms of this Agreement or the Warrant Agreement, as the case may be, the Sands
Brothers Warrants will constitute valid and binding obligations of the Company,
enforceable as to the Company in accordance with their terms, in each case
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and except that rights to indemnification and contribution
thereunder and under this Agreement may be limited by United States or state
securities laws or public policy relating thereto. A sufficient number of shares
of Common Stock have been duly reserved for issuance upon exercise of the Sands
Brothers Warrants in accordance with the provisions of the Sands Brothers
Warrants. The Sands Brothers Warrants will conform in all material respects to
the descriptions thereof contained in the Registration Statement and Prospectus.
(m) The Company is not in violation of, or in default under,
(i) any term or provision of its certificate of incorporation, by-laws, or any
other organizational documents; (ii) any material term or provision or any
financial covenants of any indenture, mortgage, contract, commitment or other
agreement or instrument to which it is a party or by which it or any of its
property or business is or may be bound or affected; or (iii) any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business, which, in the case of clause (ii) and (iii),
would have a material adverse effect on the financial condition, results of
operations, business or properties of the Company or the ability of the Company
to consummate the transactions contemplated
-8-
hereby. The Company and the Subsidiary own, possess or have obtained all
governmental and other licenses, permits, certifications, registrations,
approvals or consents and other authorizations ("Permits") necessary to own or
lease, as the case may be, and to operate their respective properties, and to
conduct their respective business or operations as presently conducted, except
where the failure to own, possess or obtain such Permits would not have a
material adverse effect on the financial condition, results of operations,
business or properties of the Company and the Subsidiary, when taken as a whole.
All such Permits are outstanding and in good standing, and there are no
proceedings pending or, to the best of the Company's or the Subsidiary's
knowledge, threatened, or any basis therefor, seeking to cancel, terminate or
limit such Permits.
(n) Except as set forth in the Prospectus, there are no
claims, actions, suits, proceedings, arbitrations, investigations or inquiries
before any governmental agency, court or tribunal, domestic or foreign, or
before any private arbitration tribunal, pending, or, to the best of the
Company's knowledge, threatened against the Company or involving the Company's
properties or business which, if determined adversely to the Company, would,
individually or in the aggregate, have a material adverse effect on the
financial position, results of operations, properties, or business of the
Company or which question the validity of the capital stock of the Company or
this Agreement or of any action taken or to be taken by the Company pursuant to,
or in connection with, this Agreement; nor, to the best of the Company's
knowledge, except as disclosed in the Prospectus, is there any reasonable basis
for any such claim, action, suit, proceeding, arbitration, investigation or
inquiry. There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, or the Company's properties or business is bound or subject which
would be material to the Company.
(o) The Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions herein
contemplated other than payments previously made to Sands Brothers.
(p) (i) The Company has sufficient title and ownership of, or
license or other rights to, or have applied for, all patents, patent
applications, trademarks, trademark applications, service marks,
service ▇▇▇▇ applications, trade names, copyrights, trade secrets,
information, proprietary rights, technologies, know-how and processes
(collectively, "Intellectual Property") necessary for its business as
now conducted and as proposed to be conducted, as described in the
Prospectus.
(ii) Except as disclosed in the Prospectus, no
claims have been asserted by any person to the ownership or use of any
Intellectual Property or challenging or questioning the validity or
effectiveness of any such license or agreement and the Company has no
knowledge of any valid basis for any such claim. The use of the
Intellectual Property by the Company does not infringe on the rights of
any person and there are no pending or, to the knowledge of the
Company, threatened claims nor has it been alleged that the
Intellectual Property is engaged in such infringements. All of the
trademark and trade name registrations, patent applications are in full
force and effect. Other than potential sublicensees of
-9-
the Company, no other person has any right to use any Intellectual
Property for similar or related products in competition with the
products of the Company and no other person is infringing any of the
Intellectual Property.
(iii) The Company has taken reasonable steps
sufficient to safeguard and maintain the secrecy and confidentiality
of, or their respective proprietary rights in, all of the unpatented
know how, technology, proprietary processes, formulae, and other
information owned by it. Without limiting the generality of the
foregoing, the Company has obtained confidentiality and secrecy
agreements from all past and present employees and independent third
parties involved in the invention or creation of their respective
Intellectual Properties.
(q) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
incurred any material liability or obligation (absolute or contingent), except
liabilities and obligations incurred in the ordinary course of business, and has
not sustained any material loss or interference with its business from fire,
storm, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree; and
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there have not been, and prior to the Closing Date
referred to below there will not be, any changes in the capital stock or any
material increases in the long-term debt of the Company or any material adverse
change in or affecting the general affairs, management, financial condition,
shareholders' equity, results of operations or prospects of the Company, other
than as set forth or contemplated in the Prospectus.
(r) The Company owns no real property. The Company has good
title to all material personal property (tangible and intangible) owned by it,
free and clear of all security interests, charges, mortgages, liens,
encumbrances and defects, except such as are described in the Registration
Statement and Prospectus or such as do not materially affect the value or
transferability of such property and do not interfere with the use of such
property made, or proposed to be made, by the Company. The leases, licenses or
other contracts or instruments under which the Company leases, holds or is
entitled to use any property, real or personal, are valid and subsisting and
neither the Company, nor, to the best of the Company's knowledge, any other
party is in default thereunder and, to the best of the Company's knowledge, no
event has occurred which, with the passage of time or the giving of notice, or
both, would constitute a default thereunder. The Company has not received any
notice of any violation of any applicable law, ordinance, regulation, order or
requirement relating to its owned or leased properties the violation of which
would have a material adverse effect on the Company.
(s) Each material contract or other instrument (however
characterized or described) to which the Company is a party or by which its
properties or business is or may be bound or affected and to which reference is
made in the Prospectus has been duly and validly executed by the Company and,
assuming that such contracts or other instruments have been properly executed by
parties other than the Company, is in full force and effect in all material
respects and is enforceable against the parties thereto in accordance with its
terms, in each case subject to applicable bankruptcy, insolvency,
-10-
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally; and none of such contracts or
instruments has been assigned by the Company, and neither the Company nor, to
the best of the Company's knowledge, any other party is in default thereunder
and, to the best of the Company's knowledge, no event has occurred which, with
the lapse of time or the giving of notice, or both, would constitute a default
thereunder.
(t) The employment agreements between the Company and its
officers and employees, described in the Registration Statement, are in all
material respects binding and enforceable obligations upon the respective
parties thereto in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or other similar laws or arrangements affecting creditors' rights generally and
subject to principles of equity and public policy and subject to the possible
finding by a court of competent jurisdiction that the scope, time period or
geographic range of any post-employment non-competition restriction exceeds that
required to protect the Company's legitimate interests.
(u) Except as set forth in the Prospectus, the Company has no
employee benefit plans (including, without limitation, profit sharing and
welfare benefit plans) or deferred compensation arrangements that are subject to
the provisions of the Employee Retirement Income Security Act of 1974. To the
best of the Company's knowledge, no labor problem exists with any of the
Company's employees or is imminent which could have a material adverse affect on
the Company.
(v) The Company has filed registration statements pursuant to
Sections 12(g) and 12(b)of the Exchange Act to register the Common Stock, has
filed an application for quotation of the Shares on the NASDAQ National Market
and listing of the Shares on the Pacific Stock Exchange, and has received
notification that such quotation and listing have been approved, subject in each
case, to notice of issuance.
(w) The Company has adequately insured its properties against
loss or damage by fire or other casualty and maintains, in amounts which it
deems, in good faith, to be adequate, such other insurance, including but not
limited to, liability insurance, as is usually maintained by companies engaged
in the same or similar businesses located in its geographic area.
(x) Neither the Company nor, to its knowledge, any of its
officers, employees, agents or any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or 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 to assist the Company in connection with any actual or proposed
transaction) which (a) might subject the Company or any other such person, to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past,
-11-
might have had a material adverse effect on the assets, business or operations
of the Company; or (c) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company, taken as a whole.
(y) Except as set forth in Prospectus, no officer, director,
principal stockholder or partner of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the Rules
and Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficial interest
in any contract or agreement to which the Company is a party or by which it may
be bound or affected. Except as set forth in the prospectus under "Certain
Transactions," there are no existing, agreements, arrangements, understandings
or transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company, and any officer, director, holder of
5% or more of the Common Stock of the Company, or any partner, affiliate or
associate of any of the foregoing persons or entities.
(z) The minute books of the Company have been made available
to the Underwriters and contain a complete record in all material respects of
all meetings and actions of the directors and stockholders of the Company since
the time of its respective incorporation, and accurately reflects all
transactions referred to in such minutes in all material respects.
Any certificate signed by an officer of the Company and
delivered to the Representatives or to counsel for the Representatives shall be
deemed to be a representation and warranty by the Company to the Representatives
as to the matters covered thereby.
5. Certain Covenants of the Company. The Company covenants with the
several Underwriters as follows:
(a) The Company will not at any time, whether before the
Effective Date or thereafter during such period as the Prospectus is required by
law to be delivered in connection with the sales of the Firm Shares by the
several Underwriters, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Representatives has not been
previously advised and furnished a copy, or to which the Representatives shall
object in writing.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective and will advise the Representatives
immediately, and, if requested by the Representatives, confirm such advice in
writing, (i) when the Registration Statement, or any post-effective amendment to
the Registration Statement or any supplemented Prospectus is filed with the
Commission; (ii) of the receipt of any comments from the Commission; (iii) of
any request of the Commission for amendment or supplementation of the
Registration Statement or Prospectus or for additional information and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any
-12-
Preliminary Prospectus, or of the suspension of the qualification of the Firm
Shares for offering or sale in any jurisdiction, or of the initiation of any
proceedings for any of such purposes. The Company will make every reasonable
effort to prevent the issuance of any such stop order or of any order preventing
or suspending such use and to obtain as soon as possible the lifting thereof, if
any such order is issued.
(c) The Company will deliver to the several Underwriters,
without charge, from time to time until the Effective Date, as many copies of
each Preliminary Prospectus as the Underwriters may reasonably request, and the
Company hereby consents to the use of such copies for purposes permitted by the
Act. The Company will deliver to the several Underwriters, without charge, as
soon as the Registration Statement becomes effective, and thereafter from time
to time as requested, such number of copies of the Prospectus (as supplemented,
if the Company makes any supplements to the Prospectus) as the Underwriters may
reasonably request. The Company has furnished or will furnish to the
Representatives two conformed copies of the Registration Statement as originally
filed and of all amendments thereto, whether filed before or after the
Registration Statement becomes effective, two copies of all exhibits filed
therewith and two conformed copies of all consents and certificates of experts.
(d) The Company will comply with the Act, the Regulations, the
Exchange Act, and the rules and regulations thereunder so as to permit the
continuance of sales of and dealings in the Firm Shares, and in any Option
Shares which may be issued and sold. If, at any time when a prospectus relating
to such Securities is required to be delivered under the Act, any event occurs
as a result of which the Registration Statement and Prospectus as then amended
or supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it shall be
necessary to amend or supplement the Registration Statement and Prospectus to
comply with the Act or the regulations thereunder, the Company will promptly
file with the Commission, subject to Section 5(a) hereof, an amendment or
supplement which will correct such statement or omission or which will effect
such compliance.
(e) The Company will furnish such proper information as may be
required and otherwise cooperate in qualifying the Shares for offering and sale
under the securities or Blue Sky laws relating to the offering or for sale in
such jurisdictions as the Representatives may reasonably designate, provided
that no such qualification will be required in any jurisdiction where, solely as
a result thereof, the Company would be subject to service of general process or
to taxation or qualification as a foreign corporation doing business in such
jurisdiction.
(f) The Company will make generally available to its security
holders, in the manner specified in Rule 158(b) under the Act, and deliver to
the Sands Brothers and its counsel as soon as practicable and in any event not
later than 45 days after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement occurs, an
earning statement meeting the requirements of Rule 158(a) under the Act covering
a period of at least 12 consecutive months beginning after the effective date of
the Registration Statement.
-13-
(g) For a period of five years from the Effective Date, the
Company will deliver to Sands Brothers and to Representatives' Counsel on a
timely basis (i) a copy of each report or document, including, without
limitation, reports on Forms 8-K, 10-K and 10-Q and exhibits thereto, filed or
furnished to the Commission, any securities exchange or the National Association
of Securities Dealers, Inc. (the "NASD"); (ii) as soon as practicable, copies of
any reports or communications (financial or other) of the Company mailed to its
security holders; (iii) as soon as practicable, a copy of any Schedule 13D, 13G,
14D-1 or 13E-3 or Form 3, 4 and 5 received or prepared by the Company from time
to time; and (iv) such additional information concerning the business and
financial condition of the Company as Sands Brothers may from time to time
reasonably request and which can be prepared or obtained by the Company without
unreasonable effort or expense. The Company will furnish to its shareholders
annual reports containing audited financial state ments and such other periodic
reports as it may determine to be appropriate or as may be required by law.
(h) Neither the Company nor any person that is controlled by
the Company will take any action designed to or which might be reasonably
expected to cause or result in the stabilization or manipulation of the price of
the Firm Shares.
(i) If the transactions contemplated by this Agreement are
consummated, Sands Brothers shall retain the Fifty Thousand Dollars ($50,000)
previously paid to it, and the Company will pay or cause to be paid the
following: all of the Company's costs and expenses incident to the performance
of its obligations under this Agreement, including, but not limited to, the fees
and expenses of accountants and counsel for the Company, the preparation,
printing, mailing and filing of the Registration Statement (including financial
statements and exhibits), Preliminary Prospectuses and the Prospectus, and any
amendments or supplements thereto, the printing and mailing of the Selected
Dealer Agreement, the issuance and delivery of the Shares to the several
Underwriters; all taxes, if any, on the issuance of the Shares; the fees,
expenses and other costs of qualifying the Shares for sale under the Blue Sky or
securities laws of those states in which the Shares are to be offered or sold,
the cost of printing and mailing the "Blue Sky Survey" and fees and
disbursements of counsel in connection therewith, including those of such local
counsel as may have been retained for such purpose; the filing fees incident to
securing any required review by the NASD; the cost of furnishing to the
Underwriters copies of the Registration Statement, Preliminary Prospectuses and
the Prospectus as herein provided; the costs of "bound volumes" for Sands
Brothers and its counsel, and all other costs and expenses incident to the
performance of the Company's obligations hereunder which are not otherwise
specifically provided for in this Section 5(i).
In addition, at the Closing Date or the Option
Closing Date, as the case may be, Sands Brothers will, in its individual rather
than its representative capacity, deduct from the payment for the Firm Shares or
any Option Shares purchased, a total of two percent (2%) of the gross proceeds
of the entire offering (less the sum of Fifty Thousand Dollars ($50,000)
previously paid to Sands Brothers), as payment for the non-accountable expense
allowance relating to the transactions contemplated hereby.
-14-
(j) If the Company elects not to proceed with the offering or
if the Representatives elect to not proceed with the offering because of a
breach by the Company of any covenant, representation or warranty herein or as a
result of material adverse changes in the affairs of the Company, the Company
shall be liable only for the actual accountable out-of-pocket expenses of the
Representatives, including legal fees, up to the sum of $100,000. In the event
the Representative decides not to proceed with the offering for any other
reason, the Company shall be liable for the actual accountable out-of-pocket
expenses of the Representatives, including legal fees, up to the sum of $50,000,
inclusive of the $50,000 previously paid. In the event the transactions
contemplated hereby are not consummated for any reason, should the Underwriter's
out-of-pocket expenses equal an amount that is less than the $50,000 advance
received, the remaining sum will be returned to the Company.
(k) The Company will apply the net proceeds from the sale of
the Shares in the manner set forth in the Prospectus under "Use of Proceeds" and
shall file such reports with the Commission with respect to the sale of the
Shares and the application of the proceeds therefrom as may be required in
accordance with Rule 463 under the Act.
(l) During the six month period following the date hereof,
none of the Company's executive officers or directors will offer for sale or
sell or otherwise dispose of any securities of the Company owned by them,
directly or indirectly, in any manner whatsoever (including pursuant to Rule 144
under the Act), and no holder of registration rights relating to the securities
of the Company will exercise any such registration rights, in either case,
without obtaining the prior written approval of Sands Brothers. The Company will
deliver to Sands Brothers the written undertakings as of the date hereof of its
officers and directors to this effect.
(m) The Company will not file any registration statement
relating to the offer or sale of any of the Company's securities, other than a
registration statement on Form S-8 to cover Shares underlying options granted
pursuant to the Company's Stock Option Plan, during the twelve (12) months
following the date hereof without Sands Brothers' prior written consent.
(n) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(o) The Company will use its best efforts to maintain the
quotation of the Shares on the Nasdaq National Market for so long as the Shares
remain qualified for such listing.
-15-
(p) Intentionally Omitted.
(q) Subject to the sale of the Firm Shares, for a period
commencing the date of the Prospectus and expiring upon the earlier of (i) three
(3) years from the date of the Prospectus or (ii) such time in which the Company
consummates an underwritten secondary equity public offering, the Company will,
at Sands Brothers' option and if so requested by Representative, recommend and
use its best efforts to elect one designee of Representative, at the option of
Representative, either as a member of or nonvoting advisor to its Board of
Directors; such designee, if elected or appointed, shall attend meetings of the
Board and receive no more or less compensation than is paid to other
non-management directors of the Company 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. The Company
agrees to indemnify and hold Representative and its designee harmless, to the
maximum extent permitted by law, against any and all claims, actions, awards and
judgments arising out of such designee's service as a director or advisor and in
the event the Company maintains a liability insurance policy affording coverage
for the acts of its officers and directors, to include each of Representative
and its designee as an insured under such policy.
If Representative does not exercise its option to
designate such member of or advisor to the Company's Board of Directors,
Representative shall nonetheless have the right to send a representative (who
need not be the same individual from meeting to meeting) to observe each meeting
of the Board of Directors. The Company agrees to give Representative notice of
each such meeting and to provide Representative with an agenda and minutes of
the meeting no later than it gives such notice and provides such items to the
directors.
(r) Intentionally Omitted.
(s) Intentionally Omitted.
(t) Intentionally Omitted.
(u) The Company shall retain a transfer agent for the shares
of Common Stock, reasonably acceptable to Sands Brothers (the First Bank of
Boston being so acceptable), for a period of five (5) years following the
Effective Date. In addition, for a period of three (3) years from the Effective
Date, the Company, at its own expense, shall cause such transfer agent to
provide Sands Brothers, if so requested in writing, with copies of the Company's
daily transfer sheets, and, when so requested by Sands Brothers, a current list
of the Company's security holders, including a list of the beneficial owners of
securities held by a depository trust company and other nominees.
(v) Intentionally Omitted.-- if NMS approved
(w) Intentionally Omitted.
(x) Intentionally Omitted.--if NMS approved
-16-
(y) For a period of five (5) years following the Effective
Date, the Company shall continue to retain ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP (or a nationally
recognized accounting firm reasonably acceptable to Sands Brothers) as the
Company's independent public accountants and shall promptly, upon the Company's
receipt thereof, submit to Sands Brothers copies of such accountants' management
reports and similar correspondence between such accountants and the Company.
(z) For a period of five (5) years following the Effective
Date, the Company, at its expense, shall cause its then independent certified
public accountants, as described in Section 5(x) above, to read(but not audit)
the Company's financial statements for each of the first three fiscal quarters
prior to the announcement of quarterly financial information, the filing of the
Company's 10-Q quarterly report and the mailing of quarterly financial
information to shareholders.
(aa) For a period of twenty-five (25) days following the
Effective date, the Company will not issue press releases or engage in any other
publicity without Sands Brothers' prior written consent, other than normal and
customary releases issued in the ordinary course of the Company's business or
those releases required by law.
6. Conditions of the Underwriters' Obligation to Purchase Shares from
the Company. The obligation of the several Underwriters to purchase and pay for
the Firm Shares which it has agreed to purchase from the Company is subject (as
of the date hereof and the Closing Date) to the accuracy in all material
respects of the representations and warranties of the Company herein, to the
accuracy of the statements of the Company or its officers made pursuant hereto,
to the performance in all material respects by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement will have become effective not
later than 10:30 A.M., New York City time, on the day following the date of this
Agreement, or at such later time or on such later date as the Representatives
may agree to in writing; prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or will be pending or, to
the best of the Representatives' or the Company's knowledge, will be
contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Representatives' Counsel.
(b) At the time that this Agreement is executed and at the
Closing Date, there will have been delivered to the Underwriters a signed
opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Company, dated as of the date
hereof or the Closing Date, as the case may be (and any other opinions of
counsel referred to in such opinion of Company Counsel or relied upon by Company
Counsel in rendering their opinion), substantially as set forth in Exhibit 6b.
(c) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto will conform in all
material respects to the requirements of the Act and the Regulations, and
neither the Registration Statement nor
-17-
the Prospectus nor any amendment or supplement thereto will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; (ii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there will not have been any material adverse change in the
financial condition, results of operations or general affairs of the Company
from that set forth or contemplated in the Registration Statement and the
Prospectus, except changes which the Registration Statement and the Prospectus
indicates might occur after the Effective Date; (iii) since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, there shall have been no material transaction, contract or agreement
entered into by the Company, other than in the ordinary course of business,
which would be required to be set forth in the Registration Statement and the
Prospectus, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the Company's
know ledge, threatened against the Company which is required to be set forth in
the Registration Statement and the Prospectus, other than as set forth therein,
and no proceedings will be pending or, to the best of the Company's knowledge,
threatened against the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding would materially adversely affect the business, property,
financial condition or results of operations of the Company, other than as set
forth in the Registration Statement and the Prospectus. At the Closing Date,
there will be delivered to the several Underwriters a certificate signed by the
Chairman of the Board or the President or a Vice President of the Company, dated
the Closing Date, evidencing compliance with the provisions of this Section 6(c)
and stating that the representations and warranties of the Company set forth in
Section 4 hereof were accurate and complete in all material respects when made
on the date hereof and are accurate and complete in all material respects on the
Closing Date as if then made; that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to or as of the Closing Date; and that, as of
the Closing Date, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or, to his knowledge, are contemplated or threatened. In addition, the
Representatives will have received such other and further certificates of
officers of the Company as the Representatives or Representatives' Counsel may
reasonably request.
(d) At the time that this Agreement is executed and at the
Closing Date, the several Underwriters will have received a signed letter from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP dated the date such letter is to be received by the
Underwriters and addressed to them, confirming that it is a firm of independent
public accountants within the meaning of the Act and Regulations and stating
that: (i) insofar as reported on by them, in their opinion, the financial
statements of the Company included in the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
applicable Regulations; (ii) on the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus and the latest available unaudited interim financial statements of
the Company, if more recent than that appearing in the Registration
-18-
Statement and Prospectus, inquiries of officers of the Company responsible for
financial and accounting matters as to the transactions and events subsequent to
the date of the latest audited financial statements of the Company, and a
reading of the minutes of meetings of the shareholders, the Board of Directors
of the Company and any committees of the Board of Directors, as set forth in the
minute books of the Company, nothing has come to their attention which, in their
judgment, would indicate that (A) during the period from the date of the latest
financial statements of the Company appearing in the Registration Statement and
Prospectus to a specified date not more than three business days prior to the
date of such letter, there have been any decreases in net current assets or net
assets as compared with amounts shown in such financial statements or decreases
in net sales or increases in total or per share net loss compared with the
corresponding period in the preceding year or any change in the capitalization
or long-term debt of the Company, except in all cases as set forth in or
contemplated by the Registration Statement and the Prospectus, and (B) the
unaudited interim financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus, do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
Regulations or are not fairly presented in conformity with generally accepted
accounting principles and practices on a basis substantially consistent with the
audited financial statements included in the Registration Statement or the
Prospectus; and (iii) they have compared specific dollar amounts, numbers of
shares, numerical data, percentages of revenues and earnings, and other
financial information pertaining to the Company set forth in the Prospectus
(with respect to all dollar amounts, numbers of shares, percentages and other
financial information contained in the Prospectus, to the extent that such
amounts, numbers, percen tages and 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 appro priate 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.
(e) There shall have been duly tendered to the Representatives
certificates representing the Firm Shares to be sold on the Closing Date.
(f) The NASD shall have indicated that it has no objection to
the underwriting arrangements pertaining to the sale of the Shares by the
Underwriters.
(g) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date or the Option Closing Date, as the case may be, for any member firm
of the NASD to execute transactions (as principal or as agent) in the Shares,
and no proceedings for the purpose of taking such action shall have been
instituted or shall be pending, or, to the best of the Underwriters' or the
Company's knowledge, shall be contemplated by the Commission or the NASD. The
Company represents at the date hereof, and shall represent as of the Closing
Date or Option Closing Date, as the case may be, that it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD.
-19-
(h) All proceedings taken at or prior to the Closing Date or
the Option Closing Date, as the case may be, in connection with the
authorization, issuance and sale of the Shares shall be reasonably satisfactory
in form and substance to the Representatives and to Representatives' counsel,
and such counsel shall have been furnished with all such documents, certificates
and opinions as they may reasonably request in order to evidence the accuracy
and completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company, or the compliance by
the Company with any of the conditions herein contained.
If any of the conditions specified in this Section 6 have not
been fulfilled, this Agreement may be terminated by the Representatives on
notice to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each officer, director, partner, employee and agent of each
Underwriter, 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, from and
against any and all losses, claims, liabilities, expenses and damages, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, any and all investigative, legal and other expenses reasonably
incurred in connection with, and any and all amounts paid in settlement of, any
action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject, under the Act or otherwise, insofar as such losses,
claims, liabilities, expenses or damages (i) arise out of or are based on any
untrue statement or alleged untrue statement of any material fact contained in
(A) the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement thereto or (B) any blue sky application or other
document executed by the Company specifically for that purpose or based on
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or the omission or alleged
omission to state in such document or in any Blue Sky Application, a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Company contained
herein; or (iii) arise out of or are based on any failure of the Company to
perform its obligations hereunder or under law in connection with the
transactions contemplated hereby; provided, however, that the Company will not
be liable in any such case to the extent, but only to the extent, that any such
loss, claim, liability, expense or damage arises from the sale of Shares in the
public offering to any person by an Underwriter and is based on an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance on and in conformity with written information furnished to the Company
by or on behalf of the Underwriters specifically for inclusion in the
Registration Statement or any such amendment or supplement thereof or any such
preliminary Prospectus or the Prospectus or any such amendment or supplement
thereto.
(b) Each Underwriter severally, but not jointly, will
indemnify and hold harmless the Company, each of its directors, each nominee (if
any) for director named in
-20-
the Prospectus, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, as set forth in
Section 7(a), but only insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or alleged untrue
statement or any omission or alleged omission made in reliance on and in
conformity with written information furnished to the Company by you or by any
Underwriter through you specifically for use in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify in writing the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 7. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the indemnifying party and in the judgment of the
Representatives, it is advisable for the Representatives or such Underwriters or
controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such Underwriter or such controlling person, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall be
designated in writing by you). No settlement of any action against an
indemnified party shall be made without the consent of the indemnifying party,
which shall not be unreasonably withheld in light of all factors of importance
to such indemnifying party.
-21-
8. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) any Underwriter makes claim
for indemnification pursuant to Section 7 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 7 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in either
such case (after contribution from others) in such proportions that all such
Underwriters are responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per share appearing on the cover page of the Prospectus
bears to the public offering price appearing thereon, and the Company shall be
responsible for the remaining portion, provided, however, that (a) if such
allocation is not permitted by applicable law then the relative fault of the
Company and the Underwriters and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriters to
contribute pursuant to this Section 8 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriters and their
respective controlling persons in the aggregate were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the first sentence of this Section 7
and (b) that the contribution of each contributing Underwriter shall not be in
excess of its proportionate share (based on the ratio of the number of Units
purchased by such Underwriter to the number of Units purchased by all
contributing Underwriters) of the portion of such losses, claims, damages or
liabilities for which the Underwriters are responsible. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. As used in this paragraph, the term "Underwriter"
includes any officer, director, or other person who controls an Underwriter
within the meaning of Section 15 of the Act, the word "Company" includes any
officer, director, or person who controls the Company within the meaning of
Section 15 of the Act. If the full amount of the contribution specified in this
paragraph is not permitted by law, then any Underwriter and each person who
controls any Underwriter shall be entitled to contribution from the Company, its
officers, directors and controlling persons to the full extent permitted by law.
The foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the Act other
than the Company and the Underwriters. No contribution shall be requested with
regard
-22-
to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
9. Substitution of Underwriters. If any Underwriters shall for any
reason not permitted hereunder cancel their obligations to purchase the Firm
Shares hereunder, or shall fail to take up and pay for the number of Firm Shares
set forth opposite their respective names in Schedule A hereto upon tender of
such Firm Shares in accordance with the terms hereof, then:
(a) If the aggregate number of Firm Shares which such
Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of
the total number of Firm Shares, the other Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase.
(b) If any Underwriter or Underwriters so default and the
agreed number of Firm Shares with respect to which such default or defaults
occurs is more than 10% of the total number of Firm Shares, the remaining
Underwriters shall have the right to take up and pay for (in such proportion as
may be agreed upon among them) the Firm Shares which the defaulting Underwriter
or Underwriters agreed but failed to purchase. If such remaining Underwriters do
not, at the First Closing Date, take up and pay for the Firm Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase, the time
for delivery of the Firm Shares shall be extended to the next business day to
allow the several Underwriters the privilege of substituting within twenty-four
hours (including nonbusiness hours) another underwriter or underwriters
satisfactory to the Company. If no such underwriter or underwriters shall have
been substituted as aforesaid, within such twenty-four hour period, the time of
delivery of the Firm Shares may, at the option of the Company, be again extended
to the next following business day, if necessary, to allow the Company the
privilege of finding within twenty-four hours (including nonbusiness hours)
another underwriter or underwriters to purchase the Firm Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted Underwriters to
take up the Firm Shares of the defaulting Underwriter or Underwriters as
provided in this Section, (i) the Company or the Representatives shall have the
right to postpone the time of delivery for a period of not more than seven
business days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
made necessary, and (ii) the respective numbers of Firm Shares to be purchased
by the remaining Underwriters or substituted Underwriters shall be taken at the
basis of the underwriting obligation for all purposes of this Agreement.
If in the event of a default by one or more Underwriters and
the remaining Underwriters shall not take up and pay for all the Firm Shares
agreed to be purchased by the defaulting Underwriters or substitute another
underwriter or underwriters as aforesaid,
-23-
and the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
If, following exercise of the option provided in Section 3(a)
hereof, any Underwriter or Underwriters shall for any reason not permitted
hereunder cancel their obligations to purchase Option Shares at the Option
Closing Date, or shall fail to take up and pay for the number of Option Shares,
which they become obligated to purchase at the Option Closing Date upon tender
of such Option Shares in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Shares of the defaulting Underwriters in the manner provided in Section 9(b)
hereof. If the remaining Underwriters or substituted Underwriters shall not take
up and pay for all such Option Shares, then the Underwriters shall be entitled
to purchase the number of Option Shares for which there is no default or, at
their election, the option shall terminate, the exercise thereof shall be of no
effect.
As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any nondefaulting
Underwriter to the Company, provided that the provisions of this Section 9 shall
not in any event affect the liability of any defaulting Underwriter to the
Company arising out of such default.
10. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriters contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained herein shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the Underwriters, the Company or any of its directors and
officers, or any controlling person referred to in said Sections, and shall
survive the delivery of, and payment for, the Shares.
11. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the
Underwriter, or the Underwriter, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriter, after the Registration Statement becomes
effective, releases the Firm Shares for public offering. The time when the
Underwriter "releases the Firm Shares for public offering" for the purposes of
this Section 10 means the time when the Underwriter releases for publication the
first newspaper advertisement, which is subsequently published, relating to the
Firm Shares or the time when the Underwriter releases for delivery to members of
a selling group copies of the Prospectus and an offering letter or an offering
telegram relating to the Firm Shares, whichever will first occur.
(b) This Agreement, including without limitation, the
obligation to purchase the Firm Shares and the obligation to purchase the Option
Shares after exercise of the option referred to in Section 3 hereof, are subject
to termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and
-24-
payment for all the Firm Shares or the Option Shares, as the case may be, if,
prior to such time, any of the following shall have occurred: (i) the Company
withdraws the Registration Statement from the Commission or the Company does not
or cannot expeditiously proceed with the public offering; (ii) the
representations and warranties in Section 4 hereof are not materially correct or
covenants in Section 5 hereof cannot be complied with; (iii) trading in
securities generally on the New York Stock Exchange or the Nasdaq Stock Market
will have been suspended; (iv) limited or minimum prices will have been
established on either such Exchange; (v) a banking moratorium will have been
declared either by United States federal or New York State authorities; (vi) any
other restrictions on transactions in securities materially affecting the free
market for securities or the payment for such securi ties, including the Firm
Shares or the Option Shares, will be established by NASDAQ, by the Commission,
by any other United States federal or state agency, by action of the Congress or
by Executive Order; (vii) trading in any securities of the Company shall have
been suspended or halted by any national securities exchange, the NASD or the
Commission; (viii) there has been a materially adverse change in the condition
(financial or otherwise), prospects or obligations of the Company; (ix) the
Company will have sustained a material loss, whether or not insured, by reason
of fire, flood, accident or other calamity; (x) any action has been taken by the
government of the United States or any department or agency thereof which, in
the judgment of the Underwriter, has had a material adverse effect upon the
market or potential market for securities in general; or (xi) the market for
securities in general or political, financial or economic conditions will have
so materially adversely changed that, in the judgment of the Underwriter, it
will be impracticable to offer for sale, or to enforce contracts made by the
Underwriter for the resale of, the Firm Shares or the Option Shares, as the case
may be.
(c) If this Agreement is terminated pursuant to Section 6
hereof or this Section 11 or if the purchases provided for herein are not
consummated because any condition of the Underwriter's obligations hereunder is
not satisfied or because of any refusal, inability or failure on the part of the
Company to comply with any of the terms or to fulfill any of the conditions of
this Agreement, or if for any reason the Company shall be unable to or does not
perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 10 of this
Agreement.
12. Information Furnished by the Underwriters to the Company. It is
hereby acknowledged and agreed by the parties hereto that for the purposes of
this Agreement, including, without limitation, Sections 4(e), 7(a), 7(b) and 8
hereof, the only information given by the Underwriters to the Company for use in
the Prospectus are the statements set forth on page 2 with respect to
stabilization, under the heading "Underwriting" and the identity of counsel to
the Underwriters under the heading "Legal Matters", and the last paragraph of
the cover page of the Prospectus, as such information appears in any Prelim
inary Prospectus and in the Prospectus.
13. Notices and Governing Law. All communications hereunder will be in
writing and, except as otherwise provided, will be delivered at, or mailed by
certified mail, return receipt requested, or telegraphed to, the following
addresses: if to the
-25-
Representatives, c/o Sands Brothers & Co., Ltd., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Executive Vice President, with a copy to
▇▇▇▇▇▇▇ Krooks ▇▇▇▇ & Ball P.C., Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; if to the Company, addressed to it at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman and
Chief Executive Officer, with a copy to ▇▇▇▇▇▇, Hall & ▇▇▇▇▇▇▇, Exchange Place,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq. and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.; or, in each case, to such other address as the parties may
hereinafter designate by like notice.
This Agreement shall be deemed to have been made and delivered
in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company (1) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively in
New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (2) waives any objection
which the Company may have now or hereafter to the venue of any such suit,
action or proceeding, and (3) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon the Company mailed by certified mail to the Company's address shall
be deemed in every respect effective service of process upon the Company, in any
such suit, action or proceeding.
14. Parties in Interest. This Agreement is made solely for the benefit
of the several Underwriters, the Company and, to the extent expressed, any
person controlling the Company or any of the Underwriters, each officer,
director, partner, shareholder, employee and agent of the several Underwriters,
the directors of the Company, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns, and, no other person will acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" will not include any
purchaser of the Shares from any of the several Underwriters, as such purchaser.
15. Validity. In case any term of this Agreement will be held invalid,
illegal or unenforceable, in whole or in part, the validity of any other terms
of this Agreement will not in any way be affected thereby.
16. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein.
17. Counterparts. This Agreement may be executed in counterparts and
each of such counterparts will for all purposes be deemed to be an original, and
such counterparts together will constitute one and the same instrument.
-26-
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriters in accordance with its terms.
Very truly yours,
NEXAR TECHNOLOGIES, INC.
By: ________________________________
Name:
Title:
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
SANDS BROTHERS & CO., LTD.
CREDIT LYONNAIS SECURITIES (USA) INC.
By: SANDS BROTHERS & CO., LTD.
By: _____________________________________
Name:
Title:
For itself and on behalf of the
Representatives and the Several Underwriters
-27-
SCHEDULE A
Name of Underwriter Number of Firm Shares to be Purchased
------------------- -------------------------------------
Sands Brothers & Co., Ltd.
Credit Lyonnais Securities (USA) Inc.
Total: 2,500,000
=========
