EXHIBIT 1.1
Draft of December 19, 1996
2,500,000 Shares
NEXAR TECHNOLOGIES, INC.
Common Stock
UNDERWRITING AGREEMENT
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December , 1996
Sands Brothers & Co., Ltd.
As Representative of the Several Underwriters
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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 representative (the "Representative"), 2,500,000 shares (the
"Firm Shares") of Common Stock, par value $.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 Representative,
individually) to purchase an additional 375,000 shares of Common Stock (the
"Option Shares") for the purposes set forth in Section 3 hereof. The Firm Shares
and the Option Shares are hereinafter collectively referred to as the "Shares."
The Company also proposes to issue and sell to you (for your
own account and not as Representative of the Several Underwriters) and/or your
designees, warrants (the "Representative's Warrants") to purchase an aggregate
of 250,000 shares of Common Stock at an exercise price of $ per share, which
sale will be consummated in accordance with the terms and conditions of the form
of Representative's Warrant Agreement filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the
Representative's Warrants are hereinafter sometimes referred to as the "Warrant
Shares." The Shares, the Representative's 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; Representative's 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 Representative, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ 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 Representative's 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.
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In addition, in the event the Underwriters (or the
Representative, 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 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
Representative 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
Representative 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 you 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.
(b) On the Closing Date, the Company will sell the
Representative's Warrants to Sands Brothers, for its own account and not as
Representative of the several Underwriters, or to its designees. The
Representative's Warrants will be in the form of, and in accordance with, the
provisions of the Representative's Common Stock Purchase Warrant attached as an
exhibit to the Registration Statement. The aggregate purchase price for the
Representative's Warrants is $100.00. The Representative's Warrants will be
restricted from sale, transfer, assignment or hypo- thecation for a period of
one year from the Effective Date, except to officers and shareholders of Sands
Brothers and to members of the selling group. Payment for the Representative's
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
Representative's Warrants. The
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certificates representing the Representative's Warrants will be in such
denominations and such names as Sands Brothers may request prior to the Closing
Date.
3. Option to Purchase Option Shares.
(a) For the purposes of covering any over- allotments
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 the Representative,
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 Registration Statement upon
written notice (each, an "Option Share Notice") by the Representative 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 the Representative 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 the Representative,
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. 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 Representative in
such manner as the Representative 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 Representative for the
respective accounts of the several Underwriters registered in such names and in
such denominations as the Representative 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.
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(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 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 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 Representative, and no changes therein will be made subsequent to the date
hereof and prior to Closing Date or, if later, the Option Closing Date.
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(b) The Company has full corporate power and
authority to enter into this Agreement and the Representative's Warrants, to
issue and sell the Shares and the Representative's 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 Representative's 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 Representative's 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
Representative's 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, 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- ) 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
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Regulations, including, if applicable, Rule 430A of the Regulations. Such
registration statement including any documents incorporated by reference therein
and all financial schedules and exhibits thereto, as amended at the time it
becomes effective, 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 (and any amendment or supplement thereto) 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 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 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 oper-
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ations 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 Prospectus, 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 State- ment
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 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, which
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 might be
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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 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 Representative's
Warrants have been duly authorized and, when issued, paid for and delivered
pursuant to the terms of this Agreement or the Representative's Warrant
Agreement, as the case may be, the Representative's 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
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have been duly reserved for issuance upon exercise of the Representative's
Warrants in accordance with the provisions of the Representative's Warrants. The
Representative's 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 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
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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 the Representative.
(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, patents and copyrights are in full force and effect.
Other than potential sublicensees of 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
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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, 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
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knowledge, no event has occurred which, with the lapse of time or the giving of
notice, or both, would constitute a default there- under.
(t) The employment agreements between the Company and
its officers and employees, described in the Registration Statement, are 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 a registration statement
pursuant to Section 12(g) of the Exchange Act to register the Common Stock, has
filed an application to list the Shares on the NASDAQ National Market, and has
received notification that the listing has been approved, subject 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
13-
(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, 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, Principal
Stockholder (as such term is defined in the Prospectus) 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 Representative or to counsel for the Representative shall be
deemed to be a representation and warranty by the Company to the Representative
as to the matters covered thereby.
14-
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 Representative has not been
previously advised and furnished a copy, or to which the Representative shall
object in writing.
(b) The Company will use its best efforts to cause
the Registration Statement to become effective and will advise the
Representative immediately, and, if requested by the Representative, 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 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 Representative 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
15-
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 informa-
tion 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 Representative 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 Representative 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.
(g) For a period of five years from the Effective
Date, the Company will deliver to the Representative and to Representative's
Counsel on a timely basis (i) a copy of each report or document, including,
without limitation, reports on Forms 8-K, 10-C, 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; (iv) monthly statements setting forth such
information regarding the Company's results of operations and financial position
(including balance sheet, profit and loss statements but excluding data
regarding outstanding purchase orders) as is regularly prepared by
16-
management of the Company; and (v) such additional information concerning the
business and financial condition of the Company as the Representative 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 statements 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, the Representative 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 costs and expenses incident to the performance of the
obligations of the Company 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 the
Representative and its counsel, and all other costs and expenses incident to the
performance of its 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, two percent (2%) of the gross proceeds of the
offering (less the sum of Fifty Thousand Dollars ($50,000) previously paid to
the Representative), as payment for the Representative's non-accountable expense
allowance relating to the transactions contemplated hereby.
17-
(j) In the event the transactions contemplated
hereby are not consummated by reason of any action by the Underwriter (except if
such prevention is based upon a breach by the Company of any covenant,
representation or warranty contained herein or because any other condition to
the Underwriter's obligations hereunder required to be fulfilled by the Company
is not fulfilled) the Company shall be liable for the actual accountable
out-of-pocket expenses of the Underwriter, including legal fees. In the event
the transactions contemplated hereby are not consummated by reason of any action
of the Company or because of a breach by the Company of any covenant,
representation or warranty herein, the Company shall be liable only for the
actual accountable out-of-pocket expenses of the Underwriter, including legal
fees. 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. In addition, if the Company elects not to proceed with the offering
contemplated hereby for any reason and subsequently engages in any public
offering, private placement, merger, acquisition of securities, joint venture or
other similar transaction within twelve (12) months following the Company's
election not to proceed, Representative shall have the right to act as
investment banker for the Company and to receive a fee in connection therewith
equal to five percent (5%) of the consideration paid or received in any such
transaction.
(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 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 the Representative. The Company will
deliver to the Representative 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,
including any registration statement on Form S-8, during the twelve (12) months
following the date hereof without the Representative's prior written consent;
provided, however that the Company shall be permitted to file a Registration
18-
Statement on Form S-8 to cover Shares underlying options granted pursuant to the
Company's Stock Option Plan.
(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 maintain the listing of the
Shares on the NASDAQ National Market for so long as the Shares remain qualified
for such listing.
(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 Representative's 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
19-
and minutes of the meeting no later than it gives such notice and provides such
items to the directors.
(r) Subject to the sale of the Firm Shares, the
Representative shall have the right of first refusal with respect to any public
or private sale of debt or equity securities (excluding sales to employees) of
the Company, any subsidiary or successor of the Company, or held by any of the
"Principal Shareholders" (i.e., holders of 5% or more of the Company's Common
Stock) during a three (3) year period following the date hereof; provided,
however, that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the Company's Chairman and Chief Executive
Officer shall have the right to sell up to 20,000 shares of Common Stock per
calendar quarter pursuant to Rule 144 under the Act without offering the
Representative such right of first refusal. It is understood that if such a
proposed financing is offered to the Representative, the Representative shall
have ten (10) business days in which to determine whether or not to accept such
offer and, if the Representative refuses, and provided that such a financing is
consummated (a) with another underwriter or placement agent upon the same terms
and conditions as those offered to the Representative and (b) within six months
after the end of the aforesaid ten (10) business day period, this right of first
refusal shall thereafter be forfeited and terminated; provided, however, if the
financing is not consummated under the conditions of clauses (a) and (b) above,
then the right of first refusal shall once again be reinstated under the same
terms and conditions set forth in this paragraph (r). Anything contained in this
paragraph (r) to the contrary notwithstanding, (i) in the event that the Company
receives a letter of intent or other agreement in principle from a "Bulge
Bracket" Underwriter (as such term is commonly known in the investment
community) or a top tier technology underwriter and is otherwise ready, willing
and able to proceed with such offering, then the Company shall satisfy its
obligations under this paragraph (r) if the Company utilizes its BEST EFFORTS to
cause the Representative to participate in such offering as a co-manager (it
being understood that such participation by the Representative shall nonetheless
be at the discretion of the lead underwriter) and (ii) the foregoing right of
first refusal shall not apply to Company directed private placement transactions
of up to $5 million.
(s) The Company hereby agrees, at its sole cost and
expense, to supply and deliver to the Representative, within a reasonable period
from the date hereof, four (4) bound volumes, including the Registration
Statement, as amended or supplemented, all exhibits to the Registration
Statement, the Prospectus and all other underwriting documents.
(t) INTENTIONALLY OMITTED.
20-
(u) The Company shall retain a transfer agent for
the shares of Common Stock, reasonably acceptable to the Representative, 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 the Representative, if so requested
in writing, with copies of the Company's daily transfer sheets, and, when so
requested by the Representative, 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) The Company shall, as of the date hereof, have
applied for listing in Standard & Poor's Corporation Records Service (including
annual report information) or ▇▇▇▇▇'▇ Industrial Manual (▇▇▇▇▇'▇ OTC Industrial
Manual not being sufficient for these purposes) and shall use its best efforts
to have the Company listed in such manual and shall maintain such listing for a
period of five (5) years from the Effective Date.
(w) For a period of two (2) years following the
Effective Date, the Company shall provide the Representative, on a not less than
annual basis, with internal forecasts setting forth projected results of
operations for each quarterly and annual period in the two (2) fiscal years
following the respective dates of such forecasts. Such forecasts shall be
provided to the Representative more frequently than annually if revised
forecasts which reflect more current information, and significantly revised
assumptions or indicate future results that differ materially from those set
forth in the forecasts.
(x) For a period of five (5) years following the
Effective Date, or until such earlier time as the shares of Common Stock are
listed on the New York Stock Exchange or the American Stock Exchange, the
Company shall cause its legal counsel to provide the Representative with a list,
to be updated at least annually, of those states in which the shares of Common
Stock may be traded in non-issuer transactions under the Blue Sky laws of the 50
states.
(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 acceptable to the Representative) as the
Company's independent public accountants and shall promptly, upon the Company's
receipt thereof, submit to the Representative 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
21-
Section 5(x) above, to review (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 the Representative's 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
Representative 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 Representative's 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
Representative's 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 the Prospectus nor any
amendment or supplement
22-
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 knowledge, 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 Representative will have received such other and
further certificates of officers of the Company as the Representative or
Representative's 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
23-
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 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, percentages 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
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.
24-
(e) There shall have been duly tendered to the
Representative 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.
(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 Representative and to Representative's Counsel, and
such counsel shall have been furnished with all such documents, certificates and
opinions as they may reasonably request for the purpose of enabling them to pass
upon the matters referred to in Section 6(c) hereof and 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
Representative 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,
25-
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 Units 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. This indemnity will be in addition to any liability which the Company
may otherwise have.
(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 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.
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(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 Representative, it is advisable for the
Representative 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.
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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
28-
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 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
29-
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 Representative 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, 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.
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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 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 American Stock Exchange 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 securities, 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)
31-
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"], as such information appears
in any Preliminary 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 Placement Agent, to ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Executive Vice President, with a copy to
▇▇▇▇▇▇▇ Krooks ▇▇▇▇ & Ball P.C., Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; if to the Com- pany, addressed to it at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman and
Chief Executive Officer,
32-
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.
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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.
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
Underwriter 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.
By:_________________________________
For itself and as Representative
of the several Underwriters
34-
SCHEDULE A
Name of Underwriter Number of Firm Shares to be Purchased
------------------- -------------------------------------
Sands Brothers & Co., Ltd.
Total: 2,500,000
=========
9.
1.311982
35-