EXHIBIT 1.1
2,000,000 SHARES OF COMMON STOCK
I.D. SYSTEMS, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
_____________, 1999
Gilford Securities Incorporated
As Representative of the
Several Underwriters listed
on Schedule A hereto
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I.D. Systems, Inc., a Delaware corporation (the "Company")
confirms its agreement with Gilford Securities Incorporated ("Gilford") and each
of the several underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 11) for whom Gilford is acting as representative
(in such capacity, Gilford shall hereinafter be referred to as "you" or the
"Representative"), with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective number of
shares of the Company's common stock, $.01 par value per share ("Common Stock"),
set forth on Schedule A hereto. Such shares of Common Stock are hereinafter
referred to as the "Firm Shares."
Upon the Representative's request, as provided in Section 2(b)
of this Agreement, the Company shall also sell to the Underwriters up to an
additional 300,000 shares of Common Stock for the purpose of covering
over-allotments, if any (the "Option Shares"). The Firm Shares and the Option
Shares are sometimes hereinafter referred to as the "Shares." The Company also
proposes to issue and sell warrants to the Representative (the "Representative's
Warrants") pursuant to the Representative's Warrant Agreement (the
"Representative's Warrant Agreement") for the purchase of an additional 200,000
shares of Common Stock. The shares of Common Stock issuable upon exercise of the
Representative's Warrants are hereinafter referred to as the "Representative's
Shares." The Firm Shares, the Option Shares, the Representative's Warrants and
the Representative's Shares (collectively, hereinafter referred to as the
"Securities") are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties.
(a) The Company represents and warrants to, and agrees with, each of the
Underwriters as of the date hereof, and as of the Closing Date (hereinafter
defined) and the Option Closing Date (hereinafter defined), if any, as follows:
(i) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. 333-___), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Firm Shares and the Option Shares under the
Securities Act of 1933, as amended (the "Act"), which registration
statement and amendment or amendments have been prepared by the Company
in conformity with the requirements of the Act, and the rules and
regulations (the "Regulations") of the Commission under the Act. The
Company will promptly file a further amendment to said registration
statement in the form heretofore delivered to the Underwriters and will
not, file any other amendment thereto to which the Underwriters shall
have objected in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed
as a part thereof or incorporated therein (including, but not limited
to those documents or information incorporated by reference therein)
and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement", and the form of
prospectus in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations, is hereinafter called the "Prospectus." For
purposes hereof, "Rules and Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(ii) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of
any thereof and no proceedings for a stop order suspending the
effectiveness of the Registration Statement or any of the Company's
securities have been instituted or are pending or threatened. Each of
the Preliminary Prospectus, Registration Statement and Prospectus at
the time of filing thereof conformed with the requirements of the Act
and the Rules and Regulations, and none of the Preliminary Prospectus,
Registration Statement or Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does
not apply to statements made in reliance upon and in conformity with
written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters expressly for use in
such Preliminary Prospectus, Registration Statement or Prospectus.
(iii) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date and each Option Closing Date,
if any,
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and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus will contain all statements
which are required to be stated therein in accordance with the Act and
the Rules and Regulations, and will conform to the requirements of the
Act and the Rules and Regulations; and, at and through such dates,
neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty does not apply to
statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriters expressly for use in the Preliminary
Prospectus, Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
(iv) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its
incorporation. The Company does not own an interest in any corporation,
partnership, trust, joint venture or other business entity. The Company
is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of
any properties or the character of its operations requires such
qualification or licensing. The Company has all requisite power and
authority (corporate and other), and the Company has obtained any and
all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those
having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as conducted on the date
hereof and as described in the Prospectus; the Company is and has been
doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and with all
federal, state and local laws, rules and regulations to which it is
subject; and the Company has not received any notice of proceedings
relating to the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, value,
operation, properties, business or results of operations of the
Company. The disclosures in the Registration Statement concerning the
effects of federal, state, local and foreign laws, rules and
regulations on the Company's business as currently conducted and as
contemplated are correct in all respects and do not omit to state a
material fact required to be stated therein or necessary to make the
statement therein in light of the circumstances under which they were
made, not misleading.
(v) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization"
and "Description of Securities" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option
Closing Date, if any, based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement, the
Representative's Warrant Agreement and as described in
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the Prospectus. The Securities and all other securities issued or
issuable by the Company on or prior to the Closing Date and each Option
Closing Date, if any, conform or, when issued and paid for, will
conform, in all respects to all statements with respect to the
descriptions thereof contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; and the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued
in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company. The
Securities to be issued and sold by the Company hereunder and pursuant
to the Representative's Warrant Agreement are not and will not be
subject to any preemptive or other similar rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof and thereof, will be validly issued,
fully paid and non-assessable and will conform to the descriptions
thereof contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the
Securities has been duly and validly taken; and the certificates
representing the Securities will be in due and proper form. Upon the
issuance and delivery of the Securities pursuant to the terms hereof
and pursuant to the Representative's Warrant Agreement, to be sold by
the Company hereunder and thereunder to the Underwriters, the
Underwriters will acquire good and marketable title to such Securities
free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind
whatsoever.
(vi) The financial statements, including the related notes and schedules
thereto, included in the Registration Statement, each Preliminary
Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity, and the
results of operations of the Company at the respective dates and for
the respective periods to which they apply and the pro forma financial
information included in the Registration Statement and Prospectus
presents fairly on a basis consistent with that of the audited
financial statements included therein, what the Company's pro forma
capitalization would have been for the respective periods and as of the
respective dates to which they apply after giving effect to the
adjustments described therein. Such financial statements have been
prepared in conformity with generally accepted accounting principles
and the Rules and Regulations, consistently applied throughout the
periods involved. There has been no adverse change or development
involving a material prospective change in the condition, financial or
otherwise, or in the earnings, position, prospects, value, operation,
properties, business, or results of operations of the Company whether
or not arising in the ordinary course of business, since the date of
the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and
intangible, and the business of the Company conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. Financial information set forth in the
Prospectus under the headings "Summary Financial Information,"
"Selected Financial Data," "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein, and have been derived
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from or compiled on a basis consistent with that of the audited
financial statements included in the Prospectus.
(vii) The Company (i) has paid all federal, state, local, and foreign taxes
for which it is liable, including, but not limited to, withholding
taxes and amounts payable under Chapters 21 through 24 of the Internal
Revenue Code of 1986 (the "Code"), and has furnished all information
returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and
payable, and (iii) does not have any tax deficiency or claims
outstanding, proposed or assessed against it.
(viii) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the
Securities from the Company, (iii) the consummation by the Company of
any of its obligations under this Agreement or the Representative's
Warrant Agreement, or (iv) resales of the Securities in connection with
the distribution contemplated hereby.
(ix) The Company maintains insurance policies, including, but not limited
to, general liability and property insurance, which insures the Company
and its employees, against such losses and risks generally insured
against by comparable businesses. The Company (A) has not failed to
give notice or present any insurance claim with respect to any matter,
including but not limited to the Company's business, property or
employees, under the insurance policy or surety bond in a due and
timely manner, (B) does not have any disputes or claims against any
underwriter of such insurance policies or surety bonds or has not
failed to pay any premiums due and payable thereunder, or (C) has not
failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under
any such insurance policy or surety bond which would relieve any
insurer of its obligation to satisfy in full any valid claim of the
Company.
(x) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against
(or circumstances that may give rise to the same), or involving the
properties or business of, the Company which (i) questions the validity
of the capital stock of the Company, this Agreement or the
Representative's Warrant Agreement or of any action taken or to be
taken by the Company pursuant to or in connection with this Agreement
or the Representative's Warrant Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and
such proceedings as are summarized in the Registration Statement are
accurately summarized in all respects), or (iii) might materially and
adversely affect the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business or results of operations of the Company.
(xi) The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Securities, enter into this Agreement and
the
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Representative's Warrant Agreement and to consummate the transactions
provided for in such agreements; and this Agreement and the
Representative's Warrant Agreement have each been duly and properly
authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement constitutes a
legal, valid and binding agreement of the Company enforceable against
the Company in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification or contribution provisions may be limited under
applicable laws or the public policies underlying such laws and (iii)
that the remedies of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceedings may be
brought. None of the Company's issue and sale of the Securities,
execution or delivery of this Agreement or the Representative's Warrant
Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct of
its business as described in the Registration Statement and the
Prospectus, and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company pursuant to
the terms of, (i) the certificate of incorporation or by-laws of the
Company, (ii) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders' agreement, note, loan or
credit agreement or other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to
which the Company is a party or by which it is or may be bound or to
which any of its properties or assets (tangible or intangible) is or
may be subject, or any indebtedness, or (iii) any statute, judgment,
decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Company or any of its activities
or properties.
(xii) Except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory
body, government agency or other body, domestic or foreign, is required
for the issuance of the Securities pursuant to the Prospectus and the
Registration Statement, the issuance of the Representative's Warrants,
the performance of this Agreement and the Representative's Warrant
Agreement and the transactions contemplated hereby and thereby,
including without limitation, any waiver of any preemptive, first
refusal or other rights that any entity or person may have for the
issue and/or sale of any of the Shares, or the Representative's
Warrants, except such as have been or may be obtained under the Act or
may be required under state securities or Blue Sky laws in connection
with the Representative's purchase and distribution of the Shares, and
the Representative's Warrants to be sold by the Company hereunder.
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(xiii) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which
it may be bound or to which any of its assets, properties or business
may be subject have been duly and validly authorized, executed and
delivered by the Company, and constitute the legal, valid and binding
agreements of the Company, enforceable against the Company, in
accordance with their respective terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification or contribution provisions may be limited under
applicable laws or the public policies underlying such laws and (iii)
that the remedies of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceedings may be
brought. The descriptions in the Registration Statement of agreements,
contracts and other documents are accurate and fairly present the
information required to be shown with respect thereto by Form SB-2, and
there are no contracts or other documents which are required by the Act
to be described in the Registration Statement or filed as exhibits to
the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are complete and
correct copies of the documents of which they purport to be copies.
(xiv) Subsequent to the respective dates as of which information is set forth
in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company
has not (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into
any transaction other than in the ordinary course of business, or (iii)
declared or paid any dividend or made any other distribution on or in
respect of its capital stock of any class, and there has not been any
change in the capital stock, or any material change in the debt (long
or short term) or liabilities or material adverse change in or
affecting the general affairs, management, financial operations,
stockholders' equity or results of operations of the Company.
(xv) No default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, partnership agreement, note, loan or
credit agreement, purchase order, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the
Company may be bound or to which the property or assets (tangible or
intangible) of the Company is or may be subject or affected.
(xvi) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance with all federal,
state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages
and hours. There are no pending investigations involving the Company by
the U.S. Department of Labor, or any other governmental agency
responsible for the enforcement of such federal, state, local,
7
or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the
Company or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company,
and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective
bargaining agreements of the Company. No labor dispute with the
employees of the Company exists, or is imminent.
(xvii) Except as described in the Prospectus, the Company does not maintain,
sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or
a "multiemployer plan" as such terms are defined in Sections 3(2), 3(1)
and 3(37), respectively, of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does not
maintain or contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code,
which could subject the Company to any tax penalty on prohibited
transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA
Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to
comply with Code Section 401(a), stating that such ERISA Plan and the
attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
(xviii) Neither the Company nor any of its employees, directors, stockholders,
partners, or affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing has taken or will take, directly
or indirectly, any action designed to or which has constituted or which
might be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities or
otherwise.
(xix) Except as otherwise disclosed in the Prospectus, none of the patents,
patent applications, trademarks, service marks, service names, trade
names and copyrights and none of the licenses and rights to the
foregoing presently owned or held by the Company are in dispute or are
in any conflict with the right of any other person or entity. The
Company (i) owns or has the right to use, free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever, all patents,
patent applications, trademarks, service marks, service names, trade
names and copyrights, technology and licenses and rights with respect
to the foregoing, used in the conduct of its business as now conducted
or proposed to be conducted without infringing upon or otherwise acting
adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing and (ii) is
not obligated or under any liability whatsoever to make any payment by
way of royalties, fees or otherwise to any owner or licensee of, or
other
8
claimant to, any patent, patent application, trademark, service ▇▇▇▇,
service names, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or
governmental or other proceeding, domestic or foreign, pending or
threatened (or circumstances that may give rise to the same) against
the Company which challenges the exclusive rights of the Company with
respect to any trademarks, trade names, service marks, service names,
copyrights, patents, patent applications or licenses or rights to the
foregoing used in the conduct of its business, or which challenge the
right of the Company to use any technology presently used or
contemplated to be used in the conduct of its business.
(xx) The Company owns and has the unrestricted right to use all trade
secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
inventions, technology, designs, processes, works of authorship,
computer programs and technical data and information (collectively
herein "intellectual property") that are material to the development,
manufacture, operation and sale of all products and services sold or
proposed to be sold by the Company, free and clear of and without
violating any right, lien, or claim of others, including without
limitation, former employers of its employees; provided, however, that
the possibility exists that other persons or entities, completely
independently of the Company, or its employees or agents, could have
developed trade secrets or items of technical information similar or
identical to those of the Company. The Company is not aware of any such
development of similar or identical trade secrets or technical
information by others.
(xxi) The Company has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property stated in
the Prospectus, to be owned or leased by it free and clear of all
liens, charges, claims, encumbrances, pledges, security interests,
defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not
yet due and payable.
(xxii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Company, LLP ("▇▇▇▇▇▇") whose report is filed with
the Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
(xxiii) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which all of the officers and
directors of the Company, all holders of the Common Stock and holders
of securities exchangeable or exercisable for or convertible into
shares of Common Stock have agreed not to, directly or indirectly,
offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate, distribute or otherwise encumber or
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144
of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of not less than twelve (12) months
following the effective date of the Registration Statement without the
prior written consent of the Representative. During the twelve (12)
month period commencing on the effective date of the Registration
Statement, the Company shall not, without the prior written consent of
the Representative, sell, contract or offer to sell, issue, transfer,
assign, pledge, distribute or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any options, rights or
warrants with respect to any shares of Common Stock, except up to
_________ shares of Common Stock reserved for grants of options under
the Company's stock option plan as described in the Prospectus. The
Company will cause the Transfer Agent, as defined below, to ▇▇▇▇ an
appropriate legend on the face of stock certificates representing all
of such securities and to place "stop transfer" orders on the Company's
stock ledgers.
(xxiv) Except as described in the Prospectus under "Underwriting," there are
no claims, payments, issuances, arrangements or understandings, whether
oral or written, for services in the nature of a finder's or
origination fee with respect to the sale of the Securities hereunder or
any other arrangements, agreements, understandings, payments or
issuance with respect to the Company or any of its officers, directors,
stockholders, partners, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association
of Securities Dealers, Inc. ("NASD").
(xxv) The Common Stock has been approved for quotation on the Nasdaq SmallCap
Market ("Nasdaq").
(xxvi) Neither the Company nor any of its officers, employees, agents, or any
other person acting on behalf of the Company, has, directly or
indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or
foreign) or other person who was, is, or may be in a position to help
or hinder the business of the Company (or 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
materially 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. The
Company's internal accounting controls are sufficient to cause the
Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
(xxvii) Except as set forth in the Prospectus, no officer, director or
stockholder 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, 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
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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, or 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.
(xxviii) Any certificate signed by any officer of the Company, and delivered to
the Underwriters or to Underwriters' Counsel (as defined herein) shall
be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(xxix) The minute books of the Company have been made available to the
Underwriters and contain a complete summary of all meetings and actions
of the directors, stockholders, audit committee, compensation committee
and any other committee of the Board of Directors of the Company,
respectively, since the time of its incorporation, and reflects all
transactions referred to in such minutes accurately in all material
respects.
(xxx) Except and to the extent described in the Prospectus, no holders of any
securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to
include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or
to require the Company to file a registration statement under the Act
and no person or entity holds any anti-dilution rights with respect to
any securities of the Company.
(xxxi) The Company has reviewed its operations and any third parties with
which the Company has a material relationship to evaluate the extent to
which the business or operations of the Company will be affected by
Year 2000 issues. As a result of such review, the Company represents
and warrants that the disclosure in the Registration Statement relating
to Year 2000 issues is accurate and complies in all material respects
with the rules and regulations of the Act. "Year 2000 issues" as used
herein means Year 2000 issues described in or contemplated by the
Commission's Interpretation: Disclosure of Year 2000 issues and
consequences by Public Companies, Investment Advisers, Investment
Companies, and Municipal Securities Issuers (Release No. 33-7558).
(xxxii) The Company has as of the effective date of the Registration Statement
(i) entered into an employment agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, N. ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, in the form filed as
Exhibits 10._, 10._, 10._ and 10._, respectively to the Registration
Statement [and (ii) purchased term key-man insurance on the life of
[_________] in the amount of $[_________], which policy names the
Company as the sole beneficiary thereof].
11
2. Purchase, Sale and Delivery of the Securities and Representative's
Warrants.
(a) On the basis of the representations, warranties, covenants and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees to
purchase from the Company at a price of $____ per share [92% of the initial
public offering price] of Common Stock, that number of Firm Shares set forth in
Schedule A opposite the name of such Underwriter, subject to adjustment as the
Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional number of Firm Shares which
such Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(b) In addition, on the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriters to purchase all
or any part of an additional 300,000 shares of Common Stock at a price of $___
per share of Common Stock [92% of the initial public offering price]. The option
granted hereby will expire 45 days after (i) the date the Registration Statement
becomes effective, if the Company has elected not to rely on Rule 430A under the
Rules and Regulations, or (ii) the date of this Agreement if the Company has
elected to rely upon Rule 430A under the Rules and Regulations, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Shares upon notice by the Representative to the Company
setting forth the number of Option Shares as to which Representative is then
exercising the option and the time and date of payment and delivery for any such
Option Shares. Any such time and date of delivery (an "Option Closing Date")
shall be determined by the Representative, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Date, as hereinafter defined, unless otherwise agreed upon by the
Representative and the Company. Nothing herein contained shall obligate the
Underwriters to make any over-allotments. No Option Shares shall be delivered
unless the Firm Shares shall be simultaneously delivered or shall theretofore
have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates for, the
Firm Shares shall be made at the offices of Gilford at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, or at such other place as shall be agreed upon by the
Representative and the Company. Such delivery and payment shall be made at 10:00
a.m. (New York City time) on __________, 1999 or at such other time and date as
shall be agreed upon by the Representative and the Company, but not less than
three (3) nor more than seven (7) full business days after the effective date of
the Registration Statement (such time and date of payment and delivery being
herein called "Closing Date"). In addition, in the event that any or all of the
Option Shares are purchased by the Underwriters, payment of the purchase price
for, and delivery of certificates for, such Option Shares shall be made at the
above-mentioned office of the Representative or at such other place as shall be
agreed upon by the Representative and the Company on each Option Closing Date as
specified in the notice from the Representative to the Company. Delivery of the
certificates for the Firm Shares and the Option Shares, if any, shall be made to
the Underwriters against payment by the Underwriters of the purchase price for
the Firm Shares and the Option Shares, if any, to the order of the Company for
the Firm Shares and the Option Shares, if any, by New York Clearing House funds.
Certificates for the Firm Shares and the Option Shares, if any,
12
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Representative may request in writing at least two (2) business days prior to
the Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Firm Shares and the Option Shares, if any, shall be made
available to the Representative at such office or such other place as the
Representative may designate for inspection, checking and packaging no later
than 9:30 a.m. on the last business day prior to Closing Date or the relevant
Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the Representative,
Representative's Warrants at a purchase price of $.0001 per warrant, which
warrants shall entitle the holders thereof to purchase an aggregate of 200,000
shares of Common Stock. The Representative's Warrants shall be exercisable for a
period of four years commencing one year from the effective date of the
Registration Statement at a price equaling one hundred twenty percent (120%) of
the initial public offering price of the shares of Common Stock. The
Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit __ to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Shares. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Shares (other than to residents
of or in any jurisdiction in which qualification of the Shares is required and
has not become effective) at the price and upon the other terms set forth in the
Prospectus. The Representative may from time to time increase or decrease the
public offering price after distribution of the Shares has been completed to
such extent as the Representative, in its discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. Covenants and Agreements of the Company. The Company covenants and agrees
with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration Statement
and any amendments thereto to become effective as promptly as practicable and
will not at any time, whether before or after the effective date of the
Registration Statement, file any amendment to the Registration Statement or
supplement to the Prospectus or file any document under the Act or Exchange Act
before termination of the offering of the Shares by the Underwriters of which
the Underwriters shall not previously have been advised and furnished with a
copy, or to which the Underwriters shall have objected or which is not in
compliance with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the Company
will advise the Underwriters and confirm the notice in writing, (i) when the
Registration Statement, as amended, becomes effective, if the provisions of Rule
430A promulgated under the Act will be relied upon, when the Prospectus has been
filed in accordance with said Rule 430A and when any post-effective amendment to
the Registration Statement becomes effective, (ii) of the issuance by the
Commission of any stop order or of the initiation, or the threatening, of any
proceeding, suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or
13
any amendment or supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any of
the Securities for offering or sale in any jurisdiction or of the initiation, or
the threatening, of any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain promptly
the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance satisfactory to
the Underwriters) or transmit the Prospectus by a means reasonably calculated to
result in filing with the Commission pursuant to Rule 424(b)(1) (or, if
applicable and if consented to by the Underwriters, pursuant to Rule 424(b)(4))
not later than the Commission's close of business on the earlier of (i) the
second business day following the execution and delivery of this Agreement and
(ii) the fifteenth business day after the effective date of the Registration
Statement.
(d) The Company will give the Representative notice of its intention to file or
prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Underwriters with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the Underwriters
or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP ("Underwriters' Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Underwriters, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Underwriters may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Underwriters agree that such action is not at the
time necessary or advisable, use all reasonable efforts to file and make such
statements or reports at such times as are or may reasonably be required by the
laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered under the Act,
the Company shall use all reasonable efforts to comply with all requirements
imposed upon it by the Act and the Exchange Act, as now and hereafter amended
and by the Rules and Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Securities in
accordance with the provisions hereof and the Prospectus, or
14
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities are required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Underwriters promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45 days after the
end of the 12-month period beginning on the day after the end of the fiscal
quarter of the Company during which the effective date of the Registration
Statement occurs (90 days in the event that the end of such fiscal quarter is
the end of the Company's fiscal year), the Company shall make generally
available to its security holders, in the manner specified in Rule 158(b) of the
Rules and Regulations, and to the Underwriters, an earnings statement which will
be in the detail required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(h) During a period of seven years after the date hereof, the Company will
furnish to its stockholders, as soon as practicable, annual reports (including
financial statements audited by independent public accountants) and unaudited
quarterly reports of earnings, and will deliver to the Underwriters:
(i) concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in
the form furnished to the Company's stockholders and certified by the
Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its stockholders, a
balance sheet of the Company as at the end of the preceding fiscal
year, together with statements of operations, stockholders' equity, and
cash flows of the Company for such fiscal year, accompanied by a copy
of the certificate thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all reports (financial or
other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any
securities exchange;
15
(v) every press release and every material news item or article of interest
to the financial community in respect of the Company, or its affairs
which was released or prepared by or on behalf of the Company; and
(vi) any additional information of a public nature concerning the Company
(and any future subsidiary) or its businesses which the Underwriters
may request.
(vii) During such seven-year period, if the Company has an active subsidiary,
the foregoing financial statements will be on a consolidated basis to
the extent that the accounts of the Company and its subsidiary are
consolidated, and will be accompanied by similar financial statements
for any significant subsidiary which is not so consolidated.
(i) The Company will maintain a Transfer Agent and, if necessary under the
jurisdiction of incorporation of the Company, a Registrar (which may be the same
entity as the Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Underwriters or on Underwriters' order,
without charge, at such place as the Underwriters may designate, copies of each
Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (two of which copies will be signed and will
include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such quantities as the Underwriters may request.
(k) On or before the effective date of the Registration Statement, the Company
shall provide the Underwriters with true copies of duly executed, legally
binding and enforceable agreements pursuant to which for a period of twelve (12)
months from the effective date of the Registration Statement, the officers and
directors of the Company, holders of all shares of Common Stock and holders of
securities exchangeable or exercisable for or convertible into shares of Common
Stock, agree that it or he or she will not directly or indirectly, issue, offer
to sell, sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein without the prior written consent of
the Underwriters and the Company (collectively, the "Lock-up Agreements"). On or
before the Closing Date, the Company shall deliver instructions to the Transfer
Agent authorizing it to place appropriate legends on the certificates
representing the securities subject to the Lock-up Agreements and to place
appropriate stop transfer orders on the Company's ledgers. During the twelve
(12) month period commencing on the effective date of the Registration
Statement, and except as contemplated by this Agreement, the Company will not,
without the prior written consent of the Underwriters, sell, contract or offer
to sell, issue, transfer, assign, pledge, hypothecate, distribute, or otherwise
dispose of, directly or indirectly, any shares of Common Stock or any options,
rights or warrants with respect to any shares of Common Stock, except pursuant
to stock options issued by the Company or any other person or entity on the date
hereof or up to [______] shares
16
of Common Stock issuable pursuant to options which may be granted after the date
hereof, provided, however, that such options shall have an exercise price which
is at least equal to the greater of (a) the initial public offering price per
share of Common Stock and (b) the fair market value of the Common Stock on the
date of grant or (ii) file any registration statement for the offer or sale by
the Company or any other person or entity securities issued or to be issued by
the Company or any present or future subsidiaries.
(l) Neither the Company, nor any of its officers, directors, stockholders, nor
any of their respective affiliates (within the meaning of the Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the Securities in
the manner, and subject to the conditions, set forth under "Use of Proceeds" in
the Prospectus. Except as described in the Prospectus, no portion of the net
proceeds will be used, directly or indirectly, to acquire any securities issued
by the Company.
(n) The Company shall timely file all such reports, forms or other documents as
may be required (including, but not limited to, a Form SR as may be required
pursuant to Rule 463 under the Act) from time to time, under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(o) The Company shall furnish to the Underwriters as early as practicable prior
to each of the date hereof, the Closing Date and each Option Closing Date, if
any, but no later than two (2) full business days prior thereto, a copy of the
latest available unaudited interim financial statements of the Company (which in
no event shall be as of a date more than thirty (30) days prior to the date of
the Registration Statement) which have been read by the Company's independent
public accountants, as stated in its letter to be furnished pursuant to Section
6(j) hereof.
(p) The Company shall cause the Common Stock to be quoted on Nasdaq and for a
period of seven (7) years from the date hereof, use its best efforts to maintain
the Nasdaq quotation of the Common Stock to the extent outstanding.
(q) For a period of five (5) years from the Closing Date, the Company shall
furnish to the Underwriters at the Representative's request and at the Company's
sole expense, (i) daily consolidated transfer sheets relating to the Common
Stock (ii) the list of holders of all of the Company's securities and (iii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel to the Company.
(r) For a period of five (5) years from the Closing Date, the Company shall, at
the Company's sole expense, (i) promptly provide the Underwriter, upon any and
all requests of the Underwriter, with a "blue sky trading survey" for secondary
sales of the Company's securities, prepared by counsel to the Company, and (ii)
take all necessary and appropriate actions to further qualify the Company's
securities in all jurisdictions of the United States in
17
order to permit secondary sales of such securities pursuant to the "blue sky"
laws of those jurisdictions, provided that such jurisdictions do not require the
Company to qualify as a foreign corporation.
(s) As soon as practicable, (i) but in no event more than 5 business days before
the effective date of the Registration Statement, file a Form 8-A with the
Commission providing for the registration under the Exchange Act of the
Securities and (ii) but in no event more than 30 days from the effective date of
the Registration Statement, take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual
and to continue such inclusion for a period of not less than seven (7) years.
(t) The Company hereby agrees that it will not for a period of twelve (12)
months from the effective date of the Registration Statement, (i) adopt, propose
to adopt or otherwise permit to exist any employee, officer, director,
consultant or compensation plan or arrangement permitting the grant, issue or
sale of any shares of Common Stock or other securities of the Company (ii) in an
amount greater than an aggregate of [_________] shares of Common Stock (iii) at
an exercise or sale price per share less than the greater of (a) the initial
public offering price of the Shares set forth herein and (b) the fair market
value of the Common Stock on the date of grant or sale, (iv) to any direct or
indirect beneficial holder on the date hereof of more than 5% of the issued and
outstanding shares of Common Stock, (v) with the payment for such securities
with any form of consideration other than cash, (vi) upon payment of less than
the full purchase or exercise price for such shares of Common Stock or other
securities of the Company on the date of grant or issuance, or (vii) permitting
the existence of stock appreciation rights, phantom options or similar
arrangements.
(u) Until the completion of the distribution of the Shares, the Company shall
not without the prior written consent of the Underwriters and Underwriters'
Counsel, issue, directly or indirectly, any press release or other communication
or hold any press conference with respect to the Company or its activities or
the offering contemplated hereby.
(v) For a period equal to the lesser of (i) five (5) years from the date hereof,
and (ii) the sale to the public of the Underwriters' Shares, the Company will
not take any action or actions which may prevent or disqualify the Company's use
of Form SB-2 (or other appropriate form) for the registration under the Act of
the Underwriters's Shares.
(w) For a period of three (3) years after the effective date of the Registration
Statement, the Underwriters shall have the right to designate for election one
(1) individual to the Company's Board of Directors (the "Board"). In the event
the Representative elects not to exercise such right, then it may designate one
(1) individual to attend meetings of the Company's Board. The Company shall
notify the Representative of each meeting of the Board and the Company shall
send to such individual all notices and other correspondence and communications
sent by the Company to members of the Board. Such individual shall be reimbursed
for all out-of-pocket expenses incurred in connection with his attendance of
meetings of the Board.
(x) For a period of twenty-four (24) months after the effective date of the
Registration Statement, the Company shall not restate, amend or alter any term
of any written employment, consulting or similar agreement entered into between
the Company and any officer, director or key employee as of the effective date
of the Registration Statement in a manner which is more favorable to such
officer,
18
director or key employee, without the prior written consent of the Underwriters.
(y) For a period of twelve (12) months after the effective date of the
Registration Statement, the Underwriters shall have a right of first refusal for
all sales of securities made by the Company or any of its present or future
affiliates or subsidiaries.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and the Option
Closing Date (to the extent not paid at the Closing Date) all expenses and fees
(other than fees of Underwriters' Counsel, except as provided in (iv) below)
incident to the performance of the obligations of the Company under this
Agreement and the Representative's Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreements, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities including, but not limited to, (x) the purchase by the Underwriters
of the Shares and the purchase by the Representative of the Representative's
Warrants from the Company, (y) the consummation by the Company of any of its
obligations under this Agreement and the Representative's Warrant Agreement, and
(z) resale of the Shares by the Underwriters in connection with the distribution
contemplated hereby, (iv) the qualification of the Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show", information meetings and presentations, bound volumes and prospectus
memorabilia and "tomb-stone" advertisement expenses, (vi) costs and expenses in
connection with due diligence investigations, including but not limited to the
fees of any independent counsel or consultant retained, (vii) fees and expenses
of the transfer agent and registrar, (viii) applications for assignments of a
rating of the Securities by qualified rating agencies, (ix) the fees payable to
the Commission and the NASD, and (x) the fees and expenses incurred in
connection with the quotation of the Securities on Nasdaq and any other
exchange.
(b) If this Agreement is terminated by the Underwriters in accordance with the
provisions of Section 6 or Section 11, the Company shall reimburse and indemnify
the Underwriters for all of its actual out-of-pocket expenses, including the
fees and disbursements of Underwriters' Counsel, less any amounts already paid
pursuant to Section 5(c) hereof.
19
(c) The Company further agrees that, in addition to the expenses payable
pursuant to subsection (a) of this Section 5, it will pay to the Representative
on the Closing Date by certified or bank cashier's check or, at the election of
the Representative, by deduction from the proceeds of the offering contemplated
herein a non-accountable expense allowance equal to two percent (2%) of the
gross proceeds received by the Company from the sale of the Firm Shares, $25,000
of which has been paid to date. In the event the Representative elects to
exercise the over-allotment option described in Section 2(b) hereof, the Company
agrees to pay to the Representative on the Option Closing Date (by certified or
bank cashier's check or, at the Representative's election, by deduction from the
proceeds of the Option Shares) a non-accountable expense allowance equal to two
percent (2%) of the gross proceeds received by the Company from the sale of the
Option Shares.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to the
Company as if it had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later than 12:00
Noon, New York time, on the date of this Agreement or such later date and time
as shall be consented to in writing by the Underwriters, and, at the Closing
Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriters of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Underwriters shall not have advised the Company that the Registration
Statement, or any amendment thereto, contains an untrue statement of fact which,
in the Underwriters' opinion, is material, or omits to state a fact which, in
the Underwriters' opinion, is material and is required to be stated therein or
is necessary to make the statements therein not misleading, or that the
Prospectus, or any supplement thereto, contains an untrue statement of fact
which, in the Underwriters' opinion, is material, or omits to state a fact
which, in the Underwriters' opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
20
(c) On or prior to the Closing Date, the Underwriters shall have received from
Underwriters' Counsel, such opinion or opinions with respect to the organization
of the Company, the validity of the Securities, the Representative's Warrants,
the Registration Statement, the Prospectus and other related matters as the
Underwriters may request and Underwriters' Counsel shall have received such
papers and information as they request to enable them to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the favorable opinion
of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP, counsel to the Company, dated the
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction, (B) is
duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of
any properties or the character of its operations requires such
qualification or licensing, and (C) has all requisite corporate power
and authority; and the Company has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; the Company is and
has been doing business in material compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state and local laws, rules and
regulations; the Company has not received any notice of proceedings
relating to the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially adversely affect the business,
operations, condition, financial or otherwise, or the earnings,
business affairs, position, prospects, value, operation, properties,
business or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state and
local laws, rules and regulations on the Company's business as
currently conducted and as contemplated are correct in all material
respects and do not omit to state a fact necessary to make the
statements contained therein not misleading in light of the
circumstances in which they were made;
(ii) the Company does not own an interest in any other corporation,
partnership, joint venture, trust or other business entity;
(iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization" and "Description of
Securities," and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue
any capital stock, rights, warrants, options or other securities,
except for this Agreement, the Representative's Warrant Agreement and
as described in the Prospectus. The Securities, and all other
securities issued or issuable by the Company conform in all material
respects to all statements with respect thereto contained in the
Registration Statement and
21
the Prospectus. All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of
the Company. The Shares, the Representative's Warrants and the
Representative's Shares to be sold by the Company hereunder and under
the Representative's Warrant Agreement are not and will not be subject
to any preemptive or other similar rights of any stockholder, have been
duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to be taken for
the authorization, issue and sale of the Shares, the Representative's
Warrants and the Representative's Shares has been duly and validly
taken; and the certificates representing the Shares and the
Representative's Warrants are in due and proper form. The
Representative's Warrants constitute valid and binding obligations of
the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called for
thereby. Upon the issuance and delivery pursuant to this Agreement and
the Representative's Warrant Agreement of the Shares and the
Representative's Warrants, respectively, to be sold by the Company, the
Representative and the Representative, respectively, will acquire good
and marketable title to the Shares and Representative's Warrants free
and clear of any pledge, lien, charge, claim, encumbrance, pledge,
security interest, or other restriction or equity of any kind
whatsoever. No transfer tax is payable by or on behalf of the
Underwriters in connection with (A) the issuance by the Company of the
Shares, (B) the purchase by the Underwriters of the Shares and the
Representative's Warrants, respectively, from the Company, (C) the
consummation by the Company of any of its obligations under this
Agreement or the Representative's Warrant Agreement, or (D) resales of
the Shares in connection with the distribution contemplated hereby;
(iv) the Registration Statement is effective under the Act, and, if
applicable, filing of all pricing information has been timely made in
the appropriate form under Rule 430A, and no stop order suspending the
use of the Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or, to the best of
such counsel's knowledge, threatened or contemplated under the Act;
(v) each of the Preliminary Prospectus, the Registration Statement, and the
Prospectus and any amendments or supplements thereto (other than the
financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) comply as to form in
all material respects with the requirements of the Act and the Rules
and Regulations;
(vi) to the best of such counsel's knowledge, (A) there are no agreements,
contracts or other documents required by the Act to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration
Statement (or required to be filed
22
under the Exchange Act if upon such filing they would be incorporated,
in whole or in part, by reference therein) and the Prospectus and filed
as exhibits thereto, and the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to
which the Company is a party or by which it is bound, including any
document to which the Company is a party or by which it is bound,
incorporated by reference into the Prospectus and any supplement or
amendment thereto, are accurate in all material respects and fairly
represent the information required to be shown by Form SB-2; (C) there
is not pending or threatened against the Company any action,
arbitration, suit, proceeding, inquiry, investigation, litigation,
governmental or other proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that may give
rise to the same), or involving the properties or business of the
Company which (x) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in
all material respects), (y) questions the validity of the capital stock
of the Company or this Agreement or the Representative's Warrant
Agreement, or of any action taken or to be taken by the Company
pursuant to or in connection with any of the foregoing; (D) no statute
or regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and (E) there
is no action, suit or proceeding pending, or threatened, against or
affecting the Company before any court or arbitrator or governmental
body, agency or official (or any basis thereof known to such counsel)
in which there is a reasonable possibility of an adverse decision which
may result in a material adverse change in the condition, financial or
otherwise, or the earnings, position, prospects, stockholders' equity,
value, operation, properties, business or results of operations of the
Company, which could adversely affect the present or prospective
ability of the Company to perform its obligations under this Agreement
or the Representative's Warrant Agreement or which in any manner draws
into question the validity or enforceability of this Agreement or the
Representative's Warrant Agreement;
(vii) the Company has full legal right, power and authority to enter into
each of this Agreement and the Representative's Warrant Agreement and
to consummate the transactions provided for herein and therein; and
each of this Agreement and the Representative's Warrant Agreement has
been duly authorized, executed and delivered by the Company. Each of
this Agreement and the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party thereto
constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or
delivery of this Agreement and the Representative's Warrant Agreement,
its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its
business as described in the Registration Statement, the Prospectus,
and any amendments or supplements thereto, conflicts with or
23
will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute
a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the terms
of, (A) the certificate of incorporation or by-laws of the Company, (B)
any license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or
any other agreement or instrument to which the Company is a party or by
which it is or may be bound or to which any of its respective
properties or assets (tangible or intangible) is or may be subject, or
any indebtedness, or (C) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties;
(viii) except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory
body, government agency or other body (other than such as may be
required under Blue Sky laws, as to which no opinion need be rendered)
is required in connection with the issuance of the Shares pursuant to
the Prospectus, the issuance of the Representative's Warrants, and the
Registration Statement, the performance of this Agreement and the
Representative's Warrant Agreement, and the transactions contemplated
hereby and thereby;
(ix) the properties and business of the Company conform in all material
respects to the description thereof contained in the Registration
Statement and the Prospectus; and the Company has good and marketable
title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus to be owned or
leased by it, in each case free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and
payable.
(x) to the best knowledge of such counsel, the Company is not in breach of,
or in default under, any term or provision of any license, contract,
indenture, mortgage, installment sale agreement, deed of trust, lease,
voting trust agreement, stockholders' agreement, partnership agreement,
note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may
be bound or to which the property or assets (tangible or intangible) of
the Company is subject or affected; and the Company is not in violation
of any term or provision of its certificate of incorporation by-laws,
or in violation of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation;
(xi) the statements in the Prospectus under "BUSINESS," "MANAGEMENT,"
"PRINCIPAL SHAREHOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION OF
SECURITIES," and "SHARES ELIGIBLE
24
FOR FUTURE SALE" have been reviewed by such counsel, and insofar as
they refer to statements of law, descriptions of statutes, licenses,
rules or regulations or legal conclusions, are correct in all material
respects;
(xii) the Shares have been accepted for quotation on the Nasdaq;
(xiii) the persons listed under the caption "PRINCIPAL SHAREHOLDERS" in the
Prospectus are the respective "beneficial owners" (as such phrase is
defined in regulation 13d-3 under the Exchange Act) of the securities
set forth opposite their respective names thereunder as and to the
extent set forth therein;
(xiv) except as described in the Prospectus, no person, corporation, trust,
partnership, association or other entity has the right to include
and/or register any securities of the Company in the Registration
Statement, require the Company to file any registration statement or,
if filed, to include any security in such registration statement;
(xv) except as described in the Prospectus, there are no claims, payments,
issuances, arrangements or understandings for services in the nature of
a finder's or origination fee with respect to the sale of the
Securities hereunder or financial consulting arrangement or any other
arrangements, agreements, understandings, payments or issuances that
may affect the Underwriters' compensation, as determined by the NASD;
(xvi) assuming due execution by the parties thereto other than the Company,
the Lock-up Agreements are legal, valid and binding obligations of
parties thereto, enforceable against the party and any subsequent
holder of the securities subject thereto in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be
limited by applicable law); and
(xvii) except as described in the Prospectus, the Company does not (A)
maintain, sponsor or contribute to any ERISA Plans, (B) maintain or
contribute, now or at any time previously, to a defined benefit plan,
as defined in Section 3(35) of ERISA, and (C) has never completely or
partially withdrawn from a "multiemployer plan".
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement and Prospectus, on the basis
of the foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or
25
the Preliminary Prospectus or Prospectus or amendment or supplement thereto as
of the date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus).
Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991), or any
comparable State bar accord.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company, and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel if requested. The
opinion shall also state that the Underwriters' Counsel is entitled to rely
thereon. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and
that the Underwriters and they are justified in relying thereon.
(e) At the Closing Date, the Underwriters shall have received the favorable
opinion, satisfactory in form and substance to Underwriters' Counsel, from
▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, intellectual property counsel to the Company, to the effect
set forth in Exhibit A.
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP,
counsel to the Company, and ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, intellectual property counsel to
the Company, each dated the Option Closing Date, addressed to the Underwriters
and in form and substance satisfactory to Underwriters' Counsel confirming as of
the Option Closing Date the statements made by each of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau &
Klimpl, LLP and ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP in their respective opinions delivered on the
Closing Date.
(f) On or prior to each of the Closing Date and the Option Closing Date, if any,
Underwriters' Counsel shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in subsection (c) of this Section 6,
or in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions of the Company, or herein contained.
(g) Prior to each of the Closing Date and each Option Closing Date, if any, (i)
there shall have been no material adverse change nor development involving a
prospective
26
change in the condition, financial or otherwise, prospects, stockholders' equity
or the business activities of the Company, whether or not in the ordinary course
of business, from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in default under any
provision of any instrument relating to any outstanding indebtedness; (iv) the
Company shall not have issued any securities (other than the Securities); the
Company shall not have declared or paid any dividend or made any distribution in
respect of its capital stock of any class; and there has not been any change in
the capital stock of the Company, or any material change in the debt (long or
short term) or liabilities or obligations of the Company (contingent or
otherwise); (v) no material amount of the assets of the Company shall have been
pledged or mortgaged, except as set forth in the Registration Statement and
Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall have
been pending or threatened (or circumstances giving rise to same) against the
Company, or affecting any of its properties or business before or by any court
or federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may adversely affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration Statement and Prospectus; and (vii) no
stop order shall have been issued under the Act and no proceedings therefor
shall have been initiated, threatened or contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the Company in this Agreement are
true and correct, as if made on and as of the Closing Date or the
Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at
or prior to such Closing Date or Option Closing Date, as the case may
be;
(ii) No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no proceedings for
that purpose have been instituted or are pending or, to the best of
each of such person's knowledge, after due inquiry are contemplated or
threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the
Registration Statement, the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading and neither the Preliminary Prospectus
or any supplement thereto included
27
any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and
(iv) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, (a) the Company has not
incurred up to and including the Closing Date or the Option Closing
Date, as the case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or
contingent; (b) the Company has not paid or declared any dividends or
other distributions on its capital stock; (c) the Company has not
entered into any transactions not in the ordinary course of business;
(d) there has not been any change in the capital stock of the Company
or any material change in the debt (long or short-term) of the Company;
(e) the Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (g) there is no litigation
which is pending or threatened (or circumstances giving rise to same)
against the Company, or any affiliated party of any of the foregoing
which is required to be set forth in an amended or supplemented
Prospectus which has not been set forth; and (h) there has occurred no
event required to be set forth in an amended or supplemented Prospectus
which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters will have received clearance from the
NASD as to the amount of compensation allowable or payable to the Underwriters,
as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters shall have received
a letter, dated such date, addressed to the Underwriters in form and substance
satisfactory (including the non-material nature of the changes or decreases, if
any, referred to in clause (iii) below) in all respects to the Underwriters and
Underwriters' Counsel, from ▇▇▇▇▇▇;
(i) confirming that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
Rules and Regulations;
(ii) stating that it is their opinion that the financial statements and
supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations thereunder and that the Underwriters may rely upon the
opinion of ▇▇▇▇▇▇ with respect to such financial statements and
supporting schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review which included a reading
of the latest available unaudited interim financial statements of the
Company, a reading of the latest available minutes of the stockholders
and board of directors and the various committees of the boards of
directors of the Company, consultations with officers and other
employees of the Company responsible for financial and accounting
matters
28
and other specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the pro forma
financial information contained in the Registration Statement and
Prospectus does not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or is not fairly presented in conformity with generally
accepted accounting principles applied on a basis consistent with that
of the audited financial statements of the Company or the unaudited pro
forma financial information included in the Registration Statement, (B)
the unaudited financial statements and supporting schedules of the
Company included in the Registration Statement do not comply as to form
in all material respects with the applicable accounting requirements of
the Act and the Rules and Regulations or are not fairly presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial
statements of the Company included in the Registration Statement, or
(C) at a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there has been any change
in the capital stock of the Company, any change in the long-term debt
of the Company, or any decrease in the stockholders' equity of the
Company or any decrease in the net current assets or net assets of the
Company as compared with amounts shown in the _____, 1999 balance
sheets included in the Registration Statement, other than as set forth
in or contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or
decrease, and (D) during the period from ______, 1999 to a specified
date not more than five (5) days prior to the effective date of the
Registration Statement, there was any decrease in net revenues or net
earnings of the Company or increase in net earnings per common share of
the Company, in each case as compared with the corresponding period
beginning _____, 1998 other than as set forth in or contemplated by the
Registration Statement, or, if there was any such decrease, setting
forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5) days prior to the date
of the Registration Statement, the amount of liabilities of the Company
(including a break-down of commercial paper and notes payable to
banks);
(v) stating that they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excluding
any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards)
set forth in the letter and found them to be in agreement; and
(vi) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriters may request.
(k) At the Closing Date and each Option Closing Date, if any, the Underwriters
shall have received from ▇▇▇▇▇▇ a letter, dated as of the Closing Date or the
Option
29
Closing Date, as the case may be, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (j) of this
Section hereof except that the specified date referred to shall be a date not
more than five days prior to the Closing Date or the Option Closing Date, as the
case may be, and, if the Company has elected to rely on Rule 430A of the Rules
and Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of subsection (j) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriters and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(l) The Company shall have delivered to the Underwriters a letter from ▇▇▇▇▇▇
addressed to the Company stating that they have not during the immediately
preceding two year period brought to the attention of the Company's management
any "weakness" as defined in Statement of Auditing Standards No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit,"
in any of the Company's internal controls.
(m) On each of the Closing Date and Option Closing Date, if any, there shall be
duly tendered to the Underwriters for the several Underwriters' accounts the
appropriate number of Securities.
(n) No order suspending the sale of the Securities in any jurisdiction
designated by the Underwriters pursuant to subsection (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Option Closing Date, if
any, and no proceedings for that purpose shall have been instituted or shall be
contemplated.
(o) On or before the Closing Date, the Company shall have executed and delivered
to the Underwriters, (i) the Underwriters' Warrant Agreement substantially in
the form filed as Exhibit __ to the Registration Statement in final form and
substance satisfactory to the Underwriters, and (ii) the Underwriters' Warrants
in such denominations and to such designees as shall have been provided to the
Company.
(p) On or before the Closing Date, the Shares shall have been duly approved for
quotation on Nasdaq, subject to official notice of issuance.
(q) On or before the Closing Date, there shall have been delivered to the
Underwriters all of the Lock-up Agreements, in form and substance satisfactory
to Representative's Counsel.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Underwriters may terminate
this Agreement or, if the Underwriters so elect, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company, agrees to indemnify and hold harmless each of the Underwriters
(for purposes of this Section 7 "Underwriters" shall include the officers,
directors, partners, employees, agents and counsel of the Underwriters,
including specifically each person
30
who may be substituted for an Underwriter as provided in Section 11 hereof), and
each person, if any, who controls the Underwriter ("controlling person") within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several (and actions, proceedings, investigations, inquiries, and suits in
respect thereof), whatsoever (including but not limited to any and all costs and
expenses whatsoever reasonably incurred in investigating, preparing or defending
against such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon (A) any untrue statement
or alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company filed, delivered or used in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
Nasdaq or any other securities exchange, (B) the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriters expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the Registration Statement, and each other person, if any, who controls
the Company within the meaning of the Act, to the same extent as the foregoing
indemnity from the Company to the Underwriter but only with respect to
statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriter expressly
31
for use therein and constitute the only information furnished in writing by or
on behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in
addition to any liability which the Underwriters may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, suit or proceeding, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action, investigation, inquiry, suit or proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action, investigation,
inquiry, suit or proceeding or separate but similar or related actions,
investigations, inquiries, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances. Anything in this Section 7
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, investigation, inquiry,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party form all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
32
(d) In order to provide for just and equitable contribution in any case in which
(i) an indemnified party makes a claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 7 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions, investigations,
inquiries, suits or proceedings in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions, investigations, inquiries,
suits or proceedings in respect thereof) referred to above in this subdivision
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action, claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, inquiry,
investigation or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set
33
forth above shall be in addition to any liabilities which any indemnifying party
may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of the Company submitted pursuant hereto, shall be
deemed to be representations, warranties and agreements at the Closing Date and
the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
9. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m., New York City time, on
the next full business day following the date hereof, or at such earlier time
after the Registration Statement becomes effective as the Underwriters, in their
sole discretion, shall release the Shares for sale to the public; provided,
however, that the provisions of Sections 5, 7 and 10 of this Agreement shall at
all times be effective. For purposes of this Section 9, the Shares to be
purchased hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Underwriters of telegrams to securities dealers releasing such
shares for offering or the release by the Underwriters for publication of the
first newspaper advertisement which is subsequently published relating to the
Shares.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the Underwriters shall have
the right to terminate this Agreement, after the date hereof, (i) if any
domestic or international event or act or occurrence has materially disrupted,
or in the Underwriters' opinion will in the immediate future materially
adversely disrupt the financial markets; or (ii) any material adverse change in
the financial markets shall have occurred; or (iii) if trading generally shall
have been suspended or materially limited on or by, as the case may be, any of
the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Boston Stock Exchange, the Chicago
Board of Trade, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Commission or any other government authority having jurisdiction;
or (iv) if trading of any of the securities of the Company shall have been
suspended, or any of the securities of the Company shall have been delisted, on
any exchange or in any over-the-counter market; or (v) if the United States
shall have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities or a national
emergency shall have been declared in the United States; or (vi) if a banking
moratorium has been declared by a state or federal authority; or (vii) if a
moratorium in foreign exchange trading has been declared; or (viii) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Underwriters' opinion, make it inadvisable to proceed with the delivery
of the Securities; or (viii) if there shall have occurred any outbreak or
escalation of hostilities or any
34
calamity or crisis or there shall have been such a material adverse change in
the conditions or prospects of the Company, or such material adverse change in
the general market, political or economic conditions, in the United States or
elsewhere as in the Underwriters' judgment would make it inadvisable to proceed
with the offering, sale and/or delivery of the Securities.
(b) If this Agreement is terminated by the Underwriters in accordance with the
provisions of Section 10(a) the Company shall promptly reimburse and indemnify
the Underwriters for all of their actual out-of-pocket expenses, including the
fees and disbursements Underwriters' Counsel (less amounts previously paid
pursuant to Section 5(c) above). Notwithstanding any contrary provision
contained in this Agreement, if this Agreement shall not be carried out within
the time specified herein, or any extension thereof granted to the Underwriters,
by reason of any failure on the part of the Company to perform any undertaking
or satisfy any condition of this Agreement by it to be performed or satisfied
(including, without limitation, pursuant to Section 6 or Section 12) then, the
Company shall promptly reimburse and indemnify the Underwriter for all of their
actual out-of-pocket expenses, including the fees and disbursements of counsel
for the Underwriter (less amounts previously paid pursuant to Section 5(c)
above). In addition, the Company shall remain liable for all Blue Sky counsel
fees and expenses and filing fees. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections 6, 10 and 12
hereof), and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 and Section 7 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
11. Substitution of the Underwriters. If one or more of the Underwriters shall
fail otherwise than for a reason sufficient to justify the termination of this
Agreement (under the provisions of Section 6, Section 10 or Section 12 hereof)
to purchase the Securities which it or they are obligated to purchase on such
date under this Agreement (the "Defaulted Securities"), the Underwriters shall
have the right, within 24 hours thereafter, to make arrangement for one or more
of the non-defaulting Underwriters, or any other Underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the Underwriters
shall not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the total
number of Firm Shares to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total number of
Firm Shares, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination
of this Agreement, the Underwriters shall have the right to postpone the Closing
Date for a period not exceeding
35
seven days in order to effect any required changes in the Registration Statement
or Prospectus or in any other documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing Date or at
any Option Closing Date, as applicable, to sell and deliver the number of Shares
which it is obligated to sell hereunder on such date, then this Agreement shall
terminate (or, if such default shall occur with respect to any Option Shares to
be purchased on an Option Closing Date, the Underwriters may at their option, by
notice from the Underwriters to the Company, terminate the Underwriters'
obligation to purchase Option Shares from the Company on such date) without any
liability on the part of any non-defaulting party other than pursuant to Section
5, Section 7 and Section 10 hereof. No action taken pursuant to this Section
shall relieve the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Representative shall be directed to the
Representative at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
[______], with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: [______]. Notices to the Company
shall be directed to the Company at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: [__________], with a copy to ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau &
Klimpl LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
[______]
14. Parties. This Agreement shall inure solely to the benefit of and shall be
binding upon, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from the Underwriters shall be deemed to be a successor
by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York without giving effect to
the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which taken together
shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the Representative's
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior written or oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may not be amended
except in a writing, signed by the Underwriters and the Company.
36
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
I.D. SYSTEMS, INC.
By: ____________________________
Name:
Title:
Confirmed and accepted as of
the date first above written.
GILFORD SECURITIES INCORPORATED
By:___________________________________
Name:
Title:
SCHEDULE A
----------
Underwriter Number of Firm Shares
----------- ---------------------
Gilford Securities Incorporated
TOTAL 2,000,000
Exhibit A
---------
[FORM OF INTELLECTUAL PROPERTY OPINION]
_________________, 1999
Gilford Securities Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Public Offering of I.D. Systems, Inc.
------------------------------------
Gentlemen:
We have acted as special counsel to I.D. Systems, Inc., a
Delaware corporation (the "Company"), in connection with the entering into by
the Company of that certain Underwriting Agreement by and between Gilford
Securities Incorporated ("Gilford"), as representative of the several
underwriters named in Schedule A thereto, and the Company, dated ____________,
1999 (the "Underwriting Agreement"). This opinion is provided to you pursuant to
Section ____________ of the Underwriting Agreement.
For the purpose of rendering the opinions set forth below we
have reviewed the following (collectively, the "Documents"):
(i) the Underwriting Agreement;
(ii) that certain Registration Statement filed _____________,
1999, together with any and all amendments thereof exhibits thereto
(collectively, the "Registration Statement");
(iii) the company's Prospectus dated _____________, 1999 (the
"Prospectus");
(iv) a search of the United States Patent and Trademark Office
records relevant to ownership of any and all:
patents and patent applications (including, without
limitation, the patents and patent applications listed on
Schedule A annexed hereto and hereby incorporated by reference
herein (collectively, the "Patents")), and trademarks,
trademark applications, service marks and service ▇▇▇▇
applications (collectively, the "Marks") (including, without
limitation, the Marks listed on Schedule B annexed hereto and
hereby incorporated by reference herein (collectively, the
"Trademarks")),
A-1
owned, purportedly owned or licensed by the Company (including, those patents,
patent applications and Marks licensed, without limitation, pursuant to the
licenses listed on Schedule C annexed hereto and hereby incorporated by
reference herein (collectively, the "Licenses")), conducted by
______________________ and certified as true and correct as of ____________,
1999 (no earlier than 5 days prior to the date of the Closing (as defined in the
Underwriting Agreement));
(v) a search of the United States Copyright Office records
relevant to ownership of any and all copyrighted material (including,
without limitation, the copyright in, or license permitting the
Company's actual use of, the material licensed or otherwise distributed
by the Company and listed on Schedule D annexed hereto and hereby
incorporated by reference herein (collectively, the "Copyrighted
Material")), owned, purportedly owned or licensed by the Company
conducted by _____________ and certified as true and correct as of
__________________, 1999 (no earlier than 5 days prior to the date of
the Closing);
(vi) an intellectual property litigation search with respect
to all Patents, Trademarks, Licenses and Copyrighted Material, listed
on Schedules A, B, C and D, respectively;
(vii) a search of the Uniform Commercial Code ("UCC")
recordation offices, in the following jurisdictions --
[______________________, ______________________ and
______________________], with respect to the following two categories
of general intangibles:
(a) the intellectual property general intangibles of
the Company, including, without limitation, the
Company's patents, patent applications, inventions,
know how, trademarks, service marks, copyrights,
service and trade names, intellectual property
licenses and other rights, and
(b) the intellectual property general intangibles
licensed to the Company, including, without
limitation, the patents, patent applications,
inventions, know how, trademarks, service marks,
copyrights, service and trade names and other
intellectual property rights licensed to the Company
pursuant to the Licenses (listed on Schedule C),
said search certified to us as complete and accurate by
_______________________ and current through ____________________, 1999
(no earlier than 5 days prior to the date of the Closing) and said
jurisdictions being the only jurisdictions in which filing of UCC
financing statements or other documents may be filed to effectively
evidence a security or other interest in said general intangibles; and
(viii) any and all records, documents, instruments and
agreements in our possession or under our control relating to the
Company.
We have also examined such corporate records, documents,
instruments and agreements, and inquired into such other matters, as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
Whenever our opinion herein is qualified by the phrase
A-2
"to the best of our knowledge" or "to the best of our knowledge, after due
inquiry," such language means that, based upon (i) our inquiries of officers of
the Company, (ii) our review of the Documents, and (iii) our review of such
other corporate records, documents, instruments and agreements described in the
first sentence of this paragraph, we believe that such opinions are factually
correct.
To the best of our knowledge, as to all matters of fact
represented to you by the Company, we advise you that nothing has come to our
attention that would cause us to believe that such facts are incorrect,
incomplete or misleading or that reliance thereon is not warranted under the
circumstances. We call to your attention that our opinion is limited to such
facts as they exist on the date hereof and do not take into account any change
of circumstances, fact or law subsequent thereto.
Based upon and subject to the foregoing, we are of the opinion
that:
1. To the best of our knowledge, after due inquiry,
except as described in the Registration Statement, the Company
owns or has the right to use, free and clear of all liens,
encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever,
(i) all patents and patent applications
(including, without limitation, the Patents),
(ii) all trademarks and service marks
(including, without limitation, the Trademarks),
(iii) all copyrights (including, without
limitation, the Copyrighted Material),
(iv) all service and trade names,
(v) all intellectual property licenses
(including, without limitation, the Licenses), and
(vi) all technology
used in, contemplated to be used in or required for, the
conduct of the Company's business.
2. To the best of our knowledge, after due inquiry,
the Company possesses all material intellectual property
licenses or rights used in, or required for, the conduct of
its business (including, the Licenses and without limitation,
any such licenses or rights described in the Registration
Statement as being owned, possessed or licensed by the
Company, as the case may be), such licenses and rights are in
full force and effect, and the Company's products, methods and
services do not infringe any unlicensed intellectual property
of any third parties.
A-3
3. To the best of our knowledge, after due inquiry,
there is no claim or action, pending, threatened or potential,
which affects or could affect the rights of the Company with
respect to any trademarks, service marks, copyrights, service
names, trade names, patents, patent applications or licenses
used in, or required for, the conduct of the Company's
business and all trademarks, service marks, copyrights, trade
names, and patents owned or licensed to the Company are valid.
4. To the best of our knowledge, after due inquiry,
there is no intellectual property based claim or action,
pending, threatened or potential, which affects or could
affect the rights of the Company with respect to any products,
services, processes or licenses, including, without
limitation, the Licenses used in the conduct of the Company's
business.
5. To the best of our knowledge, after due inquiry,
except as described in the Registration Statement, the Company
is not under any obligation to pay royalties or fees to any
third party with respect to any material, technology or
intellectual properties developed, employed, licensed or used
by the Company.
6. To the best of our knowledge, after due inquiry,
the statements in the Registration Statement under the
headings, "Risk Factors - Patents, Trademarks and Proprietary
Information" and "Business - Patents, Trademarks and
Proprietary Information", are accurate in all material
respects, fairly represent the information disclosed therein
and do not omit to state any fact necessary to make the
statements made therein complete and accurate.
7. To the best of our knowledge, after due inquiry,
the statements in the Registration Statement and the
Prospectus do not contain any untrue statement of a material
fact with respect to the intellectual property position of the
Company, or omit to state any material fact relating to the
intellectual property position of the Company which is
required to be stated in the Registration Statement and the
Prospectus or is necessary to make the statements therein not
misleading.
We call your attention to the fact that the members of this
firm are licensed to practice law in the State of ______________ and before the
United States Patent and Trademark Office as Registered Patent Attorneys.
Accordingly, we express no opinion with respect to the laws, rules and
regulations of any jurisdictions other than the State of __________ and the
United States of America.
The opinions expressed herein are for the sole benefit of, and
may be relied upon only by, the several Underwriters named in Schedule A to the
Underwriting Agreement and ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇.
Very truly yours,
A-4