Exhibit 1.1
DRAFT 10/7/99
1,500,000 Shares of Common Stock and
1,500,000 Redeemable Common Stock Purchase Warrants
▇▇▇▇▇▇.▇▇▇ HOLDING CORPORATION
UNDERWRITING AGREEMENT
New York, New York
__________, 1999
National Securities Corporation
As Representative of the Several Underwriters
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Ladies and Gentlemen:
▇▇▇▇▇▇.▇▇▇ Holding Corporation, a Delaware corporation (the "Company"),
hereby agrees with National Securities Corporation ("National") and each of the
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 National is acting as representative (in such capacity,
National 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 1,500,000 shares of the Company's Common Stock,
par value $.01 per share (the "Common Stock"), and 1,500,000 redeemable warrants
(the "Warrants," and collectively with the Common Stock, the "Firm Securities").
Each Warrant is to purchase one (1) share of Common Stock at an exercise price
of $________ (140% of the initial public offering price of a share of Common
Stock) exercisable at any time over a thirty-six-month period from _______, ____
until ________, ____ pursuant to a Warrant Agreement, as defined herein, to be
entered into on the Closing Date (as defined in Section 2(c) hereof). The Firm
Securities may be purchased in the offering only on the basis of one share of
Common Stock together with one Warrant. Immediately following the offering, the
Common Stock and Warrants will be separately transferable.
The Warrants will be redeemable by the Company at time after _______, 2000
at a redemption price of $0.10 per Warrant on thirty (30) days' prior written
notice provided that the average of the closing bid price of the Common Stock,
as quoted on the [Nasdaq SmallCap Market] averages an amount equal to or
exceeding $_____ (200% of the initial public offering price of the Common Stock)
per share for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the notice of
redemption.
In addition, upon your request, as provided in Section 2(b) of this
Agreement, certain shareholders hereof of the Company listed on Exhibit B (the
"Selling Shareholders") hereby agree that they shall sell to the Underwriters,
acting severally and not jointly, up to 225,000
shares of Common Stock for the purpose of covering over-allotments, if any. In
addition, the Company hereby agrees that it shall sell to the Underwriters,
acting severally and not jointly, up to 225,000 Warrants for the purpose of
covering over-allotments, if any. The Selling Shareholders further hereby agree
to provide the 225,000 common shares underlying the Warrants subject to the
over-allotment option. The 225,000 shares of Common Stock, 225,000 Warrants
subject to the over-allotment option and the 225,000 shares of Common Stock
underlying the Warrants are hereinafter referred to as the "Option Securities."
The Company also proposes to issue and sell to you pursuant to the
Representative's Warrant Agreement (the "Representative's Warrant Agreement")
warrants for the purchase of an additional 150,000 shares of Common Stock and
warrants for the purchase additional 150,000 Warrants (collectively, the
"Representative's Warrants"). The Representative's Warrants are initially
exercisable at a price of $_______ per share (165% of the initial public
offering price of a share of Common Stock) and $_____ per Warrant (165% of the
initial public offering price of a Warrant), respectively. The Representative's
Warrants are exercisable for Warrants for a period of thirty-six (36) months
commencing on the Closing Date. The Representative's Warrants are exercisable
for Common Stock for a period of sixty (60) months commencing on the Closing
Date. The shares of Common Stock and the Warrants underlying the
Representative's Warrants, and the shares of Common Stock underlying the
Warrants issuable upon exercise of the Representative's Warrants, are
hereinafter referred to as the "Representative Securities." The Firm Securities,
Option Securities, Representative's Warrants, and Representative's Securities
are more fully described in the Registration Statement and the Prospectus
referred to below.
1. Representations and Warranties of the Company and the Selling Shareholders.
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A. The Company and the Selling Shareholders represent and warrant to, and
agree with, each of the Underwriters as of the date hereof, and as of the
Closing Date and the Option Closing Date, if any, as follows:
(a) 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 (SEC File No. 333-83807), including any related
preliminary prospectus (the "Preliminary Prospectus"), and a related
registration statement filed with the Commission pursuant to Rule 462(b) of the
Regulations (as defined below) for the registration of the Firm Securities, the
Option Securities, the Common Stock underlying the Warrants contained in the
Units, the Representative's Warrants and the Representative's Shares
(collectively, hereinafter referred to as the "Registered Securities") 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 Regulations (as defined below) of the
Commission under the Act. The Company 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 statements as amended, on file with the Commission at the time the
registration statements become effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated 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), are
hereinafter called the "Registration Statement," and the form of prospectus in
the form first filed with the Commission
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pursuant to Rule 424(b) of the Regulations, is hereinafter called the
"Prospectus." For purposes hereof, "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.
(b) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any of the Preliminary Prospectus,
the Registration Statement or the Prospectus or any part thereof, and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or threatened. Each of the Preliminary Prospectus, the Registration Statement
and the Prospectus at the time of filing thereof conformed in all material
respects with the requirements of the Act and the Regulations, and none of the
Preliminary Prospectus, the Registration Statement or the 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 or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
statements 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.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date (as defined in Section 2(c) hereof)
and each Option Closing Date (as defined in Section 2(b) hereof), if any, 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, as amended or supplemented as required, will
contain all statements which are required to be stated therein in accordance
with the Act and the Regulations, and will conform in all material respects to
the requirements of the Act and the Regulations; 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
information furnished to the Company in writing by or on behalf of any
Underwriter expressly for use in the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto.
(d) The Company and all subsidiaries in which it owns an interest, direct
or indirect (the "Subsidiaries"), have been duly organized and are validly
existing as corporations in good standing under the laws of the respective
states of their incorporation. The Company does not own or control, directly or
indirectly, any corporation, partnership, trust, joint venture or other business
entity other than the subsidiaries listed in Exhibit 21 of the Registration
Statement. Each of the Company and the Subsidiaries is duly qualified and
licensed and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of its
operations require such qualification or licensing. Each of the Company and the
Subsidiaries has all requisite power and authority (corporate and other), and
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; each of the Company and the
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Subsidiaries is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, state, local and foreign laws, rules and regulations;
and neither the Company nor any of the Subsidiaries has 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 business affairs, operations, properties, or
results of operations of the Company and the Subsidiaries, taken as a whole. The
disclosures in the Registration Statement concerning the effects of federal,
state, local, and foreign laws, rules and regulations on the Company's and the
Subsidiaries' businesses as currently conducted and as contemplated are correct
in all material respects and do not omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the headings
"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,
including, but not limited to, any voting trust agreement, stockholders
agreement or other agreement or instrument, affecting the Common Stock or rights
or obligations of security holders of the Company or the Subsidiaries or
providing for any of the Company or the Subsidiaries 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
Registered Securities and all other securities issued or issuable by each of the
Company or the Subsidiaries conform or, when issued and paid for, will conform,
in all material respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding shares of
capital stock of the Company or any of the Subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
disclosed in or contemplated by the Prospectus and the financial statements of
the Company and the related notes thereto included in the Prospectus, neither
the Company nor any Subsidiary has outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder as set forth in the Prospectus
conforms in all material respects with the requirements of the Act. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, 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.
(f) The Registered Securities are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and will conform in all
material respects to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such holders; all
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corporate action required to be taken for the authorization, issue and sale of
the Registered Securities has been duly and validly taken; and the certificates
representing the Registered Securities will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Registered Securities
to be sold by the Company hereunder, the Underwriters or the Representative, as
the case may be, will acquire good and marketable title to such Registered
Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect, or other restriction or equity of any kind
whatsoever. No stockholder of the Company has any right which has not been
waived in writing to require the Company to register the sale of any shares
owned by such stockholder under the Act in the public offering contemplated by
this Agreement. No further approval or authority of the stockholders or the
Board of Directors of the Company will be required for the issuance and sale of
the Registered Securities to be sold by the Company as contemplated herein.
(g) The financial statements of each of the Company and the Subsidiaries,
together with the related notes and schedules thereto, included in the
Registration Statement, each Preliminary Prospectus and the Prospectus fairly
present the financial position, changes in stockholders' equity and the results
of operations of the Company and the Subsidiaries at the respective dates and
for the respective periods to which they apply and such financial statements
have been prepared in conformity with generally accepted accounting principles
and the Regulations, consistently applied throughout the periods involved. There
has been no material adverse change or development involving a material
prospective change in the condition, financial or otherwise, or in the business,
affairs, operations, properties, or results of operation of the Company and the
Subsidiaries taken as a whole whether or not arising in the ordinary course of
business since the date of the financial statements included in the Registration
Statement and the Prospectus and the outstanding debt, the property, both
tangible and intangible, and the business of the Company and the Subsidiaries
taken as a whole conform in all respects to the descriptions thereof contained
in the Registration Statement and the Prospectus. Financial information set
forth in the Prospectus under the headings "Prospectus Summary -- Summary
Combined Financial Information," "Capitalization," "Selected Financial Data,"
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 from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(h) Each of the Company and the Subsidiaries has (i) paid all federal,
state, local, franchise, and foreign taxes for which it is liable, including,
but not limited to, withholding taxes and amounts payable under Chapters 21
through 24 of the Internal Revenue Code of 1986, as amended (the "Code"), and
furnished all information returns it is required to furnish pursuant to the
Code, (ii) established adequate reserves for such taxes which are not due and
payable, and (iii) no tax deficiency or claims outstanding, proposed or assessed
against it.
(i) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters or the Representative in connection with (i) the
issuance by the Company of the Registered Securities, the Representative's
Warrants and the Representative's Shares, (ii) the purchase by the Underwriters
of the Registered Securities from the Company and the purchase by the
Representative of the Representative's Warrants or the Representative's Shares
from the Company, (iii) the consummation by the Company of any of its
obligations under this
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Agreement, the Warrant Agreement or the Representative's Warrant Agreement, or
(iv) resales of the Registered Securities in connection with the distribution
contemplated hereby.
(j) Each of the Company and the Subsidiaries maintains insurance policies,
including, but not limited to, general liability, property and product liability
insurance and surety bonds which insures the Company and the Subsidiaries and
their respective professional staffs against such losses and risks generally
insured against by comparable businesses. Neither the Company nor any of the
Subsidiaries has (A) failed to give notice or present any insurance claim with
respect to any matter, including, but not limited to, the Company's or any of
the Subsidiaries' businesses, property or professional staff, under any
insurance policy or surety bond in a due and timely manner, (B) any disputes or
claims against any underwriter of such insurance policies or surety bonds or has
failed to pay any premiums due and payable thereunder, or (C) 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 or any of the Subsidiaries.
(k) There is no claim, action, suit, proceeding, inquiry, arbitration,
mediation, 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
businesses of, the Company or any of the Subsidiaries which (i) questions the
validity of the capital stock of the Company or any of the Subsidiaries, this
Agreement, the Warrant Agreement or the Representative's Warrant Agreement, or
of any action taken or to be taken by the Company or any of the Subsidiaries or
any of the Selling Shareholders pursuant to or in connection with this
Agreement, the Warrant 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 material respects), or (iii) might materially
and adversely affect the condition, financial or otherwise, or the business,
affairs, position, stockholders' equity, operation, properties, or results of
operations of the Company and the Subsidiaries taken as a whole.
(l) The Company has the full legal right, corporate power and authority to
authorize, issue, deliver, and sell the Registered Securities and to enter into
this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement, and to consummate the transactions provided for in such agreements;
and this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement have each been duly and properly authorized, executed, and delivered
by the Company. Each of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with
their respective 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 issue and sale of the Registered Securities,
execution, delivery or performance of this Agreement, the Warrant Agreement and
the Representative's Warrant Agreement, the consummation of the transactions
contemplated herein and therein, or the conduct by the Company and the
Subsidiaries of their businesses as described in the Registration Statement, the
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Prospectus, and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of any of the
terms or provisions of, or constitutes or will constitute a default under, or
result in the creation or imposition of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of the Company
or any of the Subsidiaries pursuant to the terms of (i) the certificates of
incorporation or bylaws of the Company or any of the Subsidiaries, as amended
and restated, (ii) any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders' agreement, note, loan or credit agreement
or any other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which any of them may be bound or to which their
properties or assets (tangible or intangible) is or may be subject, or any
indebtedness of either the Company or any of the Subsidiaries, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the Company
or any of the Subsidiaries of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company of any of their
activities or properties.
(m) 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 Registered Securities pursuant to
the Prospectus and the Registration Statement, the performance of this
Agreement, the Warrant 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 Registered Securities,
except such as have been or may be obtained under the Act or may be required
under state securities or Blue Sky laws in connection with the Underwriters'
purchase and distribution of the Registered Securities to be sold hereunder.
(n) 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 or any of the Subsidiaries is a
party or by which any of them may be bound or to which either of their assets,
properties or businesses may be subject have been duly and validly authorized,
executed and delivered by the Company or any of the Subsidiaries, as the case
may be, and constitute the legal, valid and binding agreements of the Company or
any of the Subsidiaries, as the case may be, enforceable against the Company or
any of the Subsidiaries, as the case may be, in accordance with their respective
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). The descriptions in
the Registration Statement of such agreements, contracts and other documents are
accurate in all material respects 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.
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(o) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus, neither the Company nor any of the
Subsidiaries (i) has incurred any material liabilities or obligations, indirect,
direct or contingent, or entered into any material verbal or written agreement
or other transaction which is not in the ordinary course of business or which
could result in a material reduction in the future earnings of the Company or
any of the Subsidiaries; (ii) has sustained any material loss or interference
with its business or properties from fire, flood, windstorm, accident or other
calamity, whether or not covered by insurance; (iii) has paid or declared any
dividends or other distributions with respect to its capital stock, (iv) is in
default in the payment of principal or interest on any outstanding debt
obligations; (v) has had any change in its capital stock (other than upon the
sale of the Firm Securities, the Option Securities, the Representative's
Warrants, the Common Stock and Warrants underlying the Representative's
Warrants, and the Common Stock underlying the Warrants underlying the
Representative Warrants described in the Registration Statement) (other than in
the ordinary course of business) of, or indebtedness material to, the Company or
any of the Subsidiaries; (vi) has issued any securities or incurred any
liability or obligation, primary or contingent, for borrowed money; or (vii) has
experienced any material adverse change in the condition (financial or
otherwise) of their respective businesses, properties, results of operations, or
prospects.
(p) Except as disclosed in or specifically contemplated by the Prospectus,
(i) the Company and the Subsidiaries have sufficient trademarks, trade names,
patent rights, copyrights, licenses, approvals and governmental authorizations
to conduct their respective businesses as now conducted; (ii) the expiration of
any trademarks, trade names, patent rights, copyrights, licenses, approvals or
governmental authorizations would not have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Company or any of the Subsidiaries; (iii) the Company has no knowledge of
any infringement by it or its subsidiaries of trademark, trade name rights,
patent rights, copyrights, licenses, trade secret or other similar rights of
others; and (iv) there is no claim being made against the Company or any of the
Subsidiaries regarding trademark, trade name, patent, copyright, license, trade
secret or other infringement which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Company or any of the Subsidiaries.
(q) None of the Company or any of the Subsidiaries are, or with the giving
of notice or lapse of time or both, will be, in violation of or in default under
their respective charters or bylaws, and 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, note, loan or credit agreement,
or any other material agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries may be bound or to which the property or assets (tangible or
intangible) of the Company or any of the Subsidiaries are subject or affected.
(r) To the Company's knowledge, there are no pending investigations
involving the Company or any of the Subsidiaries by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state, local, or foreign laws and
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regulations. There is no unfair labor practice charge or complaint against the
Company or any of the Subsidiaries pending before the National Labor Relations
Board or any strike, picketing, boycott, dispute, slowdown or stoppage pending
or to its knowledge threatened against or involving the Company or any of the
Subsidiaries. No representation question exists respecting the employees of the
Company or any of the Subsidiaries. No collective bargaining agreement, or
modification thereof is currently being negotiated by the Company or any of the
Subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
the Subsidiaries. No labor dispute with the employees of the Company or any of
the Subsidiaries exists or is imminent.
(s) Except as described in the Prospectus, neither the Company nor any of
the Subsidiaries maintains, sponsors or contributes to any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multi-employer plan" as such terms are defined in Sections
3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans"). Neither the Company nor any
of the Subsidiaries maintains or contributes to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which could subject the
Company or any of the Subsidiaries to any tax penalty on prohibited transactions
and which has not adequately been corrected. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Code and
ERISA as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan which
is intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. Neither the Company nor any of the
Subsidiaries has ever completely or partially withdrawn from a "multi-employer
plan."
(t) None of the Company, nor any of the Subsidiaries, nor any of their
employees, directors, stockholders, or affiliates (within the meaning of the
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 stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Registered
Securities.
(u) Each of the Company and the Subsidiaries 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,
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.
(v) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, P.C. ("▇▇▇▇▇ ▇▇▇▇▇▇▇▇"), 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 Regulations.
(w) There are no claims, payments, 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 Registered Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect to
the Company, the Subsidiaries, or any of their respective officers, directors,
stockholders, employees or affiliates that may affect the Underwriters'
9
compensation as determined by the Commission and the National Association of
Securities Dealers, Inc. (the "NASD").
(x) The Registered Securities have been approved for quotation on the
Nasdaq SmallCap Market and Chicago Stock Exchange subject only to official
notice of issuance.
(y) Each of the Company and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) None of the Company, the Subsidiaries, nor any of their respective
officers, employees, agents or any other person acting on behalf of the Company
or any of the Subsidiaries has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company or any of the Subsidiaries (or assist the
Company or any of the Subsidiaries in connection with any actual or proposed
transaction) which might subject the Company, the Subsidiaries, or any other
such person to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign). Each of the Company's and the
Subsidiaries' internal accounting controls are sufficient to cause the Company
and the Subsidiaries to comply with the Foreign Corrupt Practices Act of 1977,
as amended.
(aa) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, the Subsidiaries, or any "affiliate" or "associate"
(as these terms are defined in Rule 405 promulgated under the Regulations) of
any of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company or any of the Subsidiaries, or (B) purchases from or
sells or furnishes to the Company or any of the Subsidiaries any goods or
services, or (ii) a beneficiary interest in any contract or agreement to which
the Company or any of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries may be bound or affected. Except as set forth in the
Prospectus there are no existing agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company, the Subsidiaries, and any officer,
director, principal shareholder (as such term is used in the Prospectus) of the
Company, or any affiliate or associate of any of the foregoing persons or
entities.
(bb) None of the Company or any of the Subsidiaries intends to conduct
their respective businesses in a manner in which it would become an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
(the "1940 Act").
10
(cc) Any certificate signed by any officer of the Company and delivered to
the Underwriters or to the Underwriters' Counsel (as defined in Section 4(d)
herein) shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(dd) The minute books of each of the Company and the Subsidiaries have been
made available to the Underwriters and contain a complete summary of all
meetings and actions of the directors and stockholders of each of the Company
and the Subsidiaries, since the time of their respective incorporation, and
reflect all transactions referred to in such minutes accurately in all material
respects.
(ee) Neither the Company nor any of the Subsidiaries has distributed nor
will distribute prior to the Closing Date any offering material in connection
with the offering and sale of the Registered Securities in this offering other
than the Prospectus, the Registration Statement and the other materials
permitted by the Act. Except as described in the Prospectus, no holders of any
securities of the Company or any of the Subsidiaries or of any options, warrants
or other convertible or exchangeable securities of the Company or any of the
Subsidiaries have the right to include any securities issued by the Company or
any of the Subsidiaries as part of the Registration Statement or to require the
Company or any of the Subsidiaries 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 or any of the Subsidiaries.
(ff) The Company confirms as of the date hereof that it is in compliance
with all provisions of Section 1 of Laws of Florida, Chapter 92-198, An Act
Relating to Disclosure of Doing Business with Cuba, and the Company further
agrees that if it commences engaging in business with the government of Cuba or
with any person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with the
Florida Department of Banking and Finance (the "Department"), whichever date is
later, or if the information reported or incorporated by reference in the
Prospectus, if any, concerning the Company's business with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department.
(gg) The Company has entered into a warrant agreement (the "Warrant
Agreement") substantially in the form filed as Exhibit 4.4 to the Registration
Statement, with American Stock Transfer & Trust Company, and the Representative,
in form and substance satisfactory to the Representative, with respect to the
Warrants providing for the payment of commissions contemplated by Section 4(bb),
hereof. The Warrant Agreement has been duly and validly authorized by the
Company and, assuming due execution by the parties thereto other than the
Company, constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
11
(hh) The Company has purchased "key man" life insurance on the life of
________ ____________ in the amount of [$ ] and the Company is named as the sole
beneficiary of such insurance policy.
(ii) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which all persons or entities that directly
or beneficially own Common Stock, Units or Warrants, as of the effective date of
the Registration Statement, have agreed not to, directly or indirectly, offer,
offer to sell, sell, grant any option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber or dispose of any shares of Common Stock or
securities convertible into Common Stock, 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 Regulations or otherwise) or dispose of any
interest therein for a period of 12 months from the date of the Prospectus,
without the prior written consent of National (the "Lock-up Agreements"). The
Company will cause the Transfer Agent (as defined herein) to place "stop
transfer" orders on the Company's stock ledgers in order to effect the Lock-up
Agreements.
B. Each of the Selling Shareholders represents and warrants to, and agrees
with, each of the Underwriters as of the date hereof, and as of the Option
Closing Date, if any, as follows:
(a) Such Selling Shareholder has (i) caused a certificate or certificates
for the number of shares of Common Stock, and underlying Common Stock to be sold
by the Selling Shareholder hereunder to be delivered to _________________ (in
its capacity as escrow agent, the "Escrow Agent"), duly endorsed in blank or
together with blank stock powers and/or warrant assignments duly executed, with
the signature of the Selling Shareholder appropriately guaranteed, such
certificate or certificates to be held in escrow by the Escrow Agent pursuant to
an escrow agreement for delivery, pursuant to the provisions hereof, on the
Option Closing Date, if any, and (ii) granted an irrevocable power of attorney
to the Escrow Agent to purchase all requisite stock transfer tax stamps, to sign
this Agreement (including agreeing on the price at which the Option Securities
are to be sold to the Underwriters) and thereafter to modify and amend this
Agreement, to waive any condition to the obligations of the Selling Shareholder
and to execute all other instruments and documents and to perform all other acts
necessary to carry out the provisions of this Agreement on behalf of the Selling
Shareholder (such escrow agreement together with such irrevocable powers of
attorney being herein called the "Escrow Agreement").
(b) There is no claim, action, suit proceeding, inquiry, arbitration,
mediation, investigation, litigation, governmental or other proceeding, domestic
or foreign, pending or threatened against such Selling Shareholder or any of
business properties, or assets owned by the Selling Shareholder. The Selling
Shareholder is not in violation of, or in default with respect to, any law rule,
regulation, order judgment, or decree; nor is the Selling Shareholder required
to take any action in order to avoid such violation or default.
(c) Such Selling Shareholder has all the requisite power and authority to
execute, deliver, and perform this Agreement and the Escrow Agreement. This
Agreement and the Escrow Agreement have been duly executed and delivered by the
Selling Shareholder, are the legal, valid, and binding obligations of the
Selling Shareholder and are enforceable as to the Selling Shareholder in
accordance with their respective terms. No consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or filing
with, any
12
federal, state, local, or other governmental authority or any court or other
tribunal is required by the Selling Shareholder for the execution, delivery, or
performance of this Agreement (except filings under the Act which have been or
will be made before the Closing Date and such consents consisting only of
consents under "blue sky" or securities law which have been obtained at or prior
to the date of this Agreement) or the Escrow Agreement by the Selling
Shareholder. No consent of any party to any contract, agreement, instrument,
lease license, arrangement, or understanding to which the Selling Shareholder is
a party, or to which any of the properties or assets of the Selling Shareholder
are subject, is required for the execution, delivery, or performance of this
Agreement or the escrow Agreement; and the execution, delivery, and performance
of this Agreement and the Escrow Agreement will not violate, result in a breach
of, conflict with, or (with or without the giving of notice or the passage of
time or both) entitle any party to terminate or call default under any such
contract, agreement, instrument, lease, license, arrangement, or understanding,
or violate, result in a breach of, or conflict with, any law, rule, regulation,
order, judgment, or decree binding on the operations, business, properties, or
assets of the Selling Shareholder are subject.
(d) Such Selling Shareholder has good title to the Option Securities to be
sold by him or her pursuant to this Agreement, free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
and voting trusts (except those created by this Agreement and the Escrow
Agreement), and when delivered in accordance with this Agreement, the
Underwriters will receive good title to the Option Securities purchased by them
from such Selling Shareholder, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and voting trusts.
2. Purchase, Sale and Delivery of the Units 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,
severally and not jointly, agrees to purchase from the Company, that aggregate
principal amount of Firm Securities set forth opposite the name of such
Underwriter in Schedule A hereto at a price equal to 90% of the principal amount
thereof, subject to such adjustment as the Representative in its discretion
shall make to eliminate any fractional sales or purchases, plus any additional
amount of Firm Securities 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 Selling Shareholders hereby grant an option to the Underwriters,
severally and not jointly, to purchase all or any part of the Option Securities
at a price equal to 90% of the principal amount thereof from the Closing Date.
The maximum number of Option Securities to be sold by such Selling Shareholders
is set forth opposite their respective names on Schedule B hereof. 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
Regulations, or (ii) the date of this Agreement if the Company has elected to
rely upon Rule 430A under the 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
Securities upon notice by the Representative to the Company and the Selling
Shareholders setting forth the aggregate principal amount of Option Securities
as to which the
13
several Underwriters are then exercising the option and the time and date of
payment and delivery for any such Option Securities. 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, the Company and the Selling
Shareholders. Nothing herein contained shall obligate the Underwriters to
exercise the over-allotment option described above. No Option Securities shall
be delivered unless the Firm Securities 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 Securities shall be made at the offices of National, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, 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 time) on ________, 1999 or at such other time and
date as shall be agreed upon by the Representative and the Company, but no more
than three (3) business days after the date hereof (such time and date of
payment and delivery being herein called the "Closing Date"). In addition, in
the event that any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above mentioned office of
National or at such other place as shall be agreed upon by the Representative,
the Company and the Selling Shareholders on each Option Closing Date as
specified in the notice from the Representative to the Company. Delivery of the
certificates for the Firm Securities and the Option Securities, if any, shall be
made to the Underwriters against payment by the Underwriters, of the purchase
price for the Firm Securities and the Option Securities, if any, to the order of
the Company or the Selling Shareholders, as the case may be. In the event such
option is exercised, each of the Underwriters, acting severally and not jointly,
shall purchase that proportion of the total number of Option Securities then
being purchased which the number of Firm Securities set forth in Schedule A
hereto opposite the name of such Underwriter bears to the total number of Firm
Securities, subject in each case to such adjustments as the Representative in
their discretion shall make to eliminate any sales or purchases of fractional
shares. Certificates for the Firm Securities and the Option Securities, if any,
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
Underwriters may request in writing at least three (3) business days prior to
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Firm Securities and the Option Securities, 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 the Representative's Warrants at a purchase price of $.0001 per
Representative's Warrant, which warrants shall entitle the holders thereof to
purchase the Representative's Shares. The Representative's Warrants for Common
Stock shall expire five (5) years after the effective date of the Registration
Statement and shall be exercisable for a period of four (4) years commencing one
(1) year from the effective date of the Registration Statement at an exercise
price equal to 165% of the initial public offering price of the Common Stock.
The Representative's Warrants for Warrants shall expire three (3) years after
the effective date of the Registration Statement and shall be exercisable for a
period of two (2) years commencing one (1) year from the effective
14
date of the Registration Statement at an exercise price equal to 165% of the
initial public offering price of the Warrants. The Representative's Warrant
Agreement and form of Warrant Certificate shall be substantially in the form
filed as Exhibit 4.2 to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Firm Securities.
--------------------------------------
As soon after the Registration Statement becomes effective as the
Representative deem advisable, the Underwriters shall make a public offering of
the Firm Securities (other than to residents of or in any jurisdiction in which
qualification of the Firm Securities 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 Firm Securities has been completed to such
extent as the Representative, in its sole discretion, deems advisable. The
Underwriters may enter into one or 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 of the Company and the Selling Shareholders.
-----------------------------------------------------
The Company and each of the Selling Shareholders covenant and agree 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 Firm Securities by the
Underwriters of which the Representative shall not previously have been advised
and furnished with a copy, or to which the Representative shall have objected or
which is not in compliance with the Act, the Exchange Act or the Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representative and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any post-
effective amendment to the Registration Statement becomes effective, (ii) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Registered 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 use its best efforts to obtain promptly the lifting of such
order.
15
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) in accordance with the requirements of the
Act.
(d) The Company shall 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 Registered 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 Regulations), and will furnish the
Representative 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 amendment or supplement to which the Representative or
▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC ("Underwriters' Counsel") shall reasonably object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Registered Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may reasonably
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 become subject to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of 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, as now and hereafter amended, and by
the Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Registered Securities in
accordance with the provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating to the Registered
Securities is 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 or supplement the Prospectus to comply with
the Act, the Company will notify the Representative 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
16
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 Regulations, and to the
Representative, 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 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 five (5) years after the date hereof, the Company
will furnish to its security holders, 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 Representative:
(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;
(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 Nasdaq
SmallCap Market and/or Chicago Stock Exchange or any other securities exchange
or quotation system;
(v) every press release and every material news item or article of
interest to the financial community in respect of each of the Company and the
Subsidiaries or their respective affairs which was released or prepared by or on
behalf of the Company or any of the Subsidiaries; and
(vi) any additional information of a public nature concerning the
Company or any of the Subsidiaries (and any future subsidiaries) or their
respective businesses which the Representative may reasonably request.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a transfer agent (the "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 the Common Stock,
Warrants and the Representative's Warrants.
17
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative 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), each
Preliminary Prospectus, 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 Representative may reasonably request.
(k) On or before the effective date of the Registration Statement, the
Company shall provide the Representative with true copies of duly executed,
legally binding and enforceable Lock-up Agreements. On or before the Closing
Date, the Company shall deliver instructions to the Transfer Agent authorizing
it to place appropriate stop transfer orders on the Company's ledgers.
(l) The Company shall use its best efforts to cause its officers,
directors, stockholders or affiliates (within the meaning of the Regulations)
not to 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 Common
Stock substantially in the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus.
(n) The Company shall timely file all such reports, forms or other
documents as may be required from time to time under the Act, the Exchange Act,
and the 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 Regulations.
(o) The Company shall cause the Common Stock and the Warrants to be quoted
on the Nasdaq SmallCap Market and Chicago Stock Exchange and for a period of two
(2) years from the date hereof shall use its best efforts to maintain the
quotation of the Common Stock to the extent outstanding.
(p) For a period of two (2) years from the Closing Date, the Company shall
furnish to the Representative, at the Company's sole expense, daily consolidated
transfer sheets relating to the Common Stock and the Warrants.
(q) For a period of five (5) years after the effective date of the
Registration Statement the Company shall, at the Company's sole expense, take
all necessary and appropriate actions to further qualify the Company's
securities in all jurisdictions of the United States in order to permit
secondary sales of such securities pursuant to the Blue Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of the Registration
Statement, has filed a Form 8-A with the Commission providing for the
registration of the Common Stock and the Warrants under the Exchange Act and
(ii) as soon as practicable, will use its best efforts to take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
18
Descriptions and ▇▇▇▇▇'▇ OTC Manual and to continue such inclusion for a period
of not less than five (5) years.
(s) The Company agrees that for a period of thirteen (13) months following
the effective date of the Registration Statement it will not, without the prior
written consent of National, offer, issue, sell, contract to sell, grant any
option for the sale of or otherwise dispose of any Units, Common Stock, Warrants
or any other securities convertible into Common Stock, except for the issuance
of the Option Securities, the Representative's Warrants, the Common Stock and
Warrants contained in the Units and the Common Stock issuable upon the exercise
of the Warrants and other currently outstanding warrants or options issued under
any stock option plan in effect on the Closing Date or options to purchase
shares of Common Stock granted pursuant to any stock option plan in effect on
the Closing Date.
(t) Until the completion of the distribution of the Registered Securities,
none of the Company nor any of the Subsidiaries shall, without the prior written
consent of National or Underwriters' Counsel, issue, directly or indirectly
issue any press release or other communication or hold any press conference with
respect to the Company, any of the Subsidiaries, their respective activities or
the offering contemplated hereby, other than trade releases issued in the
ordinary course of the Company's business consistent with past practices with
respect to the Company's operations.
(u) 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 Representative's 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 Representative's Shares.
(v) The Company agrees that National shall have the right to designate two
persons to attend all meetings of the Board of Directors of the Company, and all
committees thereof, as observers. Such observers shall be entitled to receive
notices of all such meetings, and all correspondence and communications sent by
the Company to members of its Board of Directors and to attend all such
meetings. Such observers shall be entitled to the same compensation paid to
members of the Company's Board of Directors. In addition, at National's
discretion, which may be exercised at any time, in lieu of such right of
observation, National shall have the power to cause the Company to use its best
efforts, which shall include, but shall not be limited to, the solicitation of
proxies, to elect two (2) designees of National to the Company's Board of
Directors for a period of five (5) years following the date of such election,
provided that such designees are reasonably acceptable to the Company.
(w) The Company agrees that within forty-five (45) days after the Closing
it shall retain a public relations firm which is acceptable to National. The
Company shall keep such public relations firm, or any replacement, for a period
of three (3) years from the Closing. Any replacement public relations firm shall
be retained only with the consent of National.
(x) The Company agrees that any and all future transactions between the
Company or any of the Subsidiaries and their respective officers, directors,
principal stockholders and the affiliates of the foregoing persons will be on
terms no less favorable to the Company or any of the Subsidiaries than could
reasonably be obtained in arm's length transactions with independent third
parties, and that any such transactions also be approved by a majority of the
Company's or
19
any of the Subsidiaries', as the case may be, outside independent directors
disinterested in the transaction.
(y) The Company shall prepare and deliver, at the Company's sole expense,
to National within the one hundred and twenty (120) day period after the later
of the effective date of the Registration Statement or the latest Option Closing
Date, as the case may be, bound volumes containing all correspondence with
regulatory officials, agreements, documents and all other materials in
connection with the offering as requested by the Underwriters' Counsel.
(z) The Company shall not invest, or otherwise use the proceeds received
by the Company from its sale of the Common Stock in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the 1940 Act.
(aa) Each of the Selling Shareholders, except the ▇▇▇▇▇▇▇▇▇ Family Trust,
shall use the proceeds of the sale of Option Securities including the sale of
the underlying Common Stock on exercise of the Warrants solely to promptly pay
down such Selling Shareholder's personal bank loans, as described under ________
in the Prospectus.
(bb) The Company shall pay the Representative a commission equal to five
percent (5%) of the exercise price of each Warrant exercised for the period
commencing _________, ____, until the expiration of the term of the Warrants,
payable on the date of such exercise on terms provided for in the Warrant
Agreement. The Company will not solicit the exercise of the Warrants other than
through the Representative. However, no compensation will be paid to the
Representative in connection with the exercise of the Warrants if (i) the
warrants are held in a discretionary account, or (ii) the Warrants are exercised
in an unsolicited transaction. Further, the Representative must be designated in
writing by the account holder as having solicited the transaction, otherwise the
Representative shall not be paid the fee. In addition, the Representative will
not receive any commission with respect to the exercise of the Warrants
underlying the Representative's Warrants, unless held by a person or entity
other than any of the Underwriters.
5. Payment of Expenses.
-------------------
(a) The Company hereby agrees to pay on each of the Closing Date and each
Option Closing Date (to the extent not previously paid) 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, the Warrant 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, 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 duplication,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Agreement Among Underwriters, the Selected Dealers
Agreement, the Powers of Attorney, and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and 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 certificates
representing the Registered Securities, (iv) the qualification of the Registered
Securities under state or foreign securities or Blue Sky laws
20
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 reasonable disbursements and fees of counsel in connection
therewith, (v) advertising costs and expenses, including but not limited to the
costs and expenses incurred in connection with the "road show," information
meetings and presentations, bound volumes and prospectus memorabilia and
"tombstone" advertisement expenses, (vi) fees and expenses of the transfer agent
and registrar, (vii) issue and transfer taxes, if any, (viii) experts, (ix) the
fees payable to the Commission and the NASD and (xi) the fees and expenses
incurred in connection with the listing of the Common Stock, Warrants and the
Representative's Shares on the Nasdaq SmallCap Market and Chicago Stock Exchange
and any other market or exchange.
(b) If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6, Section 10(a) or Section 12, the Company shall
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses on an accountable basis, including the fees and disbursements of
Underwriters' Counsel and all Blue Sky counsel fees and Blue Sky filing fees,
less any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees, with respect to the Firm Securities, that,
in addition to the expenses payable by the Company pursuant to subsection (a) of
this Section 5, they 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 three percent (3%) of the gross proceeds
received by the Company from the sale of the Firm Securities, [$50,000] 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 offering) a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Selling Shareholders and the
Company from the sale of the Option Securities.
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 and the
Selling Shareholders herein as of the date hereof and as of the Closing Date and
each Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, if any; the accuracy on and as of the
Closing Date and each Option Closing Date, if any, of the statements of officers
of the Company, or the Selling Shareholders made pursuant to the provisions
hereof; and the performance by the Company and the Selling Shareholders on and
as of the Closing Date and each Option Closing Date, if any, of their respective
covenants and obligations hereunder:
(a) The Registration Statement shall have become effective not later than
5:00 p.m., New York City time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Representative, 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'
21
Counsel. If the Company has elected to rely upon Rule 430A of the Regulations,
the price of the Firm Securities 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 Regulations within the prescribed time period, and prior to Closing Date
the Company shall have provided evidence satisfactory to the Representative 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 Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's 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 Representative's reasonable opinion, is material, or omits to
state a fact which, in the Representative's reasonable 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.
(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 Registered Securities, the
Registration Statement, the Prospectus and other related matters as the
Representative may request and Underwriters' Counsel shall have received from
the Company such papers and information as they request to enable them to pass
upon such matters.
(d) At the Closing Date, the Underwriters shall have received the
favorable opinion of ▇▇▇▇▇ & ▇▇▇▇▇ Ltd. ("▇▇▇▇▇ & ▇▇▇▇▇") 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) each of the Company and the Subsidiaries (A) has been duly
organized and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, (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) to the best of such counsel's
knowledge after due inquiry, has all requisite corporate power and authority and
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, the absence of which would have a
material adverse effect on the Company), to own or lease its properties and
conduct its business as described in the Prospectus;
(ii) the Company owns one hundred percent (100%) of the outstanding
capital stock of its Subsidiaries free and clear of any liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever;
(iii) except as described in the Prospectus, and to the best of such
counsel's knowledge after due inquiry, neither the Company nor any of the
Subsidiaries owns an interest in
22
any corporation, limited liability company, partnership, joint venture, trust or
other business entity;
(iv) 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 to the best
of such counsel's knowledge after due inquiry, neither the Company nor any of
the Subsidiaries is 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 Warrant Agreement
and the Representative's Warrant Agreement, and as described in the Prospectus;
the Registered Securities, and all other securities issued or issuable by the
Company or any of the Subsidiaries conform in all material respects to the
statements with respect thereto contained in the Registration Statement and the
Prospectus; all issued and outstanding securities of the Company or any of the
Subsidiaries have been duly authorized and validly issued and are fully paid and
nonassessable; the holders thereof 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 any of the Subsidiaries, or to the best of such counsel's knowledge after due
inquiry, similar contractual rights granted by the Company or any of the
Subsidiaries or applicable securities laws; the Registered Securities to be sold
by the Company hereunder, under the Warrant Agreement and under the
Representative's Warrant Agreement are not and will not be subject to any
preemptive or other similar rights of any security holder of the Company or any
of the Subsidiaries; 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 Registered Securities has been duly and
validly taken; the certificates representing the Registered Securities 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 (except as the enforceability
thereof 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); upon the issuance and delivery
pursuant to this Agreement, the Warrant Agreement and the Representative's
Warrant Agreement of the Registered Securities to be sold by the Company
hereunder and thereunder, the Company will convey against payment therefore as
provided herein, to the Underwriters or the Representative, as the case may be,
good and marketable title thereto free and clear of all liens and other
encumbrances;
(v) the Registration Statement is effective under the Act; 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;
(vi) 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)
23
comply as to form in all material respects with the requirements of the Act and
the Regulations. Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and the
Representative and representatives of the independent public accountants for the
Company, at which conferences the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and any amendments or supplements
thereto were discussed, and, although such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of the
Registration Statement and Prospectus, and any amendments or supplements
thereto, 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 amendment became effective or 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, and any amendments or supplements thereto);
(vii) to the best of such counsel's knowledge after due inquiry, (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 and the Prospectus and filed as exhibits thereto; (B) the descriptions
in the Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company or any of the
Subsidiaries is a party or by which any of them is bound are accurate in all
material respects and fairly represent the information required to be shown by
Form SB-2; (C) there is not pending or threatened against the Company or any of
the Subsidiaries any action, arbitration, suit, proceeding, litigation,
governmental or other proceeding (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
against the Company or any of the Subsidiaries 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 any of the Subsidiaries or this Agreement, the Warrant
Agreement or the Representative's Warrant Agreement, or of any action taken or
to be taken by the Company or any of the Subsidiaries pursuant to or in
connection with any of the foregoing; and (D) there is no action, suit or
proceeding pending or threatened against the Company or any of the Subsidiaries
before any court or arbitrator or governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which may result in a
material adverse change in the financial condition, business, affairs,
stockholders' equity, operations, properties, business or results of operations
of the Company or any of the Subsidiaries, which could adversely affect the
present or prospective ability of the Company to perform its obligations under
this Agreement, the Warrant Agreement or the Representative's Warrant Agreement
or which in any manner draws into question the validity or enforceability of
this Agreement, the Warrant Agreement or the Representative's Warrant Agreement;
(viii) the Company has the corporate power and authority to enter into
each of this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement and to consummate the transactions provided for herein and therein;
and each of this Agreement, the Warrant Agreement and the Representative's
Warrant Agreement has been duly authorized,
24
executed and delivered by the Company; each of this Agreement, the Warrant
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 the enforceability thereof 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, delivery or
performance of this Agreement, the Warrant Agreement and the Representative's
Warrant Agreement, 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 results in any breach or violation of any of the terms or provisions of,
or constitutes a default under, or will result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company or any of the Subsidiaries pursuant to
the terms of (A) the certificate of incorporation or by laws of the Company or
any of the Subsidiaries, as amended, (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 known to such
counsel to which the Company or any of the Subsidiaries is a party or by which
any of them is bound, or (C) any federal, state or local statute, rule or
regulation applicable to the Company or any of the Subsidiaries or any judgment,
decree or order known to such counsel 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
the Subsidiaries or any of their activities or properties;
(ix) no consent, approval, authorization or order, and no filing with,
any court, regulatory body, government agency or other body (other than such as
may be required under federal securities or Blue Sky laws, as to which no
opinion need be rendered) is required in connection with the issuance of the
Registered Securities as contemplated by the Prospectus and the Registration
Statement, the performance of the Agreement, the Warrant Agreement and the
Representative's Warrant Agreement and the transactions contemplated hereby and
thereby;
(x) to the best of such counsel's knowledge after due inquiry, the
properties and businesses of the Company and the Subsidiaries conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus;
(xi) to the best knowledge of such counsel, and except as disclosed in
the Registration Statement and the Prospectus, none the Company nor any of the
Subsidiaries is in breach of, or in default under, any term or provision of any
license, contract, indenture, mortgage, installment sale agreement, deed of
trust, lease, voting trust agreement, stockholders' agreement, 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 or
any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries is bound or to which the property or assets (tangible or
intangible) of the Company or any of the Subsidiaries is subject; and none the
Company nor any of the Subsidiaries is in violation of any term or provision of
its certificate of incorporation or bylaws, as amended, nor to the best of such
25
counsel's knowledge after due inquiry, in violation of any franchise, license,
permit, judgment, decree, order, statute, rule or regulation, which would have a
material adverse effect on the Company;
(xii) the statements in the Prospectus under "Dividend Policy" and
"Description of Securities," 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;
(xiii) the Common Stock and the Warrants have been approved for
listing on the Nasdaq SmallCap Market and Chicago Stock Exchange, subject only
to official notice of issuance;
(xiv) to the best of such counsel's knowledge and based upon a review
of the outstanding securities and the contracts furnished to such counsel by the
Company, 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; and (xv)
the Company is not an "investment company" or "promoter" or "principal
underwriter" for or an "affiliated person" of, an "investment company" as such
terms are defined in the 1940 Act.
(xv) the Company is not an "investment company" or "promoter" or
"principal underwriter" for an "affiliated person" of, an "investment company"
as such terms are defined in the 1940 Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws, rules and regulations of
the United States and the laws, rules and regulations of the State of Delaware,
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 provided, however, that
if the laws, rules and regulations of jurisdictions other than the United States
and Delaware on which such other counsel opines differ materially from the laws,
rules and regulations of the United States and Delaware, the opinion of such
other counsel shall be modified to contain all provisions customarily included
in such opinions in such jurisdiction; (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 of such counsel shall state that knowledge shall not
include the knowledge of a director or officer of the Company who is affiliated
with such firm in his or her capacity as an officer or director of the Company.
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.
(e) At each Option Closing Date, if any, the Underwriters shall have
received (i) the favorable opinion of ▇▇▇▇▇ & ▇▇▇▇▇, dated the Option Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
Underwriters' counsel confirming as of such Option Closing Date, the statements
made by ▇▇▇▇▇ & ▇▇▇▇▇ in their opinion delivered on the Closing Date and (ii)
the favorable opinion of _____________, counsel to the Selling Shareholders,
dated the Option Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel to the effect that:
26
(i) each Selling Shareholder has full power and authority to execute,
deliver, and perform this Agreement and the Escrow Agreement. This Agreement and
the Escrow Agreement have been duly executed and delivered by the Selling
Shareholder and are the legal, valid, and binding obligations of the Selling
Shareholder, and (subject to applicable bankruptcy, insolvency, and other laws
affecting the enforceability of creditors' rights generally) are enforceable as
to it in accordance with their respective terms. No consent, authorization,
approval, order, license, certificate, or permit of or from, or declaration or
filing with, any federal, state, local, or other governmental authority or any
court or other tribunal is required by the Selling Shareholder for the
execution, delivery, or performance of this Agreement (except filings under the
Act, all of which have been made, and such consents consisting only of consents
under "blue sky" or securities laws) or the Escrow Agreement by the Selling
Shareholder. No consent of any party to any contract, agreement, instrument,
lease, license, arrangement, or understanding known to such counsel to which the
Selling Shareholder is a party, or to which the Selling Shareholder's properties
or assets are subject, is required for the execution, delivery, or performance
of this Agreement or the Escrow Agreement; and the execution, delivery, and
performance of this Agreement and the Escrow Agreement will not violate, result
in a breach of, conflict with, or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or call a default under
any such contract, agreement, instrument, lease, license, arrangement, or
understanding, or violate, result in a breach of, or conflict with any law,
rule, regulation, order, judgment, or decree binding on the Selling Shareholder
or to which the Selling Shareholder's operations, business, properties, or
assets are subject; and
(ii) Upon the issuance and delivery pursuant to this Agreement of
the Registered Securities to be sold by each Selling Shareholder, the Selling
Shareholder will convey, against payment therefor as provided herein, to the
Underwriters and the Representative, respectively, good and marketable title to
the Registered Securities free and clear of all liens and other encumbrances.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws other than the laws, rules and regulations of the United
States and the laws, rules and regulations of the State of Delaware, to the
extent such counsel deems proper and to the extent specified in such option, 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 provided, however, that if the laws, rules and
regulations of jurisdictions other than the United States and Delaware on which
such other counsel opines differ materially from the laws, rules and regulations
of the United States and Delaware, the opinion of such other counsel shall be
modified to contain all provisions customarily included in such opinions in such
jurisdiction; (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 department 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 of such counsel shall state that knowledge shall not include the
knowledge of a director or officer of the Company who is affiliated with such
firm in his or her capacity as an officer or director of the Company. 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.
27
(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 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 change in the condition, financial or otherwise, prospects,
stockholders' equity or the business activities any of the Company and the
Subsidiaries, 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 any of the Company or the Subsidiaries, from
the latest date as of which the financial condition of the Company and the
Subsidiaries is set forth in the Registration Statement and Prospectus which is
adverse to the Company and the Subsidiaries taken as a whole; (iii) none of the
Company or the Subsidiaries shall be in default under any provision of any
instrument relating to any outstanding indebtedness which default has not been
waived; (iv) none of the Company or the Subsidiaries shall have issued any
securities (other than Registered Securities) or declared or paid any dividend
or made any distribution in respect of its capital stock of any class, nor has
there been any change in the capital stock, or any material increase in the debt
(long or short term) or liabilities or obligations of any of the Company or the
Subsidiaries (contingent or otherwise); (v) no material amount of the assets of
any of the Company or the Subsidiaries shall have been pledged or mortgaged,
except as set forth in the Registration Statement and Prospectus; (vi) no
action, suit or proceeding, at law or in equity, shall have been pending or
threatened (or circumstances developed giving rise to same) against any of the
Company or the Subsidiaries, or affecting any of their respective properties or
businesses before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or any income of the Company or any of the Subsidiaries,
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 on behalf
of the Company by the principal executive officer of the Company, dated the
Closing Date or Option Closing Date, as the case may be, to the effect that such
executive has carefully examined the Registration Statement, the Prospectus,
this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement, and that:
(i) The representations and warranties of the Company in this
Agreement, the Warrant Agreement, the Warrant Agreement and the Representative's
Warrant 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, the Warrant Agreement and the Representative's Warrant 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;
28
(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 by the Act to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and neither the Preliminary Prospectus or any supplement, as of their respective
dates, thereto included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) none of the Company
or the Subsidiaries has 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)
none of the Company or the Subsidiaries has paid or declared any dividends or
other distributions on its capital stock; (c) none of the Company or the
Subsidiaries has entered into any transactions not in the ordinary course of
business; (d) there has not been any change in the capital stock or material
increase in long-term debt or any increase in the short-term borrowings (other
than any increase in the short-term borrowings in the ordinary course of
business) of any of the Company or the Subsidiaries, (e) none of the Company or
the Subsidiaries has sustained any loss or damage to its property or assets,
whether or not insured, (f) there is no litigation which is pending or
threatened (or circumstances giving rise to same) against the Company, or any of
the Subsidiaries 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 (g) 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 (h) are to such documents as amended and supplemented at the date of
such certificate.
(i) At each Option Closing Date, if any, the Underwriters shall have
received a certificate from the Selling Shareholders, dated the Option Closing
Date, to the effect that the Selling Shareholders have carefully examined the
Registration Statement, the Prospectus and this Agreement, and that the
representations and warranties of the Selling Shareholders in this Agreement are
true and correct, as if made on and as of the Option Closing Date, and the
Selling Shareholders have 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 Option Closing Date.
(j) 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.
(k) 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 in all
29
respects (including the non-material nature of the changes or decreases, if any,
referred to in clause (iii) below) 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 Exchange Act
and the applicable Regulations;
(ii) stating that it is their opinion that the financial statements
and supporting schedules of the Company and the Subsidiaries included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Regulations thereunder and
that the Representative may rely upon the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ with respect
to the 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 and the Subsidiaries (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors of the Company and the Subsidiaries,
consultations with officers and other employees of each of the Company and the
Subsidiaries responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to their attention which
would lead them to believe that (A) the unaudited financial statements and
supporting schedules of the Company and the Subsidiaries, if any, 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 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 and the Subsidiaries included in the
Registration Statement, or (B) at a specified date not more than five (5) days
prior to the effective date of the Registration Statement, there has been any
change in the capital stock or material increase in long-term debt any of the
Company or the Subsidiaries, or any material decrease in the stockholders'
equity or net current assets or net assets of the Company as compared with
amounts shown in the ____________, 19__, balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease;
(iv) stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other financial
information pertaining to each of the Company and the Subsidiaries set forth in
the Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of each of the Company and the
Subsidiaries and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(v) statements as to such other material matters incident to the
transaction contemplated hereby as the Representative may reasonably request.
30
(l) At the Closing Date and each Option Closing Date, if any, the
Underwriters have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ a letter, dated as of the Closing
Date or the Option Closing Date, as the case may be, to the effect that they
reaffirm that statements made in the letter furnished pursuant to Subsection (i)
of this Section 6, except that the specified date referred to shall be a date
not more than five (5) days prior to 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 (iv) of Subsection (k) of this Section 6 with
respect to certain amounts, percentages and financial information as specified
by the Representative 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 (iv).
(m) On the Closing Date and each Option Closing Date, if any, there shall
have been duly tendered to the Representative for the several Underwriters'
accounts the appropriate number of Registered Securities.
(n) No order suspending the sale of the Registered Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on the Closing Date or each 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 Representative, (i) the Representative's Warrant Agreement,
substantially in the form filed as Exhibit 4.2 to the Registration Statement, in
final form and substance satisfactory to the Representative, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(p) On or before Closing Date, the Common Stock and Warrants shall have
been duly approved for quotation on the Nasdaq SmallCap Market and Chicago Stock
Exchange.
(q) On or before Closing Date, there shall have been delivered to the
Representative all of the Lock-up Agreements in final form and substance
satisfactory to Underwriters' 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 Representative may terminate this Agreement or,
if the Representative so elects, it may waive any such conditions which have not
been fulfilled or extend the time for their fulfillment.
7. Indemnification.
---------------
(a) The Company and the Selling Shareholders, as of the date hereof and as
of the Option Closing Date, if any, agree 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 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
loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
31
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented); or
(B) in any application or other document or communication (in this Section 7
collectively called "application") executed by or on behalf of the Company or
the Selling Shareholders or based upon written information furnished by or on
behalf of the Company or the Selling Shareholders in any jurisdiction in order
to qualify the Registered Securities under the securities laws thereof or filed
with the Commission, any state securities commission or agency, the
___________________ or any other securities exchange or quotation system; or any
omission or alleged omission to state 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), unless 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 Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be; or (ii) any breach of any representation, warranty, covenant or agreement of
the Company or the Selling Shareholders contained in this Agreement. The
indemnity agreement in this subsection (a) shall be in addition to any liability
which the Company or the Selling Shareholders 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, and the Selling
Shareholders, to the same extent as the foregoing indemnity from the Company and
the Selling Shareholders to the Underwriters 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 or the Representative 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 and each of the Selling Shareholders acknowledge 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 Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters or the
Representative 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
32
thereof (but the failure to so notify an indemnifying party shall not relieve it
from any liability which it may have otherwise or which it may have under this
Section 7, except to the extent that it has been prejudiced in any material
respect by such failure). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from 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, based
on the advice of counsel, 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 on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 7 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
(A) in such proportion as is appropriate to reflect the relative benefits
received by each of the contributing parties, on the one hand, and the party to
be indemnified on the other hand, from the offering of the Registered
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
and/or the Selling Shareholders on the one hand, is a contributing party and the
Underwriters on the other hand, are the indemnified party, the relative benefits
received by the Company and the Selling Shareholders 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
33
Registered Securities (before deducting expenses other than underwriting
discounts and commissions) 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 and/or the Selling Shareholders on the one
hand, or by the Underwriters on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to above in this subdivision (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subdivision (d), the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Registered Securities purchased by the
Underwriters hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 12(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 7, each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who has signed the Registration
Statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to this subparagraph (d). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect to
which a claim for contribution may be made against another party or parties
under this subparagraph (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
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 or the Selling
Shareholders submitted pursuant hereto, shall be deemed to be representations,
warranties and agreements of the Company and the Selling Shareholders at the
Closing Date and as of each Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution 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, the Selling Shareholders or any
controlling person of any of the Underwriters or the Company, and shall survive
termination of this Agreement or the issuance and delivery of the Registered
Securities to the Underwriters and the Representative, as the case may be.
9. Effective Date.
--------------
This Agreement shall become effective at 4:00 p.m., New York City time, on
the date hereof. For purposes of this Section 9, the Registered Securities to be
purchased hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Representative of
34
telegrams to securities dealers releasing such Registered Securities for
offering or the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the
Registered Securities.
10. Termination.
-----------
(a) Subject to subsection (b) of this Section 10, the Representative shall
have the right to terminate this Agreement, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in the Representative's
reasonable opinion, will in the immediate future materially disrupt the
financial markets; or (ii) any material adverse change in the financial markets
shall have occurred; or (iii) if trading on the New York Stock Exchange, the
American Stock Exchange, the Chicago Stock Exchange, or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iv) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (v) if a
banking moratorium has been declared by a state or federal authority; or (vi) 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 make it inadvisable to proceed with the delivery of the Registered
Securities; or (vii) if there shall have been such a material adverse change in
the prospects or conditions of the Company or any of the Subsidiaries, or such
material adverse change in the general market, political or economic conditions,
in the United States or elsewhere as in the Representative's judgment would make
it inadvisable to proceed with the offering, sale and/or delivery of the
Registered Securities.
(b) If this Agreement is terminated by the Representative in accordance
with any of the provisions of Section 6, Section 10(a) or Section 12, the
Company and/or the Selling Shareholders shall promptly reimburse and indemnify
the Underwriters pursuant to Section 5(b) hereof. 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, 11
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 or the Selling Shareholders.
------------------------------------------------------------
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 Representative 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 Representative shall not have completed
such arrangements within such 24-hour period, then:
35
(a) if the number of Defaulted Securities does not exceed 10% of the total
number of Securities 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 Securities to be purchased on such date, 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 Representative shall have the right to postpone the Closing
Date for a period not exceeding 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 or the Selling Shareholders.
--------------------------------------------------
If the Company or the Selling Shareholders shall fail at the Closing Date
or at any Option Closing Date, as applicable, to sell and deliver the number of
Registered Securities which it or they are 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 the Representative's option, by notice from the
Representative to the Selling Shareholders terminate the Underwriters'
obligation to purchase Option Shares from the Selling Shareholders 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 or any Selling Shareholder 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 Underwriters shall be directed to the Representative, c/o
National Securities Corporation, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, with a copy, which shall not
constitute notice, ▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLC, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Arthur Don. Notices to the Company shall be
directed to the Company at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, with a copy, which shall not constitute
notice, to ▇▇▇▇▇ & ▇▇▇▇▇ Ltd., ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
14. Parties.
-------
This Agreement shall inure solely to the benefit of and shall be binding
upon the Underwriters, the Company and the Selling Shareholders, 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,
36
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. No purchaser of Registered Securities from any
Underwriter 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 Delaware 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.
37
17. Entire Agreement; Amendments.
----------------------------
This Agreement, the Warrant 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 Representative, the Company and the Selling
Shareholders.
If the foregoing correctly sets forth the understanding among the
Underwriters, the Company and the Selling Shareholders, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Shareholder represents by doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
▇▇▇▇▇▇.▇▇▇ HOLDING CORPORATION
By:
----------------------------------
Name:
Title:
SELLING SHAREHOLDERS LISTED ON SCHEDULE B
By:
----------------------------------
Attorney-in-fact
CONFIRMED AND ACCEPTED AS OF
THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By:
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule A hereto.
38
SCHEDULE A
SECURITIES
----------
Number of Shares Total Number of
Name of to be Purchased Warrants to
Underwriters from the Company be Purchased
------------ ---------------- ---------------
National Securities Corporation 1,500,000 1,500,000
TOTAL
39
SCHEDULE B
SCHEDULE OF SELLING SHAREHOLDERS
Common Stock Underlying
Selling Shareholder Subject to Option Common Stock
------------------------ ----------------- ------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Family Trust
40