1,200,000 Units
MUSE TECHNOLOGIES, INC.
Each Unit consisting of one share of Common Stock and
one-half Class A Redeemable Common Stock Purchase Warrant
Underwriting Agreement
As of , 1998
HD ▇▇▇▇▇ & Co, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Muse Technologies, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to HD ▇▇▇▇▇ & Co., Inc., a New York corporation
("▇▇▇▇▇" or the "Underwriter"), upon the basis of the representations,
warranties, and agreements of the Company contained in this Underwriting
Agreement (the "Agreement") and, subject to the terms and conditions of this
Agreement, the Underwriter proposes to purchase from the Company, an aggregate
of 1,200,000 Units, each Unit to consist of one (1) share of the Company's
common stock, par value $.015 per share ("Common Stock"), and one-half (1/2)
Class A Redeemable Common Stock Purchase Warrants ("Warrant"). Each Warrant
entitles the holder to purchase one (1) share of Common Stock shall be
required for the purchase of one share of Common Stock at a price of $9.60 per
share, subject to adjustment. The 1,200,000 Units are hereinafter collectively
referred to as the "Firm Units." The Common Stock issuable upon exercise of
the Warrants are presently authorized but unissued shares of the Common Stock
of the Company. In addition, the Company proposes to grant the Underwriter the
option to purchase from the Company up to an additional 180,000 Units
(collectively "Option Units") solely for the purpose of covering
over-allotments, if any, in connection with the sale of the Firm Units. The
Company also proposes to issue and sell to the Underwriter or its designees,
Unit Purchase Options (the "Unit Purchase Options") to purchase 120,000 Units
(collectively the "Purchase Option Units") as more fully described in
Paragraph 5(a) of this Agreement. The Warrants included in the Firm Units, the
Option Units and the Purchase Option Units are referred to in this Agreement
collectively as the "Warrants." The Firm Units, Option Units and Purchase
Option Units are referred to in this Agreement collectively as the
"Securities."
The Company hereby confirms the agreement made by it with respect to
the purchase of the Firm Units and the Option Units by the Underwriter, as
follows.
1. Purchase, Sale, and Delivery of the Securities
(a) Purchase and Sale of Firm Units. Subject to the terms
and conditions of this Agreement, and upon the basis of the representations
and warranties contained in this Agreement, the Company agrees to issue and
sell to the Underwriter, and Underwriter agrees to purchase from the Company,
the Firm Units at a price of seven and 20/100 dollars ($7.20) per Unit. The
Underwriter plans to offer the Firm Units for sale to the public at the price
and upon the terms set forth in the Prospectus (the "Public Offering") as soon
as practicable after the date the Registration Statement, as hereinafter
defined, is declared effective (the "Effective Date"). The Company
acknowledges that the Underwriter shall have the right to enter into
agreements with selected dealers for the sale of the Units to the public.
(b) Over-Allotment Option.
(i) The Company hereby grants to the Underwriter
an option (the "Over- Allotment Option") to purchase from the Company, solely
for the purpose of covering over-allotments in connection with the sale of
Firm Units, all or any portion of the Option Units for a period of forty-five
(45) days from the date of this Agreement at the same purchase price payable
by the Underwriter for Firm Units as provided in Paragraph 1(a) of this
Agreement. The Option Units shall be purchased from the Company, for the
account of Underwriter.
(ii) The Over-Allotment Option may be exercised
during the term thereof by written notice to the Company from the Underwriter.
Such notice shall set forth the aggregate number of Option Units as to which
the option is being exercised and the time and date of payment and delivery
therefor. Such time and date of delivery shall not be earlier than either the
Closing Date (as defined below) or the second business day after the day on
which the option shall have been exercised, nor later than the fifth business
day after the date of such exercise, as determined by the Underwriter (the
"Option Closing Date"). Delivery and payment for such Option Units shall be at
the offices set forth above for delivery and payment of the Firm Units.
(iii) The obligation of the Underwriter to
purchase and pay for any of the Option Units is subject to the accuracy and
completeness (as of the date of this Agreement and as of the Option Closing
Date) of and compliance in all material respects with the representations and
warranties of the Company in this Agreement, to the accuracy and completeness
of the statements of the Company or its officers made in any certificate or
other documents to be delivered by the Company pursuant to this Agreement, to
the performance in all material respects by the Company of its obligations
hereunder, to the satisfaction by the Company of the conditions as of the date
of this Agreement and as of the Option Closing Date, set forth in Paragraph
1(c) of this Agreement and to the delivery to the Underwriter an opinion,
certificates and letters dated the Option Closing Date substantially similar
in scope to those specified in Paragraph 6 of this Agreement, but with each
reference to the "Closing Date" being deemed to be the "Option Closing Date."
Notwithstanding the exercise of the Over-Allotment Option, the Underwriter
may, at any time prior to the payment for the purchase price of the Option
Units, cancel, in whole or in part, the exercise of the Over-Allotment Option,
in which event, the Underwriter shall only be obligated to purchase and pay
for those only Option Units, if any, remaining subject to the exercise of the
Over-Allotment Option after such cancellation.
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(c) Delivery of and Payment for Securities.
(i) Delivery of the stock and warrant
certificates representing the securities comprising the Firm Units shall be
made to the Underwriter at the offices of ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other location as you shall determine and advise
the Company upon at least two (2) full business days' notice in writing,
against payment therefor by certified or bank cashier's check drawn in New
York clearing house funds or similar next day funds payable to the order of
the Company, at 10:00 A.M., Eastern Time, on ____________ ___, 1998, or at
such other time and business day (Saturdays, Sundays, and legal holidays in
New York, New York not being considered business days for the purposes of this
Agreement), not later than the 10th business day following the Effective Date,
as shall be agreed upon by you and the Company, which time and date are herein
called the "Closing Date."
(ii) Delivery of certificates for the Common
Stock and Warrants comprising the Units shall be made in registered form in
such name or names and in such denominations as you shall specify to the
Company upon at least two (2) full business days' notice in writing prior to
the Closing Date or the Option Closing Date, as the case may be. The Company
will make the certificates available to the Underwriter for examination at the
offices of ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman, or at such other location as you shall specify to
the Company, not later than 2:00 P.M., Eastern Time, on the business day
immediately preceding the Closing Date or the Option Closing Date, as the case
may be.
(d) Use of Preliminary Prospectus. The Company hereby
confirms its authorization to the Underwriter to use, and to make available
for use by prospective dealers, the Preliminary Prospectus, and the Company
hereby authorizes the Underwriter, all selected dealers, and all other dealers
to whom any of the Securities may be sold by the Underwriter or Selected
Dealers, to use the Prospectus, as from time to time amended or supplemented,
in connection with the sale of the Securities in accordance with the
applicable provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the rules and regulations (the "Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and
applicable state law until completion of the Public Offering and for such
longer period as Underwriter may request if the Prospectus is required to be
delivered in connection with sales of the Securities by Underwriter or a
dealer.
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) Filing of Registration Statement. The Company has
prepared in conformity with the requirements under the Securities Act and the
Regulations, and has filed with the Commission under the Securities Act, a
registration statement on Form SB-2, File No. 333- , including the related
preliminary prospectus, for the registration of the Securities. The conditions
for the use of a registration statement on Form SB-2 set forth in the General
Instructions thereto have been satisfied with respect to the Company, the
transactions contemplated by this Agreement, and the Registration Statement.
As used in this Agreement, the term "Registration Statement" means such
registration statement of the Company, as amended, on file with the Commission
at the time the registration statement becomes effective under the Securities
Act (including all financial statements and financial schedules, exhibits, all
other documents filed as a part thereof or incorporated by reference therein,
and all the information contained in any final
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prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act or deemed by virtue of Rule 430A of this Commission under the
Securities Act to be part of the Registration Statement). The term
"Prospectus" as used in this Agreement means the final prospectus included as
part of the Registration Statement, including, if applicable, the information
contained in any final prospectus filed with the Commission pursuant to Rule
424(b) of the Commission under the Securities Act or deemed by virtue of Rule
430A of the Commission under the Securities Act to be part of the Registration
Statement. The term "Preliminary Prospectus" refers to and means any
prospectus included in the Registration Statement or any amendment thereto
prior to the Registration Statement becoming effective under the Securities
Act.
(b) Use and Accuracy of Preliminary Prospectus. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or any part thereof, and each Preliminary Prospectus
delivered to the Underwriter for dissemination in connection with the
offering, at the time of filing thereof and delivery to the Underwriter for
such dissemination, did not contain any untrue statement of a material fact,
or omit to state a 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; the foregoing shall not apply, however, to
statements in, or omissions from, any Preliminary Prospectus that are based
upon and conform to written information furnished to the Company with respect
to Underwriter (or any affiliate or associate thereof) by or on behalf of the
Underwriter or such Underwriter specifically for use in the preparation
thereof.
(c) Effectiveness and Accuracy of Registration Statement.
The Registration Statement and the Prospectus, from the Effective Date through
the Closing Date and, if Option Units are purchased, up to the Option Closing
Date, will comply in all material respects with the applicable requirements of
the Securities Act and the Regulations, and neither the Registration Statement
nor the Prospectus will, on such dates, 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, and, on such dates, no event will
have occurred that should have been set forth in an amendment or supplement to
the Registration Statement or the Prospectus that has not then been set forth
in such an amendment or supplement; the foregoing shall not apply, however, to
statements in, or omissions from, the Registration Statement or Prospectus
that are based upon and conform to written information furnished to the
Company with respect to Underwriter (or any affiliate or associate thereof) by
or on behalf of you or Underwriter specifically for use in the preparation
thereof. The descriptions in the Registration Statement and the Prospectus of
contracts and other documents of the Company are accurate and present fairly
the information required to be disclosed, and there are no contracts or other
documents required to be described in the Registration Statement or Prospectus
or to be filed as exhibits to the Registration Statement under the Securities
Act or the regulations which have not been so described or filed as required.
(d) Independent Public Accountants. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ &
Co., P.C., the accountants whose reports on the financial statements of the
Company are filed with the Commission as a part of the Registration Statement,
are, and were during the periods covered by its report, independent public
accountants with respect to the Company as required by the Securities Act and
the Regulations.
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(e) Organization and Qualification. The Company is (i) a
corporation duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
to own its properties and to carry on its business as now being conducted and
(ii) qualified to conduct business as a foreign corporation to do business and
in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. The Company has no subsidiaries
and has no loans to or guarantee of obligations of any other corporation,
limited liability company, partnership or other entity. As used in this
Agreement, the term "Material Adverse Effect" means any material adverse
effect on (A) the Securities; (B) the ability of the Company to perform its
obligations under this Agreement or under the Securities or (C) the business,
operations, properties, financial condition or prospects of the Company.
(f) No Subsidiaries. The Company does not have any
subsidiaries, does not control, directly or indirectly, or have any direct or
indirect interest or investment in any corporation, firm, partnership,
association, limited liability company, business trust or other business
organization, and does not own any shares of stock or any other securities of
(other than bank certificates of deposit, shares or units of interest in
"money market" funds, or as set forth in the Prospectus) and the Company has
not made any loans (other than advances to employees in the ordinary course of
business, none of which are material or made to officers or directors) to or
guaranteed any obligations of, any other corporation, firm, partnership,
association, limited liability company, business trust or other business
organization.
(g) Capitalization and Legality of Securities. The
authorized, issued and outstanding capital stock of the Company is as set
forth in the Prospectus under the caption "Capitalization." The capital stock
and other securities of the Company conform to the descriptions thereof
contained in the Prospectus under the caption "Description of Capital Stock."
Except as otherwise set forth in the Prospectus, there are no outstanding
options, warrants, or other rights to purchase any shares of Common Stock or
other capital stock, or to purchase any other securities convertible into or
exchangeable for Common Stock. The outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
All the shares of Common Stock and Warrants to be offered by the Prospectus,
or which comprise the Purchase Option Units, have been duly authorized and,
when issued and delivered against payment therefor as provided in this
Agreement, the Prospectus, or the Unit Purchase Options, as applicable, will
be validly issued, fully paid and nonassessable. The Unit Purchase Options
will constitute, when sold and delivered as contemplated, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
similar laws and court decisions now or hereafter in effect relating to or
affecting creditors' rights and remedies generally and (ii) general principles
of equity (regardless of whether such enforcement is considered in a
proceeding at law or in equity). A sufficient number of shares of Common Stock
have been reserved for issuance upon sale of the Securities and Purchase
Option Units and upon the exercise of all of the above-referenced Warrants.
(h) Financial Statements. The financial statements (audited
and unaudited) of the Company and the related financial exhibits and schedules
included in the Prospectus or filed with and as part of the Registration
Statement present fairly the financial position of the Company
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as of the balance sheet dates and the results of its operations and cash flows
for the respective periods then ended, and such financial statements have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved; all adjustments that
are necessary for a fair presentation of the results for such periods have
been made. The financial statements filed with the Registration Statement or
included in the Prospectus are the only financial statements required under
the Securities Act or the Regulations to be included in the Registration
Statement and Prospectus.
(i) Material Loss. The Company has not, since the date of
the latest financial statements included in the Prospectus, sustained any
material loss or interference with its business from fire, explosion, flood,
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order, or decree, other than as set
forth in the Prospectus. Since the respective dates as of which information is
set forth in the Prospectus, and except as otherwise set forth therein: (i)
there has not been any change in the capital stock, or material increase in
the long-term debt, of the Company; (ii) there has not been any material
adverse change in the condition (financial or otherwise), business, prospects
(financial or otherwise), results of operations, general affairs, or
management of the Company, whether or not arising in the ordinary course of
business; (iii) no event has occurred that would result in a material
write-down of assets of the Company; (iv) the Company has not incurred any
material liability or obligation, direct or contingent, or entered into any
material transaction, other than those in the ordinary course of business; (v)
the Company has not purchased any of its outstanding capital stock; (vi) there
has been no dividend or distribution of any kind declared, paid, or made by
the Company in respect of the Common Stock; (vii) there has not been any
material interruption in the availability of materials, supplies, or equipment
necessary for the conduct of the business of the Company; and (viii) there has
not been any execution or imposition of any material lien, charge, or
encumbrance upon any property or assets of the Company.
(j) Compliance with Documents and Laws. The Company is not
in violation of its Certificate of Incorporation, By-Laws, or other governing
documents, or in material default in the due performance of any material lease
or other material contract, indenture, mortgage, deed of trust, note, loan, or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or businesses are subject or, to the best
knowledge of the Company, any applicable material license, franchise,
certificate, permit, authorization, statute, rule or regulation of or from any
public, regulatory, or governmental agency or authority having jurisdiction
over the Company or any of its properties or assets, or any approval, consent,
order, judgment or decree, except such as could not reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
earnings, business, assets, results of operations, or prospects (financial or
otherwise) of the Company (hereinafter a "Material Adverse Effect"). The
execution and performance of this Agreement by the Company will not conflict
with or result in a breach or violation of, or default under, any material
lease or other material contract, indenture, mortgage, deed of trust, note,
loan, or other material agreement or instrument to which the Company is a
party or by which the Company or any of its properties or businesses are
subject, and no consent, approval, authorization, or order of any court or
governmental authority or agency having jurisdiction over any of the Company
or any of its properties or assets is required to be obtained by the Company
for the consummation by the Company of the transactions contemplated by this
Agreement, except such as have been obtained or may be required under the
Securities Act or the Regulations or under state securities (or "Blue Sky")
laws or the applicable rules and regulations promulgated thereunder.
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(k) Authorization of Agreements. Each of this Agreement, the
Warrant Agreement, the Warrant, the Unit Purchase Options, the Financial
Consulting Agreement, as hereinafter defined, and the M/A Agreement, as
hereinafter defined, has been duly authorized, executed, and delivered by the
Company and constitutes the valid and binding obligation of the Company. The
execution, delivery and performance of this Agreement, the Warrant Agreement,
the Warrants, the Unit Purchase Options, the Financial Consulting Agreement
and the M/A Agreement, by the Company, the consummation by the Company of the
transactions herein and therein contemplated, and the compliance by the
Company with the terms of this Agreement, the Warrant Agreement, the Warrants,
the Unit Purchase Options, the Financial Consulting Agreement and the M/A
Agreement, have been duly authorized by all necessary corporate action and do
not and will not, with or without the giving of notice or the lapse of time,
or both, (i) result in any violation of the Certificate of Incorporation and
By-Laws of the Company, (ii) result in a breach of or conflict with any of the
terms or provisions of, or constitute a default under, or result in the
modification or termination of, or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company pursuant to any indenture, mortgage, note, contract,
commitment or other agreement or instrument to which the Company is a party
over which the Company or any of its properties or assets are or may be bound
or affected, (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
business, or (iv) violate any permit, certification, registration, approval,
consent, license or franchise applicable to the business or properties of the
Company.
(l) Title to Property. The Company has good and marketable
title to, and valid and enforceable leasehold estates in, all items of
property described in the Registration Statement or Prospectus as owned or
leased by it, as the case may be, or that are material to the conduct of the
Company's businesses, free and clear of all liens, encumbrances, claims,
security interests, and other restrictions, other than those described in the
Prospectus and those that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. The leases, licenses
or other contracts or instruments under which the Company leases, holds or is
entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not interfere
with the use of such property made, or proposed to be made, by the Company,
and all rentals, royalties or other payments accruing thereunder which became
due prior to the date of this Agreement have been duly paid, and neither the
Company nor, to the best of its knowledge, any other party is in default
thereunder and, to the best of the Company's knowledge, no event has occurred
which, with the passage of time or the giving of notice, or both, would
constitute a default thereunder. The Company has not received notice of any
violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties except any such violation that
could not reasonably be expected to have a Material Adverse Effect. The
Company and has insured their respective properties against loss or damage by
fire or other casualty and maintain such other insurance which management of
the Company believes is adequate for the Company's present and proposed
business operations.
(m) Copyrights, Trademarks and Intellectual Property Rights.
Except as set forth in the Prospectus, the Company owns or possesses the
requisite licenses or rights to use all trademarks, copyrights, service marks,
service names, and trade names, if any, presently used in or necessary to
conduct their respective businesses as described in the Prospectus. The
Company has not knowingly infringed the rights of another in any trademark,
copyright, service
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▇▇▇▇, service name, trade name, trade secret, confidential information, or any
other such intellectual property, and there is no outstanding claim of others
alleging any such infringement. There is no claim or action by any person
pertaining to, or proceeding pending, or threatened, which challenges the
exclusive rights of the Company with respect to any trademarks, copyrights,
service marks, service names and trade names used in the conduct of the
Company's business.
(n) Litigation. There is no litigation or governmental or
other proceeding or investigation before any court or before or by any public,
regulatory, or governmental agency or authority (or any judgment, decree, or
order of such court, agency, or authority) pending or, to the best knowledge
of the Company, threatened, to which the Company is a party or of which the
business or property of the Company is the subject that is material to the
Company and is not properly disclosed in the Prospectus. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal naming the Company and enjoining the Company from taking, or
requiring the Company to take, any action, or to which the Company or its
respective properties or businesses are bound or subject.
(o) Prohibited Payments. Neither the Company nor any of its
directors or officers acting in any capacity on behalf of the Company nor, to
the Company's knowledge after due inquiry, any of its foreign sales agents,
directly or indirectly, has used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or campaigns from corporate funds; violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment.
(p) Internal Accounting Controls. The Company maintains a
system of internal accounting controls which, taken as a whole, is sufficient
to meet the broad objectives of preventing and detecting errors or
irregularities in amounts that would be material to the Company's financial
statements. Except as specifically disclosed in the Prospectus, neither the
Company nor any of its employee or agent has made any payment or transfer of
any funds or assets of the Company, conferred any personal benefit by the use
of the assets of the Company or received any funds, assets, or personal
benefit in violation of any law, rule, or regulation, which is required to be
stated in the Prospectus or necessary to make the statements therein not
misleading.
(q) Tax Returns. The Company has filed all Federal, state,
and local tax returns required to be filed through the date of this Agreement,
including but not limited to franchise tax returns, or has obtained valid
extensions with respect to such filings not made; the Company is not in
default in the payment of any taxes or other amounts that were payable
pursuant to said returns or any assessments with respect thereto; and the
Company is not aware of any tax or other payment deficiency outstanding,
proposed, or assessed against the Company that could, in the aggregate, have a
Material Adverse Effect. Except as disclosed in writing to the Underwriter,
the Company has not executed or filed with any taxing authority, foreign or
domestic, any agreement extending the period for assessment or collection of
any income taxes and is not a party to any pending action or proceeding by and
foreign or domestic governmental agency for assessment or collection of taxes;
and no claims for assessment or collection of taxes have been asserted against
the Company.
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(r) Employee Plans. Except as set forth in the Prospectus,
the Company does not have any employee benefit plans (including, without
limitation, pension, profit sharing, and welfare benefit plans) or deferred
compensation arrangements.
(s) Labor Disputes. No labor dispute exists or, to the best
knowledge of the Company, is imminent with the employees or other persons
engaged by the Company which could reasonably be expected to result in a
Material Adverse Effect.
(t) Registration Rights. Except for the Selling
Securityholders, as described in the Prospectus under the caption "Sales by
Selling Securityholders," no person, firm or entity of any nature whatsoever
has any right to require the Company to register or attempt to register under
the Securities Act or any other securities law any shares of Common Stock or
securities convertible into or exchangeable or exercisable for any shares of
Common Stock, by reason of the filing of the Registration Statement with the
Commission or otherwise or which may require the Company to file a
registration statement within eighteen (18) months from the Effective Date.
(u) Stabilization. Neither the Company nor any person that
controls, is controlled by or is under common control with the Company has
taken or will take, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), stabilization or
manipulation of the price of any security in order to facilitate the sale or
resale of any of the Securities.
(v) Finder or Broker. The Company has not retained or dealt
with any broker or finder with respect to the transactions contemplated
hereby, and the Company knows of no outstanding claims for services in the
nature of a finder's fee or origination fee with respect to the sale of the
Securities. The Company will indemnify and hold harmless Underwriter with
respect to any claim for a finder's fee by any party claiming to be owed such
fee based on contacts, conversations or arrangements with the Company.
(w) Employment Agreements. The employment agreements between
the Company and its officers named under the caption "Management -- Employment
Agreements" in the Prospectus, are binding and enforceable obligations upon
the respective parties thereto in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws or arrangements affecting
creditors' rights generally and subject to principles of equity, and public
policy considerations. Except for such employment agreements, the Company does
not have any employment, severance or similar agreement with any officers,
directors or employees.
(x) Contracts. Each contract or other instrument (however
characterized or described) to which the Company is a party or by which it or
its property or business is or may be bound or affected and to which reference
is made in the Prospectus has been duly and validly executed by the Company,
is in full force and effect in all material respects and, assuming that each
other party has full power, corporate or other, to execute, deliver and
perform such contracts, is enforceable against the parties thereto in
accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and neither the Company nor, to the best of the
Company's knowledge, any other party is in default thereunder and, to the best
of the Company's knowledge, no event has occurred which, with the lapse of
time or the giving
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of notice, or both, would constitute a default thereunder. None of the
material provisions of such contracts or instruments violates any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court having jurisdiction over the Company or any of
its assets or businesses, where such violation or default would have a
Material Adverse Effect.
3. Covenants of the Company. The Company covenants and agrees with
the Underwriter that:
(a) Effectiveness of Registration Statement. The Company
will use its best efforts to cause the Registration Statement and any
subsequent amendments thereto to become effective as promptly as possible. The
Company will notify you promptly (i) when the Registration Statement or any
subsequent amendment thereto has become effective or any supplement to the
Prospectus has been filed and (ii) of the receipt of any requests, and the
nature and substance thereof, by the Commission for any amendment or
supplement to the Registration Statement or Prospectus or for any other
additional information. The Company will prepare and file with the Commission,
promptly upon your reasonable request, any amendments or supplements to the
Registration Statement or Prospectus that may be necessary or advisable in
connection with the distribution of the Securities or any of the Securities.
The Company will file no amendment or supplement to the Registration Statement
or Prospectus (other than any document required to be filed under the Exchange
Act that upon filing is deemed to be incorporated by reference therein) to
which you shall reasonably object by notice to the Company after having been
furnished a copy within a reasonable time, but no later than three (3)
business days, prior to the proposed filing thereof. The Company will furnish
to you at or prior to the filing thereof a copy of any document that upon
filing is deemed to be incorporated by reference in whole or in part in the
Registration Statement or Prospectus.
(b) Notice of Stop Order. The Company will advise you
promptly, and confirm in writing, when and if it receives notice or obtains
knowledge of (i) the issuance by the Commission of any stop order or other
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or the effectiveness of the Registration Statement, (ii) the
suspension of the qualification of any of the Securities for offering or sale
in any jurisdiction in which they were previously qualified, or (iii) the
initiation or threat of any proceeding for that purpose. The Company will
promptly use its reasonable best efforts to prevent the issuance, and to
obtain the withdrawal if such issuance is not prevented, of any such stop
order or other suspension.
(c) Compliance with the Securities Act and the Exchange Act.
Within the time during which a prospectus relating to the Securities is
required to be delivered under the Securities Act, the Company will use its
best efforts to comply with all requirements imposed upon it by the Securities
Act and the Exchange Act, as now and hereafter amended, and by the
Regulations, as from time to time in force to permit the continuance of sales
of or dealings in the distribution of the Securities as contemplated by the
provisions therein, in this Agreement, and in the Prospectus. If during such
period any event as to which the Company has knowledge occurs as a result of
which the Prospectus as then amended or supplemented includes an untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances then existing,
not misleading, or if during such period it is necessary to amend the
Registration Statement or supplement the Prospectus to comply with the
Securities Act, the Company will notify you promptly, will amend the
Registration Statement
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or supplement the Prospectus to comply with the Securities Act, the Company
will notify you promptly, will amend the Registration Statement or supplement
the Prospectus (at the expense of the Company) so as to correct such statement
or omission or otherwise to effect such compliance, and will furnish without
charge to Underwriter and to any dealer in securities as many copies of such
amended or supplemented Prospectus as you may from time to time reasonably
request.
(d) Copies of Registration Statement. The Company will
deliver to Underwriter, from time to time without charge, such number of
copies of the Registration Statement (at least one of which delivered to you
shall be manually signed and will include all exhibits), each Preliminary
Prospectus, the Prospectus, and all amendments and supplements thereto, in
each case as soon as available and in such quantities and to such persons as
requested by you.
(e) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with you and your counsel, to register or qualify the
Securities for offering and sale under the securities laws of such
jurisdictions as you reasonably designate, and will continue such
qualifications in effect for so long as may be necessary to complete the
distribution of such Securities; provided that in no event shall the Company
be required in connection therewith to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which
would subject it to general service of process in any jurisdiction where it is
not now so subject.
(f) Section 11(a) Earnings Statement. The Company will make
generally available to its security holders (within the meaning of Section
11(a) of the Securities Act) and deliver to you as soon as practicable (but
not later than fifteen (15) months after the Effective Date), an earnings
statement that shall satisfy the requirements of Section 11(a) and Rule 158
under the Securities Act, covering a period of at least twelve (12)
consecutive months after the Effective Date.
(g) Information to the Underwriter. Until the earlier of the
fifth anniversary of the Effective Date or such date as of which the Warrants
and the Unit Purchase Options have been exercised or have expired, the Company
will furnish or cause to be furnished to you and your counsel, with reasonable
promptness, copies of (i) annual audited balance sheets and audited statements
of operations and changes in cash flows of the Company, and quarterly balance
sheets and statements of income of the Company (which need not be audited),
(ii) all reports, if any, to its stockholders, (iii) all reports filed by the
Company with the Commission, and any securities exchange or the National
Association of Securities Dealers, Inc. ("NASD") and (iv) such other material
documents and information with respect to the Company and its affairs as you
may from time to time reasonably request and which the Company can produce at
reasonable cost; provided, however, that the Company shall not be required to
produce such information or documents if the Company has received a written
opinion of its counsel that providing such information to Underwriter is
reasonably likely to create liability under applicable Federal and state
securities laws and a copy of such opinion is furnished to Underwriter. Upon
request of the Underwriter, the Company shall cause its transfer agent to
provide the Underwriter with copies of the Company's monthly transfer sheets
and Depository Trust Company transfer sheets. Upon request, the Company shall
also provide the Underwriter with current lists of its stockholders.
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(h) Listing in Securities Manual; Investor Relations Firm.
The Company shall, as soon as practicable after the Effective Date, use its
reasonable best efforts to obtain listing on an expedited basis in Standard
and Poor's Corporation Records or such other recognized securities manuals for
which it may qualify for listing, and the Company shall use its reasonable
best efforts to maintain such listings for at least five (5) years after the
Closing Date. The Company further agrees at any time during the five (5) year
period following the Closing Date, to engage within sixty (60) days of a
written request by you, the services of an investor relations firm reasonably,
acceptable to you, who will act as investor relations liaison during such five
(5) year period, which spokesperson is not required to be the same person
during the duration of the five (5) year period, to consult with and advise
the Company regarding communications and relations with stockholders and the
financial and investment communities.
(i) Listing on Nasdaq and Boston Stock Exchange. The Company
shall apply for the inclusion of the Units, Common Stock and Warrants on The
Nasdaq SmallCap Market (the "SmallCap Market") and, if requested by the
Underwriter, the Boston Stock Exchange ("BSE") under proposed symbols
acceptable to the Underwriter, to take effect on the Effective Date; provided,
that if the Common Stock and Warrants are not separately transferable on the
Effective Date, then the Common Stock and Warrants need not be included in the
SmallCap Market at such date; provided, however, that, on the date on which
the Common Stock and Warrants first become separately transferable, the Common
Stock and Warrants are listed on the Small Cap Market. At such time as the
Company meets the eligibility requirements for the inclusion of the Common
Stock and Warrants on the Nasdaq National Market ("NNM"), the Company shall
use its best efforts to obtain such listing. The Company shall use its best
efforts to maintain the Nasdaq inclusion provided for in this Paragraph 3(i)
for at least five (5) years after the date of this Agreement.
(j) Exchange Act Filings. The Company shall file such
registration statement and take such other action to register Common Stock and
the Warrants pursuant to Section 12(g) of the Exchange Act, such registration
statement to become effective simultaneously with the effectiveness of the
Registration Statement, and shall thereafter keep such registration effective.
The Company shall comply with the Securities Act, the Regulations, the
Exchange Act and the rules and regulations promulgated Commission under the
Exchange Act, the applicable rules and regulations of the NASD and BSE, and
applicable state securities laws so as to permit the continuance of sales of
and dealings in the Securities in compliance with applicable provisions of
such laws, rules, and regulations, including the filing with the Commission
and the NASD and BSE of all reports required to be so filed, and the Company
will deliver to the holders of the Securities all reports required to be
provided to such holders pursuant to such laws, rules, or regulations. The
Company shall promptly file with the Commission and deliver to you, from time
to time as required to make the same reasonably current, such statements and
reports as are required under Rule 15c2-11 of the Exchange Act.
(k) Use of Proceeds. The Company shall apply the net
proceeds received from the sale of the Securities in the manner set forth
under the caption "Use of Proceeds" in the Prospectus. The Company report the
use of proceeds from the Offering in accordance with Rule 463 of the
Regulations and will provide a copy of each such report to you and your
counsel.
(l) Board Meetings and Membership. For a period of five (5)
years commencing on the Closing Date, the Underwriter shall have the right to
designate one nominee
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(reasonably acceptable to the Company) for election to the Company's Board of
Directors. The Company shall cause the officers, directors and holders of five
percent (5%) or more of the outstanding Common Stock of the Company to agree
in writing at or prior to the Closing Date to vote their shares during such
five (5) year period in favor of the election of such nominees. Following the
election of such nominees as directors, such person shall receive no more or
less compensation than is paid to other non-employee directors of the Company
for attendance at meetings of the Board of Directors of the Company and shall
be entitled to receive reimbursement for all reasonable costs incurred in
attending such meetings including, but not limited to, food, lodging and
transportation. The Company agrees to indemnify and hold such director
harmless to the maximum extent permitted by law, against any and all claims,
actions, awards and judgments arising out of his service as a director and, in
the event the Company maintains a liability insurance policy affording
coverage for the acts of its officers and directors, to include such director
as an insured under such policy. The rights and benefits of such
indemnification and the benefits of such insurance shall, to the extent
possible, extend to the Underwriter insofar as it may be or may be alleged to
be responsible for such director, without additional cost to the Company.
(m) Future Sales. Except for the permitted issuances, for a
period of two years from the Effective Date, the Company shall not sell or
otherwise dispose of any Common Stock (or securities convertible into or
exercisable for Common Stock) or Preferred Stock of the Company or any
subsidiary of the Company without the Underwriter's prior written consent.
Permitted issuance shall mean shares of Common Stock issuable (i) upon the
exercise of options or warrants specifically contemplated in the Registration
Statement or provided for in this Agreement, (ii) pursuant to and in order to
consummate a merger with or acquisition from an unaffiliated party in a
transaction negotiated at arms' length and approved by (A) a majority of the
Company's Board of Directors, and (B) all of the non-employee directors; (iii)
in a public offering approved by the Underwriter, and (iv) pursuant to a
private placement, at a price per share, or, with respect to convertible
securities and warrants, having an exercise or conversion price, not less than
90% of the average of the closing bid prices of the Common Stock for ten (10)
consecutive trading days ending not earlier than five (5) days prior to the
date of such sale or on other terms acceptable to the Underwriter.
(n) Press Releases. Prior to the later of the Closing Date
or the Option Closing Date, if any, the Company will not issue, directly or
indirectly, without your prior written consent (which consent shall not be
unreasonably withheld), any press release or other public communication or
hold any press conference with respect to the Company, its activities, or the
public offering, other than trade releases in the ordinary course of the
Company's business.
(o) Undertakings. The Company will comply with the
provisions of all undertakings contained in the Registration Statement or made
in connection with any application to register or qualify any of the
Securities under blue sky laws.
(p) Certain Deliveries to the Underwriter. The Company will
use its best efforts to obtain from its officers, counsel, and accountants
those certificates, opinions, and letters referred to in Paragraphs 6 of this
Agreement.
(q) Key Man Life Insurance. The Company will use its best
efforts to obtain on or before the Closing Date, and maintain thereafter for
the term of their respective employment with the Company, key man life
insurance policies insuring the lives of Dr. Creve ▇▇▇▇▇▇ and
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Messrs. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, with the Company named as sole
beneficiary, in a policy amount of not less than $1,000,000, $500,000 and
$500,000, respectively.
(r) Employment Agreements. The Company has entered into
employment agreements with Dr. Creve ▇▇▇▇▇▇ and Messrs. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ on the terms that are
disclosed in the Prospectus.
(s) Redemption and Dividends. For a period of two (2) years
from the Closing Date, the Company shall not redeem any of its securities
(other than redemptions that may be required in connection with possible
termination of employment agreements with the Company under the terms of
Employment Agreements in effect on the Effective Date and repurchases of
Warrants, or as otherwise provided in this Agreement), and shall not pay any
dividends or make any other cash distribution in respect of its securities in
excess of the amount of the Company's current or retained earnings derived
after the Closing Date, without obtaining the Underwriter's prior written
consent, which consent shall not be unreasonably withheld. The Underwriter
shall either approve or disapprove such contemplated redemption of securities
or dividend payment or distribution within ten (10) business days from the
date the Underwriter receives written notice of the Company's proposal with
respect thereto; a failure of the Underwriter to respond within the ten (10)
business day period shall be deemed approval of the transaction. Nothing in
this Paragraph 3(s) shall be construed to prohibit the Company from calling
the Warrants for redemption subsequent to one year from the Effective Date.
(t) Restrictions on Sales, Options by Affiliates. The
Company will cause each of its officers, directors, five percent (5%)
stockholders and other major stockholders designated by the Underwriter to
agree in writing that such person (i) will not, during the twelve (12) month
period immediately following the Effective Date (the "Lockup Period"), offer,
pledge, sell (which term includes a short sale or sale against the box),
contract to sell, grant any option for the sale of, or otherwise transfer or
dispose of, directly or indirectly, any shares of the Company's Common Stock
without obtaining the Underwriter's prior written approval.
(u) Outstanding Warrants, Options and Other Rights. Unless
the Underwriter has given its written consent prior to the Effective Date,
which consent shall not be unreasonably withheld, there shall not be
outstanding on the Closing Date any warrants, options, or other rights to
purchase any shares of Common Stock, except as otherwise set forth in the
Prospectus. During the three (3) years following the Effective Date, the
Company shall not, without the prior written consent of the Underwriter, grant
options, rights or warrants or sell any securities to its officers, directors,
employees or consultants under its stock option plans as described in the
Prospectus or otherwise except at an exercise, purchase or conversion price
which is not less than the market price of the Common Stock on the date of
grant, issuance or sale, as the case may be.
(v) Restrictions on Filing Registration Statements. During
the eighteen (18) months following the Effective Date, the Company will not,
without the prior written consent of the Underwriter, register any securities
pursuant to the Securities Act, except that such restriction shall not apply
to the registration of Common Stock issuable pursuant to the Company's present
stock option plans, as described in the Prospectus, on a Form S-8 registration
statement.
- 14 -
(w) Right of First Refusal. The Company, its officers,
directors and 5% stockholders agree that the Underwriter shall have, for a
period of eighteen (18) months from the Effective Date, the right to purchase
for the Underwriter's account or to sell for the account of the Company, its
subsidiaries or any of the Company's executive officers and directors or five
percent (5%) stockholders (the "Affiliates") any securities with respect to
which the Company or any of the Affiliates may seek a public offering of the
Company's securities pursuant to a registration under the Securities Act or
otherwise (including a sale pursuant to Rule 144 of the Securities Act) or a
private offering of the securities. The Company and the Affiliates will
consult with the Underwriter with regard to any such offering and will offer
the Underwriter exclusively the opportunity to purchase, sell or act as
underwriter or placement agent for the purchase or sale of, any such
securities on terms not less favorable to the Company or the Affiliates, as
the case may be, than they can secure elsewhere. If the Underwriter fails to
accept in writing such proposal for financing made by the Company or the
Affiliates within thirty (30) days (three (3) business days with respect to
proposed sales under said Rule 144) after the receipt of a notice containing
such proposal, then the Underwriter shall have no further claim or right with
respect to the financing proposal contained in such notice. If, thereafter,
such proposal is modified in any material respect, the Company or the
Affiliates shall adopt the same procedure as with respect to the original
proposal. If the Underwriter does not avail itself of such opportunity to act
as underwriter or placement agent, this will not affect any preferential
rights for future financings during the term of this the eighteen (18) month
period. The Company and the Affiliates acknowledge that any violation of the
Underwriter's right of first refusal would cause irreparable harm to the
Underwriter and agree that the Underwriter shall be entitled to injunctive
relief to prevent any violation of the provisions of this Paragraph 3(w). The
Company represents and warrants that no other person or entity has any rights
to participate in any offer, sale or distribution of securities with respect
to which the Underwriter shall have preferential rights pursuant to this
Agreement. The Underwriter may exercise the right of first refusal granted
pursuant to this Paragraph 3(w) either on its own behalf or together with
another firm or firms designated by the Underwriter.
(x) Waiver of Registration Rights. The Company shall obtain
a waiver of so-called "piggy-back" registration rights from any holders of any
securities of the Company who have the right to require inclusion of any or
all of their securities in the Registration Statement contemplated by this
Agreement, except that, with respect to the shares listed as being sold by the
Selling Securityholders in the Prospectus, the Company shall obtain the
agreement of the holders of such shares not to sell or otherwise transfer or
distribute such shares except as disclosed in the Prospectus.
(y) Directors and Officers Liability Insurance. Within
ninety (90) days after the effective date of the Registration Statement, the
Company will use its best efforts to obtain Directors and Officers Liability
Insurance in an amount no less than $5,000,000, so long as the cost thereof is
reasonable, as determined by the Board of Directors.
(z) Accounting Firm. The Company shall retain an independent
public accounting firm reasonably acceptable to the Underwriter for a period
of five years from the Effective Date. The Underwriter agrees that the firm of
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., P.C. is acceptable to the Underwriter. In
addition, for a period of two years from the Effective Date, the Company, at
its expense, shall cause its independent accounting firm to review, but not
audit, the Company's financial statements for each of the first three fiscal
quarters prior to the
- 15 -
announcement of quarterly financial information, the filing of the Company's
quarterly report on Form 10-QSB and the mailing of quarterly financial
information to stockholders, if applicable.
(aa) Restrictions on Acquisitions. During the eighteen (18)
months following the Closing Date, without the prior consent of the
Underwriter, the Company shall not enter into any agreement to acquire any
other business or the assets of any other business. The term "acquire" shall
be broadly construed and shall include the acquisition of assets, the merger
with or into another corporation or entity, whether directly by the Company or
through a subsidiary, or the acquisition of stock or other equity interests,
however defined, of another corporation, partnership, limited liability
company, business trust, sole proprietorship or other entity of any kind or
description.
4. Offering Expenses and Related Matters
(a) General. Whether or not the Public Offering is
consummated, the Company will pay all costs and expenses incident to the
performance of the obligations of the Company hereunder, including without
limiting the generality of the foregoing, (i) the preparation, printing,
filing, and copying of the Registration Statement, Prospectus, this Agreement,
blue sky memoranda, the Agreement Among Underwriter, if any, the Selected
Dealers Agreement, and other underwriting documents, if any, and any drafts,
amendments or supplements thereto, including the cost of all copies thereof
supplied to the Underwriter in such quantities as reasonably requested by the
Underwriter, the costs of mailing Prospectuses to offerees and purchasers of
the Securities, and the out-of-pocket travel expenses of the Underwriter and
counsel to the Underwriter or other professionals designated by the
Underwriter to visit the Company's facilities for purposes of discharging due
diligence responsibilities; (ii) the printing, engraving, issuance and
delivery of certificates representing Common Stock and Warrants, including any
transfer or other taxes payable thereon; (iii) the registration or
qualification of the Securities under state securities or "blue sky" laws,
including the reasonable fees and disbursements of counsel (regardless of
whether such counsel is also counsel to the Underwriter, subject to the
limitation set forth in Paragraph 4(c) of this Agreement) and filing fees in
connection therewith; (iv) all reasonable fees and expenses of the Company's
counsel and accountants; (v) all costs, expenses and filing fees in connection
with review of the terms of the Public Offering by the NASD; (vi) all costs
and expenses of any listing of the Securities, Common Stock and Warrants on
the SmallCap Market or the NNM and/or a stock exchange and/or in Standard and
Poor's Stock Guide and/or any other securities manuals; (vii) all costs and
expenses of four (4) bound volumes provided to the Underwriter and its counsel
of all closing documents, paper exhibits, correspondence and records forming
the materials included in the Public Offering; (viii) the reasonable costs and
expenses of all pre-closing and post-closing advertisements relating to the
Public Offering (such as tombstone adds) up to an aggregate of $20,000, in
addition to fifteen (15) lucite cubes;(ix) all costs of holding informational
meetings and "road shows;" and (x) all other costs and expenses incurred or to
be incurred by the Company in connection with the transactions contemplated by
this Agreement. The obligations of the Company under this Paragraph 4(a) shall
survive any termination or cancellation of this Agreement.
(b) Non-Accountable Expense Allowance. In addition to the
Company's responsibility for payment of the foregoing expenses, the Company
shall pay to the Underwriter a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds of the Public Offering, including in
such amount the proceeds from any sale of Option Units. The
- 16 -
non-accountable expense allowance due shall be paid at the Closing Date and
any Option Closing Date, as applicable, and shall include fees and
disbursements of Underwriter's counsel (exclusive of legal fees for state
registration and qualification as provided in Paragraph 4(c) of this
Agreement), but shall not include fees of the Company's counsel, state
registration filing fees, NASD filing fees, Nasdaq listing fees, printing and
mailing to members of the underwriting or selling group, and any and all other
expenses customarily paid by the issuer in a public offering of securities.
You hereby acknowledge your prior receipt from the Company
of $10,000, which amount shall be applied to the non-accountable expense
allowance due when and if the Public Offering is closed. If the Public
Offering does not close, then any portion of such amount in excess of your
accountable reimbursable expenses shall be returned promptly by you to the
Company.
(c) Compliance with Blue Sky Laws. You shall determine in
which states or jurisdictions the Securities shall be registered or qualified
for sale. Copies of all applications and related documents for the
registration or qualification of securities (except for the Registration
Statement and Prospectus) filed with the various states shall be supplied to
the Company's counsel not later than one business day following their
transmission to the various states, and copies of all comments and orders
received from the various states shall be made available promptly to the
Company's counsel. Immediately prior to the Effective Date, counsel for the
Underwriter shall advise counsel for the Company in writing of all states in
which the offering has been registered or qualified for sale or has been
canceled, withdrawn, or denied, the date of each such event, and the number of
Securities registered or qualified for sale in each such state. The Company
shall be responsible for the cost of state registration or qualification
filing fees and the legal fees of Underwriter's counsel in connection with
such filings, which filing fees are payable to Underwriter's counsel in
advance of such filings. The legal fees of Underwriter's counsel payable by
the Company with respect to blue sky filings be forty thousand dollars
($40,000), of which twenty thousand dollars ($20,000) has been paid. The
Company hereby acknowledges that any remaining balance with respect to legal
fees or blue sky filing fees is immediately due and payable.
5. Unit Purchase Options; Other Financial Arrangements
(a) Unit Purchase Options. On the Closing Date, the Company
will sell to the Underwriter, for an aggregate price of $100, Unit Purchase
Options to purchase an aggregate of one hundred twenty thousand (120,000)
Units from the Company at an exercise price equal to one hundred twenty
percent (120%) of the public offering price of the Units. The Unit Purchase
Options and the underlying securities shall be non-transferable (other than to
officers or partners of members of the underwriting or selling group or as
otherwise may be permitted by the NASD) during the one (1) year period
commencing on the Effective Date. The Unit Purchase Options shall be
exercisable four a period of four (4) years commencing one (1) year from the
Effective Date "Term"). The Unit Purchase Options shall be in the forms
provided by the Underwriter and filed as an Exhibit to the Registration
Statement.
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(b) M/A Agreement.
(i) The Company hereby agrees that if, during
the five (5) year period commencing on the Effective Date, the Underwriter
shall introduce to the Company another party or entity (the "Introduced
Party"), and, as a result of such introduction, a Transaction is consummated
with such Introduced Party, the Company shall pay to the Underwriter a
finder's fee (the "Fee") equal to six percent (6%) of the first five million
dollars ($5,000,000) of the consideration paid or received in such
Transaction; plus five percent (5%) of the consideration in excess of five
million dollars ($5,000,000) and up to six million dollars ($6,000,000); plus
four percent (4%) of the consideration in excess of six million dollars
($6,000,000) and up to seven million dollars ($7,000,000); plus three percent
(3%) of the consideration in excess of seven million dollars ($7,000,000) and
up to eight million dollars ($8,000,000); plus two percent (2%) of the
consideration in excess of eight million dollars ($8,000,000) and up to nine
million dollars ($9,000,000); plus one percent (1%) of the consideration in
excess of nine million dollars ($9,000,000).
(ii) The Fee shall be paid in cash at the closing
of the particular Transaction, regardless of whether the Transaction involves
installment payments or the consideration paid includes securities or a
combination of securities and cash; provided, however, that in the event that
the Transaction is a marketing or license or other agreement pursuant to which
a stream of revenue or cash receipts may be generated or other Transaction
where it is impossible to determine the value of the consideration to be paid
or received or in the event that there are contingent payments, the Fee shall
be paid with respect to each payment at the same time as the payment is made
or received, as the case may be, regardless of when the payment is received as
long as the original agreement pursuant to which the payment is made was
entered into during the five (5) year period commencing on the Effective Date.
No modification of payment or other terms of any agreement shall impair the
Underwriter's right to the Fee. In the event that the Transaction involves a
merger or sale of assets or tender offer or sale of stock where the
consideration is paid to any or all of the Company's stockholders, the
consideration paid to such stockholders shall be included in the consideration
paid or received for purposes of computing the Fee. All references to the
Company in the context of a Transaction shall include Muse Technologies, Inc.,
any of its present or future subsidiaries or any affiliate of the Company,
regardless of whether such party shall pay or receive the consideration paid
in the Transaction.
(iii) In determining the value of the
consideration paid or received, the following provisions shall apply:
(A) Any securities which are regularly
traded on a securities exchange or in the over-the-counter market shall be
valued at the average of the closing prices in the case of securities listed
on the New York or American Stock Exchange or the Nasdaq Stock Market (or the
closing bid price if there are no transactions on any of such days) or the
average of the closing bid prices, as reported by Nasdaq or the National
Quotation Bureau, Inc. or similar recognized reporting agency, in the case of
securities not traded on such exchanges or in such markets on the ten (10)
trading days prior to the earlier of (I) the date of the agreement or (II) in
the event that a press release or other announcement is made by the Company
and/or the Introduced Party concerning the Transaction and the consideration
provided for in the agreement includes the transfer of a fixed number of
securities, the date of such press release or announcement.
- 18 -
(B) Any debt securities which are not
regularly traded on a securities exchange or on the over-the-counter market
shall be valued at the principal amount thereof if such obligations bear a
stated interest rate or, if no interest rate is stated, at the present value
of the payments due, discounted using an interest rate equal to the prime rate
of Chemical Bank in effect on the second business day prior to the closing
date.
(C) The consideration received in a joint
venture shall be based on the consideration paid to the joint venture by both
the Introduced Party and the Company; plus any additional consideration paid
by the Company to the joint venture partner or by the joint venture partner to
the Company.
(D) In the event that the Transaction
involves the receipt by the Company of property or equipment the consideration
shall be fair value of the property and equipment.
(E) In the event that the fair market
value of any property cannot be determined pursuant to the application of
Paragraph 5(b)(iii) of this Agreement and the Company and the Underwriter
shall not be able to agree on a value, the value shall be determined by an
appraiser jointly selected by the Company and the Underwriter.
(iv) Notwithstanding anything in this Paragraph
5(b) to the contrary, if the Company shall, within one hundred eighty (180)
days immediately following the expiration of five (5) years from the Effective
Date, consummate a Transaction with an Introduced Party which was introduced
by the Underwriter to the Company during such five (5) year period, the
Company shall pay the Underwriter the Fee in the same manner as is otherwise
provided in this Paragraph 5(b).
6. Conditions to the Obligations of the Underwriter. The obligation
of Underwriter to purchase and pay for the Securities shall be subject to the
accuracy in all material respects, as of the date of this Agreement and each
Closing Date (whether the Closing Date with respect to the Firm Units or an
Option Closing Date with respect to the Option Units), as if made on such
Closing Date, of the representations and warranties of the Company contained
in this Agreement and the following additional conditions:
(a) Effectiveness of Registration Statement.
(i) The Registration Statement shall have become
effective not later than 5:30 P.M., Eastern Time, on the date of this
Agreement, or such later time or date as shall have been consented to by you
in writing (the "Effective Date").
(ii) On the Closing Date, no stop order
suspending the effectiveness of the Registration Statement or the
qualification or registration of the Securities under the blue sky laws of any
jurisdiction (whether or not a jurisdiction specified by the Underwriter)
shall have been issued, and no proceeding for that purpose shall have been
initiated or shall be threatened or contemplated by the Commission or the
authorities of any such jurisdiction.
(iii) Any request of the Commission or any such
authorities for additional information to be included in the Registration
Statement or Prospectus or otherwise shall have been complied with to the
reasonable satisfaction of counsel for the Underwriter.
- 19 -
(b) Representations; Compliance with Agreement. The
representations and warranties of the Company in this Agreement shall be true
and correct on and as of the Closing Date, with the same effect as if made on
the Closing Date, and the Company shall have complied with all the agreements
and satisfied all the obligations required to be performed or satisfied by it
at or prior to the Closing Date.
(c) No Untrue Statements. The Registration Statement and the
Prospectus shall contain all statements required to be stated therein in
accordance with the Securities Act and the Regulation and the Registration
Statement and the Prospectus shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and, since the
Effective Date, there shall not have occurred any event required to be set
forth in an amended or supplemented Prospectus that has not been so set forth
(except any such statement or omission based upon information furnished in
writing by or on behalf of the Underwriter for inclusion in the Registration
Statement).
(d) No Material Change. Subsequent to the respective dates
as of which information is given in the Registration Statement and Prospectus,
and except as set forth or contemplated in the Prospectus, (i) there shall
have been no material adverse changes with respect to the officers, directors,
operations, capitalization, contractual obligations, legal proceedings,
proposed use of proceeds from the sale of the Securities, business, plans or
prospects, net assets or liabilities or obligations, properties, or any other
aspect of the financial condition or results of operations of the Company,
(ii) the Company shall not have entered into any material transaction not in
the ordinary course of business, (iii) the Company shall not have paid or
declared any dividends or other distributions on its capital stock, (iv) the
conduct of the business and operations of the Company shall not have been
materially interfered with by strike, fire, flood, hurricane, accident or
other calamity (whether or not insured), or by any court or governmental
action, order or decree, and the properties of the Company shall not have
sustained any material loss or damage (whether or not insured) as a result of
any such occurrence, and (v) except as set forth in the Prospectus, there are
no actions, suits, proceedings or investigations pending before any
arbitrator, court or governmental agency, authority or body or, to the
knowledge of the Company, threatened, to which the Company is a party or of
which the business or property of the Company is the subject and which, if
adversely decided, could reasonably be expected to have a material adverse
affect on the business, property, condition (financial or otherwise), results
of operations or general affairs of the Company, and there have been no
material adverse development in any such suits, actions, proceedings or
investigations.
(e) NASD. The NASD shall have indicated that it has no
objection to the underwriting arrangements pertaining to the sale of the
Securities by the Underwriter. No action shall have been taken by the
Commission or the NASD the effect of which would make it improper, at any time
prior to the Closing Date, for any member firm of the NASD to execute
transactions (as principal or as agent) in the Securities, Common Stock or
Warrants and no proceedings for the purpose of taking such action shall have
been instituted or shall be pending, or, to the best of the Underwriter's or
the Company's knowledge, shall be contemplated by the Commission or the NASD.
The Company represents at the date of this Agreement, and shall represent as
of the Closing Date or Option Closing Date, as the case may be, that it has no
knowledge that any such action is in fact contemplated by the Commission or
the NASD.
- 20 -
(f) Certificates, Bylaws and Proceedings. The Company's
Certificate of Incorporation and By-Laws, and all proceedings taken in
connection with the authorization, issuance, or sale of the Securities as
herein contemplated, shall be reasonably satisfactory in form and substance to
you.
(g) Officers' Certificate. The Company shall have furnished
to the Underwriter a certificate of the President and of the Chief Financial
Officer of the Company, dated the day of the Closing Date, to the effect that
each signer of such certificate has examined the Registration Statement, the
Prospectus, and this Agreement, and confirming, in form satisfactory to the
Underwriter, that the compliance by the Company of the conditions set forth in
Paragraphs 6(a) through (d) of this Agreement have been satisfied.
(h) Opinion of Company Counsel. The Company shall have
furnished to the Underwriter the opinion of Proskauer Rose LLP, counsel for
the Company, dated the Closing Date, in form and substance reasonably
satisfactory to counsel to the Underwriter and substantially in the form of
Exhibit A attached hereto. In rendering the opinion, such counsel may rely as
to matters of fact, to the extent they deem proper, upon certificates of the
Company's officers and governmental officials.
(i) Accountants' Letter. At the time this Agreement is
executed and as of the Closing Date, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., P.C.,
independent public accountants for the Company, shall have furnished to you a
letter addressed to the Underwriter and dated the date of this Agreement or
the Closing Date, as applicable, in form and substance previously approved by
the Underwriter and its counsel.
(j) Agreements with Stockholders. The Underwriter shall have
received the agreements, in form and substance satisfactory to the
Underwriter, as contemplated by Paragraphs 3(l), (t) and (w) of this
Agreement.
(k) Change in Capitalization. Subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there shall not have been any material adverse change or decrease
in the capital stock or long-term debt obligations of the Company or any
changes or decreases in stockholders' equity, net assets or current net assets
of the Company or any material adverse change in the financial position,
revenues, expenses or results of operations of the Company, each as compared
with the amounts shown in the most recent financial statements included in the
Registration Statement, except as disclosed in the Prospectus, that makes it
impractical or inadvisable in the reasonable judgment of the Underwriter to
proceed with the Public Offering or the delivery of the Securities, as the
case may be, as contemplated in the Prospectus.
(l) Other Agreements. The Company shall have executed and
delivered to the Underwriter the Warrant Agreement and the Unit Purchase
Options to purchase one hundred twenty thousand (120,000) Units.
(m) Opinion of Underwriter's Counsel. The Underwriter shall
have received an opinion from Esanu Katsky ▇▇▇▇▇▇ & Siger, LLP, counsel for
the Underwriter, as to the organization of the Company, the validity of the
Securities, the form of the Registration Statement and the Prospectus, and
such other related matters as you may request, and such counsel shall
- 21 -
have been furnished by the Company such papers and information as they request
to enable them to pass upon such matters. It is understood that such counsel
will express no opinion with respect to the financial statements and other
financial, accounting, and statistical data included in the Registration
Statement and the Prospectus. In rendering the foregoing opinion, such counsel
shall be entitled to rely upon the opinion delivered to the Underwriter
pursuant to Paragraph 6(h) of this Agreement as to matters of Federal
securities law, and may rely as to matters of fact upon such certificates and
other documents and information as they may reasonably request for purposes of
such opinion.
(n) Other Information. Prior to the Closing Date, the
Company shall have furnished to the Underwriter such further information,
certificates, and documents in connection with the Company's obligations set
forth in this Agreement as you may reasonably request.
If any of the conditions specified in this Paragraph 6 shall
not have been fulfilled when and as required by this Agreement, this Agreement
and all obligations of the Underwriter hereunder may be terminated by you at,
or at any time prior to, the Closing Date. Notice of such termination shall be
given to the Company in writing, or by facsimile transmission or telephone and
confirmed in writing.
7. Indemnification
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless Underwriter and each person who controls any
Underwriter within the meaning of the Securities Act, from and against any and
all losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Securities Act, the Exchange Act, or
other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact made by the Company in this
Agreement, (ii) any untrue statement or alleged untrue statement of a material
fact made by the Company contained in the Registration Statement, or any
amendment thereof, or in any Preliminary Prospectus or the Prospectus, or any
amendment thereof or supplement thereto, or in any blue sky application or
other document executed by the Company specifically for that purpose (or based
upon written information furnished by the Company) filed in any state or other
jurisdiction in order to qualify any of the Securities or other Securities
under the securities laws thereof (any such application, document or
information being referred to as a "Blue Sky Application"); or (iii) the
omission or alleged omission to state in any such Registration Statement,
Preliminary Prospectus or Prospectus, or amendment thereof or supplement
thereto, or Blue Sky Application a material fact required to be stated therein
or necessary to make the statements made therein not misleading, and agrees to
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by it in connection with investigating or defending
against any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage, or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein or omitted therefrom in reliance upon and in conformity with
written information furnished to the Company by or on behalf of you or such
Underwriter specifically for use in connection with the preparation thereof,
and further provided, however, that the foregoing indemnity with respect to
any untrue statement, alleged untrue statement, omission, or alleged omission
contained in any Preliminary Prospectus shall not inure to the benefit of any
Underwriter
- 22 -
from whom the person asserting any such loss, claims any of, damage, or
liability purchased any of the securities that are the subject thereof (or to
the benefit of any person who controls such Underwriter), if a copy of the
Prospectus was not delivered to such person with or prior to the written
confirmation of the sale of such security to such person. This indemnity
agreement will be in addition to any liability that the Company may otherwise
have.
(b) Indemnification by Underwriter. Underwriter agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed or signs the Registration Statement, and each person
who controls the Company within the meaning of the Securities Act, from and
against any and all losses, claims, damages or liabilities, joint or several,
to which they or any of them may become subject under the Securities Act, the
Exchange Act, or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereof, or in any Preliminary
Prospectus or the Prospectus, or any amendment thereof or supplement thereto,
or in a Blue Sky Application, or (ii) the omission or the alleged omission to
state in any such Registration Statement, Preliminary Prospectus or
Prospectus, amendment thereof or supplement thereto, or Blue Sky Application a
material fact required to be stated therein or necessary to make the
statements made therein not misleading, in each case to the extent, but only
to the extent, that the same was made therein or omitted therefrom in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of you or such Underwriter specifically for use in the preparation
thereof, and agrees to reimburse each such indemnified party for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending against any such loss, claim, damage, liability or action. This
indemnity agreement will be in addition to any liability that the Underwriter
may otherwise have.
(c) Claims. Within five (5) days after receipt by an
indemnified party under Paragraph 7(a) or (b) of this Agreement of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; the failure so to notify the indemnifying party shall relieve the
indemnifying party from any liability under this Paragraph 7 as to the
particular item for which indemnification is then being sought, unless such
indemnifying party has otherwise received actual notice of the action at least
thirty (30) days before any answer or response is required by the indemnifying
party in its defense of such action, but will not relieve it from any
liability that it may have to any indemnified party otherwise than under this
Paragraph 7. If any such action is brought against any indemnified party and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that 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; provided, that if the defendants in any such
action include both the indemnified party and the indemnifying party and
either (i) the indemnifying party or parties agree, or (ii) representation of
both the indemnifying party or parties and the indemnified party or parties by
the same counsel is inappropriate under applicable standards of professional
conduct because of actual or potential conflicting interests between them,
then the indemnified party or parties shall have the right to select separate
counsel to assume such legal defense and to otherwise participate in the
defense of such action. The indemnifying party will not be liable to such
indemnified party under this Paragraph 7 for any legal or other expenses
subsequently
- 23 -
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed counsel in connection
with the assumption of legal defenses in accordance with the proviso to the
immediately preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel approved by the indemnifying party for all indemnified
parties), (ii) the indemnifying party shall not have employed counsel to
represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall an indemnifying party be liable under
this Paragraph 7 for any settlement, effected without its written consent,
which consent shall not be unreasonably withheld, of any claim or action
against an indemnified party.
(d) Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) an indemnified
party makes a claim for indemnification pursuant to Paragraphs 7(a) or (b) of
this Agreement (subject to the limitations thereof) but 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
not withstanding that the provisions of this Paragraph 7 provide for
indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified or indemnifying party in
circumstances for which indemnification is provided under Paragraphs 7(a) or
(b) of this Agreement, then, and in each such case, the Company and the
Underwriter shall contribute to the aggregate losses, claims, damages, or
liabilities to which they may be subject (after contribution from all others)
in such proportion so that the Underwriter are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the Public Offering Price appearing
thereon, and the Company is responsible for the remaining portion; provided,
however, that if such allocation is not permitted by applicable law, then the
relative fault of the Company and the Underwriter in connection with the
statements or omissions that resulted in such losses, liabilities, claims, and
damages and other relevant equitable considerations shall also be considered.
The relative fault shall be determined by reference to, among other things,
whether in the case of an untrue statement of a material fact or the omission
to state a material fact, such statement or omission relates to information
supplied by the Company or by the Underwriter and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Underwriter agree that
it would not be just and equitable if the respective obligations of the
Company and the Underwriter to contribute pursuant to this Paragraph 7(d) were
to be determined by pro rata or per capita allocation of the aggregate damages
(even if the Underwriter and their respective controlling persons in the
aggregate were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the first sentence of this Paragraph 7(d). For purposes of this
Paragraph 7(d), the term "damages" shall include any legal or other expenses
reasonably incurred by the indemnified party in connection with investigating
or defending against or appearing as a third party witness in any action or
claim that is the subject of the contribution provisions of this Paragraph
7(d). Notwithstanding the provisions of this Paragraph 7(d), an Underwriter
and its controlling persons collectively shall not be required to contribute
any amount in excess of the difference between the total price of the
Securities purchased by the Underwriter, directly or indirectly, from the
Company pursuant to this Agreement and the amount of any damages that such
Underwriter and its controlling persons collectively have been required to pay
by reason of such untrue statement or
- 24 -
omission other than pursuant to this Paragraph 7(d). No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For the purposes of this
Paragraph 7(d), any person who controls an Underwriter within the meaning of
Paragraph 15 of the Securities Act or Paragraph 20(a) of the Exchange Act
shall have the same rights to contributions as the Underwriter and each
director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within Paragraph 15 of the Securities Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as the Company.
The foregoing contribution agreement shall in no way
affect the contribution liabilities of any person having liability under
Section 11 of the Securities Act other than the Company and the Underwriter
and persons controlling the Company or the Underwriter.
After receipt by any party to this Agreement of
notice of the commencement of any action, suit, or proceeding, such person
will, if a claim for contribution in respect thereof is to be made against
another party (the "contributing party"), notify the contributing party of the
commencement thereof within a reasonable time thereafter, but the failure so
to notify the contributing party will not relieve the contributing party from
any liability that it may have to any party other than for contribution
pursuant to this Paragraph 7(d). Any notice given pursuant to any other
provision of this Paragraph 7 shall be deemed to be like notice pursuant to
this Paragraph 7(d). If any such action, suit or proceeding is brought against
any party, and such person notifies a contributing party of the commencement
thereof, the contributing party will be entitled to participate therein with
the notifying party and any other contributing party similarly notified,
subject to the provisions of Paragraph 7(c) of this Agreement.
(e) Survival. The respective indemnity and contribution
agreements by the Underwriter and the Company contained in this Paragraph 7,
and the covenants, representations and warranties of the Company set forth in
this Agreement, shall remain operative and in full force and effect regardless
of (i) any investigation made by the Underwriter or on their behalf or by or
on behalf of any person who controls any Underwriter, by the Company or any
controlling person of the Company or any director or any officer of the
Company, (ii) acceptance of the Securities and payment therefor, or (iii) any
termination of this Agreement, and shall survive the delivery of the
Securities, and any successor to the Company or to any Underwriter or any
person who controls any Underwriter or the Company, as the case may be, shall
be entitled to the benefit of such respective indemnity and contribution
agreements.
8. Effectiveness. This Agreement shall become effective
contemporaneously with the effectiveness of the Registration Statement, or at
such date after the effective time of the Registration Statement as you, in
your discretion, shall first release the Securities for sale to the public;
provided, however, that the provisions of Paragraphs 4, 6, and 7 of this
Agreement shall at all times be in full force and effect. For the purposes of
this Paragraph 8, the Securities shall be deemed to have been released for
sale to the public upon release by you after effectiveness of the Registration
Statement of a newspaper advertisement relating to the Securities or upon
release by you thereafter of telegrams advising securities dealers of the
effectiveness of the Registration Statement, whichever shall first occur.
- 25 -
9. Termination. This Agreement may be terminated, in your absolute
discretion, by notice given to the Company prior to the Closing Date if the
Company shall have failed, refused, or been unable, prior to the Closing Date,
to perform any material agreement required to be performed by it hereunder, or
if any other condition of the Underwriter' obligations hereunder required to
be fulfilled by the Company is not fulfilled. In addition, this Agreement may
be terminated, as set forth above, if, prior to the Closing Date, any of the
following shall have occurred: (a) material governmental restrictions (not in
force and effect on the date of this Agreement) have been imposed on trading
in securities on the New York Stock Exchange or American Stock Exchange or in
the over-the-counter market; (b) a material adverse change, beyond normal
fluctuations, in general financial market or economic conditions from such
conditions on the date of this Agreement; (c) a material interruption in mail
or telecommunications service or other general means of communications within
the United States after the execution and delivery of this Agreement; (d) a
banking moratorium has been declared by Federal or New York or Florida state
authorities; (e) an outbreak of major international hostilities or other
national or international calamity has occurred; (f) the passage by the
Congress of the United States or by any state legislative body of any act or
measure, or the adoption of any orders, rules, or regulations by any
governmental body or executive or any authoritative accounting institute or
board, that you believe will have a Material Adverse Effect on the business,
financial condition, or financial statements of the Company or the
distribution of the Securities or market for the Securities; or (g) any
material adverse change has occurred, since the respective dates of which
information is given in the Registration Statement and Prospectus, in the
condition of the Company, financial or otherwise, whether or not arising in
the ordinary course of business. Any such termination shall be without
liability of any party to any other party, except as provided in Paragraph 7
in this Agreement and except that the Company shall remain obligated to pay
costs and expenses pursuant to Paragraph 5 in this Agreement. If you elect to
prevent this Agreement from becoming effective, or to terminate this
Agreement, as provided in this Paragraph 9, you shall promptly notify the
Company by telecopier or telephone, and confirm by letter, and the Underwriter
shall not be under any liability to the Company.
10. Survival of Representations, Warranties, and Indemnities. The
respective agreements, representations, warranties, and indemnities contained
in this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of you, any Underwriter or the Company, or
any of your or their respective officers or directors or controlling persons,
and will survive delivery of and payment for the Securities and the Unit
Purchase Options.
11. Notices. All notices and other communications hereunder (unless
otherwise expressly provided for in this Agreement) shall be in writing and
shall be deemed given when delivered in person or by overnight courier service
or Express Mail, on the business day (before 5:00 P.M.) transmitted if sent by
facsimile transmission or similar means of communication if receipt if
confirmed or if transmission is confirmed as otherwise provided in this
Paragraph 12, or the fifth (5th) day after mailing if mailed if sent by
registered or certified mail (return receipt requested) to the party to
receive the same at the following addresses (or at such other address for a
party as shall be specified by like notice):
-26-
If to the Company: Muse Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
With a copy to: Proskauer Rose, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
If to the Underwriter: HD ▇▇▇▇▇ & Co., Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
With a copy to: Esanu Katsky ▇▇▇▇▇▇ & Siger, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ P.C.
12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors. The terms
"successor" and "successors and assigns" as used in this Agreement shall not
include any buyer, as such, of any of the Securities from the Underwriter.
13. Entire Understanding. This Agreement contains the entire
understanding between the parties to this Agreement and supersedes any prior
or contemporaneous oral or prior written agreement, understandings or letter
of intent, and may not be modified or amended nor may any right be waived
except by a writing signed by all parties in the case of a modification or
amendment or the party to be charged in the case of a waiver. No course of
conduct or dealing and no trade custom or practice shall be construed to
modify any of the provisions of this Agreement.
14. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which taken
together shall constitute one and same agreement.
15. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York applicable
to agreements executed and to be performed wholly within such State.
- 27 -
Please confirm, by signing and returning to the Company
counterparts of this Underwriting Agreement, that the foregoing correctly sets
forth the understanding between the Company and you, whereupon this Agreement
will constitute a binding agreement among us.
Very truly yours,
MUSE TECHNOLOGIES, INC.
By: ___________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Confirmed and Accepted as of
the date first above-written:
HD ▇▇▇▇▇ & CO, INC.
By: _____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
- 28 -
Exhibit A
Opinion of Company Counsel
--------------------------
1. The Company (a) has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of Delaware,
with full corporate power and authority to own and operate its properties and
to carry on its business as set forth in the Registration Statement and
Prospectus; (b) on the Effective Date has authorized and, to such counsel's
knowledge, outstanding capital stock as set forth in the Prospectus, and (c)
is duly licensed or qualified as a foreign corporation in New Mexico and all
other jurisdictions in which by reason of owning or leasing real property in
such jurisdiction it is required to be so licensed or qualified except where
failure to be so qualified or licensed would have no material adverse effect.
2. All of the outstanding shares of Common Stock are duly and validly
authorized and issued and outstanding, fully paid and non-assessable, conform
to the description set forth in the Prospectus and do not have any, and were
not issued in violation of any, preemptive rights under the Company's
certificate of incorporation or by-laws or any other agreement known to such
counsel.
3. The Company has authorized and reserved for issuance the shares of
Common Stock issuable (a) upon exercise of the outstanding options or warrants
(other than the Warrants) in accordance with the terms of the applicable
options or warrants, (b) upon exercise of the Warrants, including Warrants
issued upon exercise of the Unit Purchase Option and Warrants held by the
Selling Securityholders, pursuant to the terms of the Warrants and the Warrant
Agreement, and (c) upon exercise of the Unit Purchase Option, and when issued
upon such exercise, such shares of Common Stock will be duly and validly
authorized and issued, fully paid and nonassessable and not subject to any
preemptive rights or rights of first refusal pursuant to the Company's
certificate of incorporation or bylaws or other agreement known to such
counsel.
4. The shares of Common Stock included in the Units offered pursuant
to the Prospectus (a) are duly and validly authorized and issued, fully paid
and non-assessable, (b) have not been issued in violation of the pre-emptive
rights or rights of first refusal pursuant to the Company's certificate of
incorporation or any agreement known to such counsel and (c) are not subject
to any restrictions on voting or transfer other than as may be imposed by the
Securities Act.
5. The Warrants and the Unit Purchase Options conform to the
descriptions thereof that are contained in the Prospectus (excluding financial
statements) and, when issued as provided in this Agreement and/or the Unit
Purchase Option, will constitute the valid, binding and enforceable
obligations of the Company, subject to bankruptcy, insolvency and other laws
of general applications affecting the enforceability of creditors' rights and
subject to the discretionary nature of any remedies in the nature of equitable
relief and except that no opinion is given with respect to the indemnification
and contribution provisions of the Underwriter's Warrants.
6. The shares of Common Stock and Warrant included in the Units
offered pursuant to the Prospectus, when issued pursuant to this Agreement
upon payment of the consideration provided for in this Agreement, will, to the
best of such counsel's knowledge, be free of all liens, encumbrances, claims,
security interests, restrictions (other than those imposed by Federal or
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state securities laws), stockholders' agreements and voting trusts resulting
from agreements known to such counsel to which the Company is a party.
7. The shares of Common Stock issuable upon exercise of the Unit
Purchase Option and upon exercise of the Warrants issuable upon exercise of
the Unit Purchase Option have been duly and validly authorized for issuance,
and when issued pursuant to the terms of the Unit Purchase Option and/or the
Warrant Agreement, as the case may be, will be validly issued, fully paid and
non-assessable; the Warrants issuable upon exercise as provided in the Unit
Purchase Option, will constitute the valid and binding obligations of the
Company, subject to bankruptcy, insolvency and other laws of general
applications affecting the enforceability of creditors' rights and subject to
the discretionary nature of any remedies in the nature of equitable relief in
any legal or equitable action.
8. Except as set forth in or contemplated by the Prospectus, to the
best of such counsel's knowledge, as of the date of this Agreement, there were
no outstanding options, warrants or other rights providing for the issuance of
any class of capital stock of the Company, or any security convertible into,
or exchangeable for, any shares of any class of capital stock of the Company.
9. To the best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering of the Units as contemplated by this
Agreement gives rise to any registration rights or other rights, other than
those which have been waived or satisfied, relating to the registration under
the Act of any shares of Common Stock.
10. The certificate evidencing the shares of Common Stock and
Warrants are in proper legal form.
11. To the best of such counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other regulatory authorities
are necessary for the valid authorization, issue or sale of the Securities
pursuant to this Agreement, except such as may be required under the Act or
state securities or blue sky laws or pursuant to the NASD's rules, regulations
and policies.
12. Based solely upon a review of a lien search delivered at the
Closing (the "Lien Search") and an officer's certificate, such counsel does
not know of any liens on any of the Company's assets not disclosed in the Lien
Search or the Prospectus.
13. This Agreement, the Warrant Agreement and the Unit Purchase
Options have been duly authorized and executed by the Company and constitute
the valid and binding agreements of the Company, enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency and other laws
of general applications affecting the enforceability of creditors' rights and
subject to the discretionary nature of any remedies in the nature of equitable
relief and except that no opinion is given with respect to the provisions of
Paragraph 7 of this Agreement.
14. The Company has full corporate power and authority to authorize,
issue and sell the Securities on the terms and conditions set forth in this
Agreement, the Warrant Agreement, the Unit Purchase Option, as the case may
be, and in the Registration Statement and in the Prospectus, and the execution
and delivery of this Agreement, the consummation of the
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transactions contemplated by this Agreement, the Warrant Agreement and the
Unit Purchase Option and compliance by the Company with the terms of this
Agreement, the Warrant Agreement and the Unit Purchase Agreement will not
conflict with, or constitute a default under, the certificate of incorporation
or by laws of the Company or any indenture, mortgage, deed or trust, note or
any other agreement or instrument known to such counsel to which the Company
is a party or by which they or their businesses or their properties are bound,
or, to such counsel's knowledge, any law, order, rule or regulation, writ,
injunction or decree of any government, governmental instrumentality, or court
having jurisdiction over the Company or its business or properties.
15. Such counsel knows of no actions, suits or proceedings at law or
in equity of a material nature pending, or to such counsel's knowledge,
threatened, against the Company before or by any state commission, regulatory
body, or administrative agency or other governmental body, wherein an
unfavorable ruling, decision or finding would materially adversely affect the
business or financial condition of the Company or which question either (a)
the validity of the Securities, the Underwriting Agreement, the Warrant
Agreement or the Unit Purchase Option, or (b) any action taken or to be taken
by the Company pursuant to the Underwriting Agreement, the Warrant Agreement
or the Unit Purchase Option, which are not disclosed in or contemplated by the
Prospectus.
16. The Registration Statement has become effective under the Act
and, to such counsel's knowledge, no order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the Act.
Furthermore, the Registration Statement and the Prospectus (except as
to the financial statements and other financial information contained therein
and thereto, as to which no opinion is expressed), comply as to form in all
material respects with the requirements of the Act and the rules and
regulations (the "Rules") of the Commission under the Act. In passing upon the
form of such documents, such counsel has assumed the correctness and
completeness of the statements made or included therein by the Company and
take no responsibility for the accuracy, completeness or fairness of the
statements contained therein except insofar as such statements relate to the
description of the Securities or relate to such counsel. However, in the
course of the preparation by the Company of the Registration Statement and the
Prospectus, such counsel had conferences with officers and directors of the
Company with a view to imparting to them a clear understanding of the
requirements of the Act and the Rules with reference to the preparation of
registration statements and prospectuses, and such counsel's examination of
the Registration Statement and the Prospectus and their discussions in the
above-mentioned conferences did not disclose to such counsel any information
which gave such counsel reason to believe that the Registration Statement, as
of the effective date thereof (except as to the financial statements and other
financial information contained therein, as to which no opinion is expressed),
contained 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 not misleading; or that the Prospectus (except as to the
financial statements and other financial information contained therein, as to
which no opinion is expressed) contained any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Such counsel have reviewed all contracts filed as exhibits to the
Registration Statement, and such counsel does not know of any agreements to
which the
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Company is a party required to be filed as exhibits to the Registration
Statement which have not been so filed.
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