EXHIBIT 1.01
DRAFT 01/24/97
1,125,000 SHARES OF COMMON STOCK
OSMOTICS CORPORATION
UNDERWRITING AGREEMENT
Denver, Colorado
____________, 1997
National Securities Corporation
As Representative of the Several Underwriters
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Osmotics Corporation, a Delaware corporation (the "Company"), hereby
agrees with National Securities Corporation ("National") and each of the
underwriters named in Schedule A hereto (collectively, the "Underwriters," which
term shall also include any underwriter substituted as hereinafter provided in
Section 11), for whom National is acting as representative (in such capacity,
National shall hereinafter be referred to as "you" or the "Representative") with
respect to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective amount of shares (the "Shares") set
forth in said Schedule A of the Company's common stock, par value $.001 per
share (the "Common Stock"). The aggregate 1,125,000 Shares purchased by the
Underwriters are hereinafter referred to as the "Firm Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and not
jointly, up to an additional 168,750 shares of Common Stock for the purpose of
covering over-allotments, if any. Such 168,750 shares of Common Stock are
hereinafter collectively to as the "Option Securities." The Company also
proposes to issue and sell to you warrants (the "Representative's Warrants")
pursuant to the Representative's Warrant Agreement (the "Representative's
Warrant Agreement") for the purchase of an additional 112,500 shares of Common
Stock. The shares of Common Stock issuable upon exercise of the
Representative's Warrants are hereinafter referred to as the "Representative's
Securities." The Firm Securities, the Option Securities, the Representative's
Warrants and the Representative's Securities (collectively, hereinafter referred
to as the "Securities") are more fully described in the Registration Statement
and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
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represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date and the Option Closing Date, if any, as
follows:
(A) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. 333-5306-D), including any
related preliminary prospectus (the "Preliminary Prospectus"), for the
registration of the Firm Securities, the Option Securities and the
Representative's Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
Regulations (as defined below) of the Commission under the Act. The Company will
not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430(A) of the Regulations), is hereinafter called the "Registration
Statement," and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Regulations, is hereinafter called the
"Prospectus." For purposes hereof, "Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as applicable.
(B) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus and no proceedings for a stop order
suspending the effectiveness of the Registration Statement have been instituted,
or, to the Company's knowledge, are threatened. Each of the Preliminary
Prospectus, the Registration Statement and the Prospectus at the time of filing
thereof conformed in all material respects with the requirements of the Act and
Regulations, and none of the Preliminary Prospectus, the Registration Statement
or the Prospectus at the time of filing thereof contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by or on behalf of the Underwriters expressly for use in
such Preliminary Prospectus, Registration Statement or Prospectus.
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(C) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined in Section 2(c)
hereof) and each Option Closing Date (as defined in Section 2(b) hereof), if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus, as amended or supplemented as
required, will contain all statements which are required to be stated therein in
accordance with the Act and the Regulations, and will conform in all material
respects to the requirements of the Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
conformity with information furnished to the Company in writing by or on behalf
of any Underwriter expressly for use in the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto.
(D) The Company and each of its subsidiaries have been duly
organized and are validly existing as corporations in good standing under the
laws of the respective states of their incorporation. The Company does not own
or control, directly or indirectly, any corporation, partnership, trust, joint
venture or other business entity other than the subsidiaries listed in Exhibit
21 of the Registration Statement. Each of the Company and its subsidiaries is
duly qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification or licensing, except
where the failure to be so qualified or licensed would not have a material and
adverse effect on the condition, financial or otherwise, or the business
affairs, operations, properties, or results of operations of the Company and its
subsidiaries, taken as a whole (the "Business"). Each of the Company and its
subsidiaries has all requisite power and authority (corporate and other), and
has obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; the Company and each of its
subsidiaries have been doing business in compliance in all material respects
with all such authorizations, approvals, orders, licenses, certificates,
franchises and permits and all federal, state, local and foreign laws, rules and
regulations; and neither the Company nor any of its subsidiaries have received
any notice of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the Business. The
disclosures in the Registration Statement concerning the effects of federal,
state, local, and foreign laws, rules and regulations on the Company's business
as currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
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(E) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Descrip tion of Capital Stock" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company conform
or, when issued and paid for, will conform, in all material respects to all
statements with respect thereto contained in the Registra tion Statement and the
Prospectus. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company and the related notes
thereto included in the Prospectus, neither the Company nor any subsidiary has
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or arrangements
and the options or other rights granted and exercised thereunder as set forth in
the Prospectus conforms in all material respects with the requirements of the
Act. All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, and the
holders thereof have no rights of rescission with respect thereto and are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company.
(F) The Securities are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable and will conform in all
material respects to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue and sale of
the Securities has been duly and validly taken; and the certificates
representing the Securities will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof of the Securities to be sold by the
Company hereunder, the Underwriters or the Representative, as the case may be,
will acquire good and marketable title to such Securities free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect, or other
restriction or equity of any kind whatsoever. No stockholder of the Company has
any right which has not been waived in writing to require the Company to
register the sale of any shares owned by such stockholder under the Act in the
public offering contemplated by this Agreement. No further approval or authority
of the stockholders or the Board of Directors of the Company will be required
for the issuance and sale of the Shares, the Option Shares and the
Representative's Warrants to be sold by the Company as contemplated herein.
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(G) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, changes in stockholders' equity and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply and such financial statements have been prepared in conformity with
generally accepted accounting principles and the Regulations, consistently
applied throughout the periods involved. There has been no material adverse
change or development involving a material prospective change in the Business,
whether or not arising in the ordinary course of business since the date of the
financial statements included in the Registration Statement and the Prospectus
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company and its subsidiaries taken as a whole conform in all
material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. Financial information set forth in the Prospectus
under the headings "Prospectus Summary -Selected Financial Data,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(H) The Company (i) has paid all federal, state, local,
franchise, and foreign taxes for which it is liable, including, but not limited
to, withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(I) No transfer tax, stamp duty or other similar tax is payable
by or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the Firm
Securities and the Option Securities from the Company and the purchase by the
Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Firm Securities and the Option Securities in connection with
the distribution contemplated hereby.
(J) There is no action, suit, proceeding, inquiry, arbitration,
mediation, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or circumstances
that may give rise to the same), or involving the properties or businesses of,
the Company which (i) questions the validity of the capital stock of the
Company, this Agreement or the Representative's Warrant Agreement, or of any
action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representative's Warrant Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (iii) might materially and adversely
affect the condition,
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financial or otherwise, or the business, affairs, position, stockholders'
equity, operation, properties, or results of operations of the Company and its
subsidiaries taken as a whole.
(K) The Company has the corporate power and authority to
authorize, issue, deliver, and sell the Securities and to enter into this
Agreement and the Representative's Warrant Agreement, and to consummate the
transactions provided for in such agreements; and this Agreement and the
Representative's Warrant Agreement have each been duly and properly authorized,
executed, and delivered by the Company. Each of this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its respective terms (except as the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribu tion may be
limited by applicable law), and none of the issue and sale of the Securities,
execution by the Company, delivery or performance of this Agreement and the
Representative's Warrant Agreement, the consummation by the Company of the
transactions contemplated herein and therein, or the conduct of the Company's
businesses as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of (i) the articles of incorporation or by-laws of the Company, as
amended and restated, (ii) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which its properties or assets (tangible
or intangible) is or may be subject, or any indebtedness, or (iii) any statute,
judgment, decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company of any of their activities or properties.
(L) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this
Agreement, the Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Securities, except such as have been or may
be obtained under the Act or may be required under state securities or Blue Sky
laws in connection with the Underwriters' purchase and distribution of the Firm
Securities, the Option Securities, and the Representative's Warrants to be sold
by the Company hereunder.
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(M) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or businesses may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribu tion may be limited by applicable law). The descriptions in the
Registration Statement of such agreements, contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by Form SB-2, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
(N) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus (i) the Company has not incurred any
material liabilities or obligations, indirect, direct or contingent, or entered
into any material verbal or written agreement or other transaction which is not
in the ordinary course of business or which could result in a material reduction
in the future earnings of the Company; (ii) the Company has not sustained any
material loss or interference with its business or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by insurance;
(iii) the Company has not paid or declared any dividends or other distributions
with respect to its capital stock, and the Company is not in default in the
payment of principal or interest on any outstanding debt obligations; (iv) there
has not been any change in the capital stock (other than upon the sale of the
Firm Securities, the Option Securities and the Representative's Warrants
hereunder and upon the exercise of options and warrants described in the
Registration Statement) of, or indebtedness material to, the Company (other than
in the ordinary course of business); (v) the Company has not issued any
securities or incurred any liability or obligation, primary or contingent, for
borrowed money; and (vi) there has not been any material adverse change in the
condition (financial or otherwise), business, properties, results of operations,
or prospects of the Company and its subsidiaries.
(O) Except as disclosed in or specifically contemplated by the
Prospectus, and subject to the risks and uncertainties described in the
Prospectus in the headings entitled "Risk Factors A Protection of Intellectual
Property" and "Business A Intellectual Property and Other Proprietary Rights,"
(i) the Company has sufficient trademarks, trade names, patent rights,
copyrights, licenses, approvals and governmental authorizations to conduct its
business as now conducted; (ii) the expiration of any trademarks, trade names,
patent rights, copyrights, licenses, approvals or governmental authorizations
would not have a material adverse effect on the
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condition (financial or otherwise), business, results of operations or prospects
of the Company; (iii) the Company has no knowledge of any infringement by it or
its subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and (iv) there is no
claim being made against the Company regarding trademark, trade name, patent,
copyright, license, trade secret or other infringement which could have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company.
(P) No default exists in the due performance and observance of
any term, covenant or condition of any material license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
material agreement or instrument evidenc ing an obligation for borrowed money,
or any other material agreement or instrument to which the Company is a party or
by which the Company may be bound or to which the property or assets (tangible
or intangible) of the Company is subject or affected, except for such defaults,
if any, which individually and in the aggregate would not have a material
adverse effect on the Business.
(Q) To the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or to its knowledge threatened against or involving the Company. No
representation question exists respecting the employees of the Company. No
collective bargaining agreement, or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company.
No labor dispute with the employees of the Company exists or to its knowledge is
imminent.
(R) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute to a
defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction" within
the meaning of Section 406 of ERISA or Section 4975 of the Code, which could
subject the Company to any tax penalty on prohibited transactions and which has
not adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the Code and ERISA as
they relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified
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thereunder. The Company has never completely or partially withdrawn from a
"multiemployer plan."
(S) None of the Company, nor any of its employees, directors,
stockholders, or affiliates (within the meaning of the Regulations) of any of
the foregoing has taken or will take directly or indirectly, any action designed
to or which has constituted or which might be expected to cause or result in
unlawful stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(T) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, or other
restrictions or equities of any kind whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable.
(U) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇"), whose report is
filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the
Regulations.
(V) The Company has caused to be duly executed legally binding
and enforceable agreements pursuant to which all persons or entities, other than
▇▇▇▇▇ ▇▇▇▇ who has entered into a modified agreement as described in the
Prospectus, and ▇▇▇ ▇▇▇▇▇▇▇ who has refused to sign any such agreement, that
directly or beneficially own Common Stock, as of the effective date of the
Registration Statement, have agreed not to, directly or indirectly, offer, offer
to sell, sell, grant any option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber or dispose of any shares of Common Stock or
Securities convertible into Common Stock, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Regulations or otherwise) or dispose of any
interest therein for a period from the date of the Prospectus until twelve (12)
months following the date that the Registration Statement becomes effective,
without the prior written consent of National (the "Lock-up Agreements"). The
Company will cause the Transfer Agent (as defined herein) to place "stop
transfer" orders on the Company's stock ledgers in order to effect the Lock-up
Agreements.
(W) There are no claims, payments, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company or any of its officers, directors, stockholders,
employees or affiliates that may affect the Underwriters' compensation as
determined by the Commission and the National Association of Securities Dealers,
Inc. (the "NASD").
(X) The Securities have been approved for quotation on the Nasdaq
SmallCap Market and the Boston Stock Exchange.
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(Y) Neither the Company nor any of its officers, employees,
agents or any other person acting on behalf of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency (domestic or foreign) or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which might subject the
Company or any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign). The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(Z) Except as set forth in the Prospectus, no officer, director
or stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Regulations) of any of the
foregoing persons or entities has or has had, either directly or indirectly, (i)
an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficiary interest in any contract or agreement
to which the Company is a party or by which it may be bound or affected. Except
as set forth in the Prospectus there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any officer,
director, principal shareholder (as such term is used in the Prospectus) of the
Company, or any affiliate or associate of any of the foregoing persons or
entities which are required to be disclosed in the Prospectus.
(AA) The Company is not, and does not intend to conduct its
business in a manner in which it would become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(BB) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' Counsel (as defined in
Section 4(d) herein) shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
(CC) The minute books of the Company have been made available to
the Underwriters and contain a complete summary of all meetings and actions of
the directors and stockholders of the Company, since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
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(DD) The Company has not distributed and will not distribute
prior to the Closing Date any offering material in connection with the offering
and sale of the Shares in this offering other than the Prospectus, the
Registration Statement and the other materials permitted by the Act. Except as
described in the Prospectus, no holders of any Securities of the Company or of
any options, warrants or other convertible or exchangeable Securities of the
Company have the right to include any Securities issued by the Company as part
of the Registration Statement or to require the Company to file a registration
statement under the Act and no person or entity holds any anti-dilution rights
with respect to any Securities of the Company.
(EE) Each of the Company and its subsidiaries maintains insurance
by insurers of recognized financial responsibility of the types and in the
amounts as the Company believes are prudent and adequate for the business in
which it is engaged, including, but not limited to, insurance covering real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect. The Company
has delivered to the Underwriter's Counsel satisfactory summaries of these
insurance policies. The Company has no reason to believe that it will not be
able to renew existing insurance coverage with respect to the Company as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business, in either case, at a cost that
would not have a material adverse effect on the financial condition, operations,
business, assets or properties of the Company. The Company has not failed to
file any material claims, has no material disputes with its insurance company
regarding any claims submitted under its insurance policies, and has complied in
material respects with all material provisions contained in its insurance
policies.
2. Purchase, Sale and Delivery of the Securities.
----------------------------------------------
(A) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly agrees to purchase from the Company, at a price equal
to $__________ per Share, that number of Firm Securities set forth in Schedule A
opposite the name of such Underwriter, subject to such adjustment as the
Representative in its discretion shall make to eliminate any sales or purchases
of fractional shares, plus any additional numbers of Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(B) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 168,750 shares of Common Stock at a price of $_____ per share of
Common Stock. The option granted hereby will expire 45 days after (i) the date
the Registration Statement becomes effective, if the Company has elected not to
rely on Rule 430A under the Regulations, or (ii) the date of this Agreement if
the Company has elected to rely upon Rule 430A under the Regulations, and may be
exercised in whole or in part from time to time (but not
-11-
on more than two (2) occasions) only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the Firm
Securities upon notice by the Representative to the Company setting forth the
number of Option Securities as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for any such
Option Securities. Any such time and date of delivery (an "Option Closing Date")
shall be determined by the Representative, but shall not be later than three
full business days after the exercise of said option, nor in any event prior to
the Closing Date, as hereinafter defined, unless otherwise agreed upon by the
Representative and the Company. Nothing herein contained shall obligate the
Underwriters to exercise the over-allotment option described above. No Option
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(C) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of National,
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other place
as shall be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 9:00 a.m. (New York time) on ______________, 1997, or
at such other time and date as shall be agreed upon by the Representative and
the Company, but no more than four (4) business days after the date hereof (such
time and date of payment and delivery being herein called the "Closing Date").
In addition, in the event that any or all of the Option Securities are purchased
by the Underwriters, payment of the purchase price for, and delivery of
certificates for, such Option Securities shall be made at the above mentioned
office of National or at such other place as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in the
notice from the Representative to the Company. Delivery of the certificates for
the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters, of the purchase price for the
Firm Securities and the Option Securities, if any, to the order of the Company.
In the event such option is exercised, each of the Underwriters, acting
severally and not jointly, shall purchase that proportion of the total number of
Option Securities then being purchased which the number of Firm Securities set
forth in Schedule A hereto opposite the name of such Underwriter bears to the
total number of Firm Securities, subject in each case to such adjustments as the
Representative in their discretion shall make to eliminate any sales or
purchases of fractional shares. Certificates for the Firm Securities and the
Option Securities, if any, shall be in definitive, fully registered form, shall
bear no restrictive legends and shall be in such denominations and registered in
such names as the Underwriters may request in writing at least three (3)
business days prior to Closing Date or the relevant Option Closing Date, as the
case may be. The certificates for the Firm Securities and the Option Securities,
if any, shall be made available to the Representative at such office or such
other place as the Representative may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the relevant Option Closing Date, as the case may be.
(D) On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants at a purchase price of $0.0001 per
warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of 112,500 shares of Common
-12-
Stock. The Representative's Warrants shall expire five (5) years after the
effective date of the Registration Statement and shall be exercisable for a
period of four (4) years commencing one (1) year from the effective date of the
Registration Statement at a price equaling one hundred twenty percent (120%) of
the initial public offering price of the Shares. The Representative's Warrant
Agreement and form of Warrant Certificate shall be substantially in the form
filed as Exhibit 4.2 to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Shares and the Redeemable Warrants. As soon
---------------------------------------------------------
after the Registration Statement becomes effective as the Representative deems
advisable, the Underwriters shall make a public offering of the Shares (other
than to residents of or in any jurisdiction in which qualification of the Shares
is required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Representative may from time to time increase
or decrease the public offering price after distribution of the Shares has been
completed to such extent as the Representative, in its sole discretion, deems
advisable. The Underwriters may enter into one or more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
4. Covenants of the Company. The Company covenants and agrees with
------------------------
each of the Underwriters as follows:
(A) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Shares
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Regulations.
(B) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state Securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any
-13-
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
Securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will use its best efforts to obtain
promptly the lifting of such order.
(C) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) in accordance with the requirements of the
Act.
(D) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such amendment or supplement to which the
Representative or Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP ("Underwriters' Counsel") shall
reasonably object.
(E) The Company shall endeavor in good faith, in cooperation with
the Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the Securities
laws of such jurisdictions as the Representative may reasonably designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information as may be required for such purpose;
provided, however, the Company shall not be required to qualify as a foreign
-------- -------
corporation or become subject to service of process in any such jurisdiction. In
each jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agree that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(F) During the time when a prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act, as now and hereafter amended, and by
the Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus, or any amendments or supplements thereto.
If at any time when a prospectus relating to the Securities is required to be
delivered under the Act, any event shall have occurred as a result of which, in
the opinion of counsel for the Company or Underwriters' Counsel, the Prospectus,
as then amended or supplemented, includes an untrue statement of a material fact
or omits to state any material fact required to be
-14-
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend or supplement the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to Underwrit
ers' Counsel, and the Company will furnish to the Underwriters copies of such
amendment or supplement as soon as available and in such quantities as the
Underwriters may request.
(G) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(H) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
will make available to its stockholders unaudited quarterly reports of earnings,
and will deliver to the Representative:
(I) concurrently with furnishing such quarterly reports to
its stockholders, statements of income of the Company for each quarter
in the form furnished to the Company's stockholders;
(II) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the report thereon of independent
certified public accountants;
(III) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(IV) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
the Nasdaq SmallCap Market or any Securities exchange;
-15-
(V) every press release and every material news item or
article of interest to the financial community in respect of the
Company or its affairs which was released or prepared by or on behalf
of the Company; and
(VI) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its businesses
which the Representative may reasonably request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(I) The Company will maintain a transfer agent (the "Transfer
Agent") and, if necessary under the jurisdiction of incorporation of the
Company, a registrar (which may be the same entity as the transfer agent) for
the Common Stock and the Representative's Warrants.
(J) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may reasonably
request.
(K) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of duly
executed Lock-up Agreements. On or before the Closing Date, the Company shall
deliver instructions to the Transfer Agent authorizing it to place appropriate
stop transfer orders on the Company's ledgers.
(L) The Company shall use its best efforts to cause its officers,
directors, stockholders or affiliates (within the meaning of the Regulations)
not to take, directly or indirectly, any action designed to, or which might in
the future reasonably be expected to cause or result in, unlawful stabilization
or manipulation of the price of any Securities of the Company.
(M) The Company shall apply the net proceeds from the sale of the
Securities substantially in the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus.
(N) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Regulations, and all such reports, forms and
documents filed will comply as to form and
-16-
substance with the applicable requirements under the Act, the Exchange Act, and
the Regulations.
(O) The Company shall cause the Securities to be quoted on the
Nasdaq SmallCap Market or Boston Stock Exchange, and for a period of two (2)
years from the date hereof shall use its best efforts to maintain the quotation
of the Securities to the extent outstanding.
(P) For a period of two (2) years from the Closing Date, the
Company shall furnish to the Representative, at the Company's sole expense,
monthly consolidated transfer sheets relating to the Common Stock.
(Q) For a period of five (5) years after the effective date of
the Registration Statement the Company shall, at the Company's sole expense,
take all necessary and appropriate actions to further qualify the Company's
Securities in all jurisdictions of the United States in order to permit
secondary sales of such Securities pursuant to the Blue Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(R) The Company (i) prior to the effective date of the
Registration Statement, has filed a Form 8-A with the Commission providing for
the registration of the Common Stock under the Exchange Act and (ii) as soon as
practicable, will use its best efforts to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions or
▇▇▇▇▇'▇ OTC Manual and to continue such inclusion for a period of not less than
five (5) years.
(S) The Company agrees that for a period of twelve (12) months
following the effective date of the Registration Statement it will not, without
the prior written consent of National, offer, issue, sell, contract to sell,
grant any option for the sale of or otherwise dispose of any Common Stock, or
Securities convertible into Common Stock, except for the issuance of the Option
Securities, the Representative's Warrants, and shares of Common Stock issued
upon the exercise of currently outstanding warrants or options, or options and
warrants granted in the ordinary course of business consistent with prior
practice.
(T) Until the completion of the distribution of the Securities,
the Company shall not without the prior written consent of National or
Underwriters' Counsel, issue, directly or indirectly any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(U) For a period equal to the lesser of (i) five (5) years from
the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not
-17-
take any action or actions which may prevent or disqualify the Company's use of
an appropriate form for the registration under the Act of the Representative's
Securities.
(V) The Company agrees that it shall use its best efforts, which
shall include, but shall not be limited to, the solicitation of proxies, to
elect one (1) designee of National to the Company's Board of Directors for a
period of five (5) years following the Closing, provided that such designee is
reasonably acceptable to the Company and that such director may be excluded from
consideration of certain confidential matters which, in the good faith judgment
of a majority of the other directors, such director's presence would not be
appropriate.
(W) The Company agrees that within forty-five (45) days after the
Closing it shall retain a public relations firm which is reasonably acceptable
to National. The Company shall keep such public relations firm, or any
replacement, for a period of two (2) years from the Closing. Any replacement
public relations firm shall be retained only with the consent of National, which
shall not be unreasonably withheld.
(X) The Company agrees that any and all future transactions
between the Company and its officers, directors, principal stockholders and the
affiliates of the foregoing persons will be on terms no less favorable to the
Company than could reasonably be obtained in arm's length transactions with
independent third parties, and that any such transactions also be approved by a
majority of the Company's outside independent directors disinterested in the
transaction.
(Y) The Company shall prepare and deliver, at the Company's sole
expense, to National within the one hundred and twenty (120) day period after
the later of the effective date of the Registration Statement or the latest
Option Closing Date, as the case may be, one bound volume containing all
correspondence with regulatory officials, agreements, documents and all other
materials in connection with the offering as requested by the Underwriters'
Counsel.
5. Payment of Expenses.
-------------------
(A) The Company hereby agrees to pay on each of the Closing Date
and each Option Closing Date (to the extent not previously paid) all expenses
and fees (other than fees of Underwriters' Counsel, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement, and the Representative's Warrant Agreement, including, without
limitation, (i) the fees and expenses of accoun tants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, filing, delivery and mailing (including the
payment of postage with respect thereto) of the Registration Statement and the
Prospectus and any amendments and supplements thereto and the duplication,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Agreement Among Underwriters, the Selected Dealers
-18-
Agreements, the Powers of Attorney, and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters and
such dealers as the Underwriters may request, in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the
certificates representing the Securities, (iv) the qualification of the
Securities under state or foreign Securities or "Blue Sky" laws and
determination of the status of such Securities under legal investment laws,
including the costs of word processing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and reasonable disbursements and fees of counsel in connection
therewith, (v) advertising costs and expenses, including but not limited to the
costs and expenses incurred by the Company and the Representative in connection
with the "road show," information meetings and presentations, bound volumes and
prospectus memorabilia and reasonable "tombstone" advertisement expenses, (vi)
experts, (vii) fees and expenses of the transfer agent and registrar, (viii) the
fees payable to the Commission and the NASD, (ix) issue and transfer taxes, if
any and (x) the fees and expenses incurred in connection with the listing of the
Common Stock on the Nasdaq SmallCap Market and the Boston Stock Exchange and any
other market or exchange.
(B) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 11, the
Company shall reimburse and indemnify the Representative for all of its actual
out-of-pocket expenses on an accountable basis, including the fees and
disbursements of Underwriters' Counsel, less any amounts already paid pursuant
to Section 5(c) hereof provided that National shall notify the Company of any
single expense or any series of similar expenses which in the aggregate exceed
$5,000 (provided further that such notice requirement shall not apply to
National's actual out-of-pocket legal expenses).
(C) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to the
Representative on the Closing Date by certified or bank cashier's check or, at
the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Firm Securities, $30,000 of which has been paid to date. In the event the
Representative elects to exercise the over-allotment option described in Section
2(b) hereof, the Company further agrees to pay to the Representative on the
Option Closing Date (by certified or bank cashier's check or, at the
Representative's election, by deduction from the proceeds of the offering) a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Option Securities.
6. Conditions of the Underwriters' Obligations. The obligations of
-------------------------------------------
the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Option Closing Date, if any,
of the statements of officers of the Company made pursuant to
-19-
the provisions hereof; and the performance by the Company on and as of the
Closing Date and each Option Closing Date, if any, of its covenants and
obligations hereunder and to the following further conditions:
(A) The Registration Statement shall have become effective not
later than 5:00 p.m., New York City time, on the date prior to the date of this
Agreement or such later date and time as shall be consented to in writing by the
Representative, and, at Closing Date and each Option Closing Date, if any, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of Underwriters' Counsel. If the Company has elected
to rely upon Rule 430A of the Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Regulations within the
prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Regulations.
(B) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's reasonable opinion, is
material, or omits to state a fact which, in the Representative's reasonable
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(C) At Closing Date, the Underwriters shall have received the
favorable opinion of Fenwick & West LLP ("Fenwick & West"), counsel to the
Company, dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, and is duly qualified or licensed to do business and is
in good standing as a foreign corporation in all jurisdictions of
the United States of America in which the nature of the
activities conducted by it or the character of the assets owned
or leased by it makes such license or qualification necessary,
except to the extent that the failure to so qualify would not
have a material adverse effect on the Company's business. To such
counsel's knowledge, (a) the Company
-20-
has full corporate power and corporate authority to own or lease
all the assets owned or leased by it and to conduct its business
as described in the Prospectus, and (b) the Company has all
governmental licenses, permits, consents, orders, approvals and
other authorizations ("Permits") necessary to carry on its
business as described in the Prospectus, except for such Permits
the absence of which would not have a material adverse effect on
the Company's business.
(ii) except as described in the Prospectus, to such
counsel's knowledge the Company does not own an interest in any
corporation, limited liability company, partnership, joint
venture, trust or other business entity;
(iii) to such counsel's knowledge, at the dates set forth
in the Prospectus, the Company had a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus (except
for insignificant rounding or other differences) under the
captions "Capitalization" and "Description of Capital Stock." To
the knowledge of such counsel, the Company is not a party to or
bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, rights, warrants, options or
other Securities, except for this Agreement, the Representative's
Warrant Agreement, or as described in the Prospectus. The
statements set forth in the Prospectus under the captions
"Description of Capital Stock" and "Shares Eligible for Future
Sale," insofar as they purport to constitute a summary of the
terms of the Common Stock and warrants (including without
limitation the Representative's Warrants) which will be
outstanding after the Closing Date, are accurate in all material
respects. At the date set forth under "Capitalization" in the
Prospectus, all issued and outstanding Securities of the Company
have been duly authorized and validly issued and are
nonassessable and, to such counsel's knowledge, are fully paid;
and none of such Securities were issued in violation of any
preemptive or similar rights known to such counsel of any holders
of any security of the Company imposed by the Certificate of
Incorporation, Bylaws or any agreement known to such counsel to
which the Company is a party or by which to such counsel's
knowledge it is bound. The Securities to be sold by the Company
hereunder and under the Representative's Warrant Agreement are
not and will not be subject to any preemptive or other similar
rights of any stockholder imposed by the Certificate of
Incorporation, Bylaws or any agreement known to such counsel to
which the Company is a party or by which to such counsel's
knowledge it is bound, have been duly authorized and, when
issued, paid for and delivered in accordance with their terms,
will be validly issued, fully paid and nonassessable; all
corporate approvals and consents of the Board of Directors and
stockholders of the Company
-21-
required to be taken for the authorization, issue and sale of the
Securities has been duly and validly taken. The certificates
representing the Securities are in due and proper form under
Delaware law. The Representative's Warrants constitute valid,
binding and enforceable obligations of the Company to issue and
sell, upon exercise thereof and payment therefor and subject to
the terms and conditions thereof and the Representative's Warrant
Agreement, the number and type of Securities of the Company
called for thereby (subject to the limitations regarding
enforceability of obligations set forth elsewhere in such
counsel's opinion). Upon the issuance and delivery of and payment
for the Securities pursuant to this Agreement, and upon
registration of such Securities in the names of the Underwriters
in the stock and warrant records of the Company, the Underwriters
will be the owners of such Securities, free and clear of any
adverse claim, assuming for purposes of such counsel's opinion
that the Underwriters are purchasing such Securities in good
faith and without notice of any adverse claim;
(iv) based solely upon the oral advice to such counsel
from the Staff of the Commission, (A) the Registration Statement
is effective under the Act, and, if applicable, filing of all
pricing information has been timely made in the appropriate form
under Rule 430A, (B) no stop order suspending the use of the
Preliminary Prospectus, the Registration Statement or Prospectus
or any part of any thereof or suspending the effectiveness of the
Registration Statement has been issued and (C) no proceedings for
that purpose have been instituted or are pending or, to such
counsel's knowledge, threatened or contemplated under the Act;
(v) each of any preliminary prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial
and statistical data included therein as to which such counsel
expresses no opinion) comply as to form in all material respects
with the requirements of the Act and the Regulations.
Such counsel shall state that, during the course of the
preparation of the Registration Statement and the Prospectus,
such counsel participated in conferences with officers and other
representatives of the Company, the Representative, Underwriters'
counsel and the independent public accountants of the Company, at
which conferences the contents of the Registration Statement and
the Prospectus and other related matters were discussed, and
although such counsel has not verified the accuracy, completeness
or fairness of the statements contained in the Registration
Statement or the Prospectus, nothing has come to such counsel's
attention that causes such counsel to believe that, as of its
effective date, the Registration Statement (other than financial
statements and any financial or
-22-
statistical data derived therefrom as to which such counsel
expresses no opinion) contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading or
that, as of its date, the Prospectus (other than the financial
statements and any financial or statistical data therein as to
which such counsel expresses no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or that,
as of the date of such counsel's opinion, either the Registration
Statement or the Prospectus (other than the financial statements
and any financial or statistical data derived therefrom as to
which such counsel expresses no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(vi) to such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act to
be described in the Registration Statement and the Prospectus and
filed as exhibits to the Registration Statement other than those
described in the Registration Statement and the Prospectus and
filed as exhibits thereto; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or
amendment thereto of contracts and other agreements to which the
Company is a party that are expressly referred to in the
Registration Statement and the Prospectus, are accurate in all
material respects; (C) there is not pending or overtly threatened
against the Company any action, arbitration, proceeding,
litigation, governmental or other proceeding, domestic or foreign
(an "Action"), which (x) is required by the Regulations to be
disclosed in the Registration Statement which is not so disclosed
(and such proceedings as are summarized in the Registration
Statement are accurately summarized in all material respects),
(y) questions the validity of the capital stock of the Company or
this Agreement or the Representative's Warrant Agreement, or of
any action taken or to be taken by the Company pursuant to or in
connection with any of the foregoing or in which there is a
reasonable possibility of an adverse decision which could
reasonably be expected to result in a material adverse change in
the business of the Company, which could reasonably be expected
to materially adversely affect the present or prospective ability
of the Company to perform its obligations under this Agreement or
the Representative's Warrant Agreement;
-23-
(vii) the Company has the corporate power and corporate
authority to enter into each of this Agreement and the
Representative's Warrant Agreement and to consummate the
transactions provided for therein; and each of this Agreement and
the Representative's Warrant Agreement has been duly authorized,
executed and delivered by the Company. Each of this Agreement and
the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party
thereto, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms (subject to the limitations regarding enforceability of
obligations set forth elsewhere in such counsel's opinion), and
to such counsel's knowledge none of the Company's execution,
delivery or performance of this Agreement and the
Representative's Warrant Agreement, the consummation by the
Company of the transactions contemplated herein or therein, or
the conduct of the Company's business as described in the
Registration Statement, the Prospectus, and any amendments or
supplements thereto, materially conflicts with or results in any
material breach or material violation of any of the terms or
provisions of, or constitutes a material default under, or result
in the creation or imposition of any material lien, charge,
claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company pursuant to the
terms of (A) the Certificate of Incorporation or Bylaws, (B) any
material agreement or instrument of the Company identified by the
Company to such counsel as material to the business of the
Company, to which the Company is a party or by which it is bound
("Material Agreement"), or (C) any federal, state or local
statute, rule or regulation known to such counsel to be
applicable to the Company or any judgment, decree or order known
to such counsel of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body having
jurisdiction over the Company or any of its activities or
properties, in each case where such conflict, breach, violation
or default could reasonably be expected to have a material
adverse effect on the Company's business;
(viii) no consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or
other body (other than such as may be required under Blue Sky
laws, as to which such counsel expressses no opinion or under
federal Securities laws, as to which such counsel expresses no
opinion pursuant to this subsection (viii)) is required in
connection with the issuance of the Firm Securities and
Representative's Warrant pursuant to the Prospectus and the
Registration Statement, the performance of this Agreement and the
Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby;
-24-
(ix) to such counsel's knowledge, the description of the
real property lease agreements to which the Company is a party
that are expressly referred to in the Registration Statement and
Prospectus are accurate in all material respects;
(x) to the knowledge of such counsel, and except as
disclosed in the Registration Statement and the Prospectus, (A)
the Company is not in material breach of, or in material default
under, any term or provision of any Material Agreement, in each
case where such breach or default could reasonably be expected to
have a material adverse effect on the business of the Company,
and (B) the Company is not in material violation of any term or
provision of its Certificate of Incorporation or Bylaws, or in
material violation of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation known to such counsel
to be applicable to the Company, in each case where such breach,
default or violation could reasonably be expected to have a
material adverse effect on the Company's business;
(xi) the statements in the Prospectus under "Dividend
Policy," "Description of Capital Stock," and "Shares Eligible for
Future Sale," insofar as such statements constitute a summary of
law, descriptions of statutes, licenses, rules or regulations or
legal conclusions expressly referred to therein, are correct in
all material respects;
(xii) the Common Stock has been accepted for quotation on
the Nasdaq SmallCap Market and the Boston Stock Exchange; and
(xiii) to such counsel's knowledge, except as disclosed in
the Registration Statement and Prospectus, no person,
corporation, trust, partnership, association or other entity has
the right under any Material Agreement or other agreement
identified in items ____ through ____ in the third paragraph of
such counsel's opinion to include and/or register any Securities
of the Company in the Registration Statement, require the Company
to file any registration statement or, if filed, to include any
security in such registration statement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws, rules and regulations of
the United States and the laws, rules and regulations of the State of Delaware,
to the extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written statements
of officers of departments of various jurisdictions having custody of
-25-
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to Underwriters' Counsel if requested. The opinion of such counsel shall state
that knowledge shall not include the knowledge of a director or officer of the
Company who is affiliated with such firm in his or her capacity as an officer or
director of the Company. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel.
At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Fenwick & West, counsel to the Company, dated
the Option Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel confirming as of such Option Closing Date
the statements made by Fenwick & West in its opinion delivered on the Closing
Date.
(C) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
(D) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is adverse to the Company; (iii) the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness which default has not been waived; (iv) the Company
shall not have issued any Securities (other than the Securities) or declared or
paid any dividend or made any distribution in respect of its capital stock of
any class and there has not been any change in the capital stock, or any
material increase in the debt (long or short term) or liabilities or obligations
of the Company (contingent or otherwise) except for the issuance of the Option
Securities, the Representative's Warrants, and shares of Common Stock issued
upon the exercise of currently outstanding warrants or options, or options and
warrants granted in the ordinary course of business consistent with prior
practice; (v) no material amount of the assets of the Company shall have been
pledged or mortgaged, except as set forth in the Registration Statement and
Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall have
been pending or threatened (or circum stances giving rise to same) against the
Company, or affecting any of its respective properties or businesses before or
by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the
-26-
Company, except as set forth in the Registration Statement and Prospectus; and
(vii) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
(E) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate of the Company signed on
behalf of the Company by the principal executive officer of the Company, dated
the Closing Date or Option Closing Date, as the case may be, to the effect that
such executive has carefully examined the Registration Statement, the Prospectus
and this Agreement, and that:
(I) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and
the Company has complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its part
to be performed or satisfied at or prior to such Closing Date or
Option Closing Date, as the case may be;
(II) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and
no proceedings for that purpose have been instituted or are
pending or, to the best of each of such person's knowledge after
due inquiry, are contemplated or threatened under the Act;
(III) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all
statements and information required by the Act to be included
therein, and none of the Registration Statement, the Prospectus
nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and neither the Preliminary Prospectus or
any supplement, as of their respective dates, thereto included
any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading; and
(IV) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) the Company has not incurred up to and including
the Closing Date or the Option Closing Date, as the case may be,
other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent; (b) the Company
has not paid or declared any dividends or other distributions on
its capital stock; (c) the Company has not entered into any
transactions not in the ordinary course of business; (d) there
has not been any change in the capital
-27-
stock as described in the Registration Statement and Prospectus
or material increase in long-term debt or any increase in the
short-term borrowings (other than any increase in the short-term
borrowings in the ordinary course of business) of the Company,
(e) the Company has not sustained any loss or damage to its
property or assets, whether or not insured, (f) there is no
litigation which is pending or threatened (or circumstances
giving rise to same) against the Company or any affiliated party
of any of the foregoing which is required to be set forth in an
amended or supplemented Prospectus which has not been set forth,
and (g) there has occurred no event required to be set forth in
an amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(F) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters.
(G) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters and Underwriters' Counsel, from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇:
(I) confirming that they are independent certified
public accountants with respect to the Company within the
meaning of the Act and the applicable Rules and Regulations;
(II) stating that it is their opinion that the
financial statements and supporting schedules of the Company
included in the Registration Statement comply as to form in
all material respects with the applicable accounting
requirements of the Act and the Regulations thereunder and
that the Representative may rely upon the opinion of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ with respect to the financial statements and
supporting schedules included in the Registration Statement;
(III) stating that, on the basis of a limited review
which included a reading of the latest available unaudited
interim financial statements of the Company (with an
indication of the date of the latest available unaudited
interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors
and the various committees of the board of directors of the
Company, consultations with officers and other employees of
the Company responsible for financial and accounting matters
-28-
and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe
that (A) the unaudited financial statements and supporting
schedules of the Company included in the Registration
Statement, if any, do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Regulations or are not fairly presented in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more
than five (5) days prior to the effective date of the
Registration Statement, there has been any change in the
capital stock or material increase in long-term debt of the
Company, or any material decrease in the stockholders'
equity or net current assets or net assets of the Company as
compared with amounts shown in the most recent balance sheet
included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or,
if there was any change or decrease, setting forth the
amount of such change or decrease.
(IV) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from
the general accounting records, including work sheets, of
the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not
constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and
found them to be in agreement; and
(V) statements as to such other material matters
incident to the transaction contemplated hereby as the
Representative may reasonably request.
(H) At the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ a letter, dated
as of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (iv) of Subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial information
as specified by the Representative and deemed to be a part of the Registration
-29-
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (iv).
(I) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(J) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(K) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement, substantially in the form filed as Exhibit 4(b), to the Registration
Statement, in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(L) On or before the Closing Date, the Common Stock shall have
been duly approved for quotation on the Boston Stock Exchange.
(M) On or before the Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, subject to the
exceptions set forth in Section (v) above, in final form and substance
satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Represen tative so elect, they may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
---------------
(A) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may
-30-
not agree to any such settlement without the prior written consent of the
Company), as and when incurred, arising out of, based upon or in connection with
(i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time amended and supplemented); or (B) in any
application or other document or communication (in this Section 7 collectively
called "application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company in any jurisdiction
in order to qualify the Securities under the Securities laws thereof or filed
with the Commission, any state Securities commission or agency, The Boston Stock
Exchange or any Securities exchange; or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of the Prospectus, in the light
of the circumstances under which they were made), unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be; or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement. The
indemnity agreement in this subsection (a) shall be in addition to any liability
which the Company may have at common law or otherwise.
(B) Each of the Underwriters agrees severally, but not jointly,
to indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company, within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter or the Representative expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriters in connection with
this Offering. The Company acknowledges that the statements with respect to the
public offering of the Securities set forth under the heading "Underwriting" and
the stabilization legend in the Prospectus have been furnished by the
Underwriters expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriters or the Representative
for inclusion in the Prospectus.
(C) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure to so notify an indemnifying party shall not relieve it
-31-
from any liability which it may have otherwise or which it may have under this
Section 7, except to the extent that it has been prejudiced in any material
respect by such failure). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the reasonable fees and expenses of one additional counsel shall be
borne by the indemnifying parties. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
-------- -------
unreasonably withheld.
(D) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations.
-32-
In any case where the Company is a contributing party and the Underwriters are
the indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities (before
deducting expenses other than underwriting discounts and commissions) bear to
the total underwriting discounts received by the Underwriters hereunder, in each
case as set forth in the table on the Cover Page of the Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 12(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements of the Company
at the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution agreements contained in Section 7 hereof shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, any controlling person of either
the Underwriter or the Company, and shall survive termination of this Agreement
or the issuance and delivery of the Securities to the Underwriters and the
Representative, as the case may be.
-33-
9. Effective Date.
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(A) This Agreement shall become effective at 5:00 p.m., New York
City time, on the date hereof. For purposes of this Section 9, the Securities to
be purchased hereunder shall be deemed to have been so released upon the earlier
of dispatch by the Representative of telegrams to Securities dealers releasing
such shares for offering or the release by the Representative for publication of
the first newspaper advertisement which is subsequently published relating to
the Securities.
10. Termination.
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(A) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, if between the
date of this Agreement and the Closing Date or the Option Closing Date, as the
case may be, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Representative's reasonable opinion will in the
immediate future materially disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if trading
on the New York Stock Exchange, the American Stock Exchange, or in the over-the-
counter market shall have been suspended, or minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for Securities shall
have been required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iv) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (v) if a
banking moratorium has been declared by a state or federal authority; or (vi) if
the Company shall have sustained a loss material or substantial to the Company
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in the Representative's opinion, make it inadvisable to proceed
with the delivery of the Securities; or (viii) if there shall have been such a
material adverse change in the prospects or conditions of the Company, or such
material adverse change in the general market, political or economic conditions,
in the United States or elsewhere as in the Representative's judgment would make
it inadvisable to proceed with the offering, sale and/or delivery of the
Securities.
(B) If this Agreement is terminated by the Representative in
accordance with any of the provisions of Section 6, Section 10(a) or Section 11,
the Company shall promptly reimburse and indemnify the Underwriters pursuant to
Section 5(b) hereof. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6, 10, 11 and 12 hereof),
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
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11. Substitution of the Underwriters. If one or more of the
--------------------------------
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(A) if the number of Defaulted Securities does not exceed 10% of
the total number of Firm Securities to be purchased on such date, the non-
defaulting Underwriters shall be obligated to purchase the full amount thereof
in the proportions that their respective underwriting obligations hereunder bear
to the underwriting obligations of all non-defaulting Underwriters, or
(B) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities to be purchased on such date, this Agreement
shall terminate without liability on the part of any nondefaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
----------------------
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any non-
defaulting party other than pursuant to Section 5, Section 7 and Section 10
hereof. No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as
-------
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/o National Securities Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, with a copy,
which shall not constitute notice, to Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
-▇▇-
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. Annex, Esq. Notices to the Company shall be
directed to the Company at ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Osmotics Corporation, ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy, which shall not
constitute notice, to Fenwick & West LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: C. ▇▇▇▇▇ ▇▇▇▇▇, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
-------
shall be binding upon the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed
------------
and enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
----------------------------
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
OSMOTICS CORPORATION
By: ______________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
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CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule A hereto.
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SCHEDULE A
ERROR! BOOKMARK NOT DEFINED. NUMBER OF SHARES OF COMMON
NAME OF UNDERWRITERS STOCK TO BE PURCHASED
-------------------- ---------------------
National Securities Corporation
TOTAL................... 1,125,000 1,125,000
SCH. A-1