EXHIBIT 1.1
U.S. REMODELERS, INC.
1,400,000 UNITS
EACH UNIT COMPRISED OF
ONE SHARE OF COMMON STOCK
AND
ONE REDEEMABLE COMMON STOCK PURCHASE WARRANT
(AND ONE SHARE OF COMMON STOCK ISSUABLE UNDER THE WARRANT)
UNDERWRITING AGREEMENT
----------------------
Dallas, Texas
_________________, 1998
First London Securities Corporation
As Representative of the Several
Underwriters named in Schedule A
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
U.S. Remodelers, Inc. (the "Company"), on the basis of the representations,
warranties, covenants and conditions contained herein, hereby proposes to issue
and sell to such Underwriters as named in Schedule A (the "Underwriters") to
this Underwriting Agreement (the "Agreement"), for whom First London Securities
Corporation ("First London") is acting as the Representative (the
"Representative"), pursuant to the terms of this Agreement, on a "firm
commitment" basis, 1,400,000 Units (the "Securities"), at $5.125 per Unit, each
Unit comprised of one share of common stock, par value $.01 per share (the
"Share"), at $5.00 per Share, and one redeemable common stock purchase warrant
(the "Warrant"), at $.125 per Warrant (each such price the "Initial Public
Offering Price"). Each Warrant is exercisable to purchase one share of common
stock (the "Common Stock") at a price equal to $6.25, subject to certain
adjustments, per Share at any time and continuing thereafter during the five
year period commencing on the date hereof, unless such period is extended by the
Company. The date upon which the Securities and Exchange Commission
("Commission") shall declare the registration statement of the Company effective
shall be the "Effective Date." The Warrants are subject to redemption under
certain circumstances. In addition, the Company proposes to grant to the
Underwriters (or, at the option of the Representative, to the Representative,
individually) the option referred to in Section 2(b) to purchase all or any part
of an aggregate of 210,000 Units (collectively, the "Option Securities").
You have advised the Company that you and the other Underwriters desire to
purchase, severally, the Securities, and that you have been authorized by the
Underwriters to execute this Agreement on their behalf. The Company confirms
the agreements made by it with respect to the purchase of the Securities by the
several Underwriters on whose behalf you are signing this Agreement, as follows:
1. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to, and agrees with each of the
Underwriters as of the Effective Date (as defined above), the date of this
Agreement, the Closing Date (as hereinafter defined) and the Option Closing Date
(as hereinafter defined) that:
(a) A registration statement (File No. __________________) on Form SB-2
relating to the public offering of the Securities, including a preliminary form
of the prospectus, copies of which have heretofore been delivered to you, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Commission thereunder, and has been filed
with the Commission under the Act. The Company has prepared in the same manner
and proposes to file, prior to the Effective Date of such registration
statement, an additional amendment or amendments to such registration statement,
including a final form of Prospectus, copies of which shall be delivered to you.
"Preliminary Prospectus" shall mean each prospectus filed pursuant to the Rules
and Regulations under the Act prior to the Effective Date. The registration
statement (including all financial schedules and exhibits) as amended at the
time it becomes effective and the final prospectus included therein are
respectively referred to as the "Registration Statement" and the "Prospectus,"
except that (i) if the prospectus first filed by the Company pursuant to Rule
424(b) of the Rules and Regulations shall differ from said prospectus as then
amended, the term "Prospectus" shall mean the prospectus first filed pursuant to
Rule 424(b), and (ii) if such registration statement or prospectus is amended or
such prospectus is supplemented, after the effective date of such registration
statement and prior to the Option Closing Date (as hereinafter defined), the
terms "Registration Statement" and "Prospectus" shall include such registration
statement and prospectus as so amended, and the term "Prospectus" shall include
the prospectus as so supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent thereto up to the
Option Closing Date, if any, and during such longer period as the Prospectus may
be required to be delivered in connection with sales by the Underwriters or any
selected dealers: (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and Regulations;
and (ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
the Company makes no representations, warranties or agreements as to information
contained in or omitted from the Registration Statement or Prospectus in
reliance upon, and in conformity with, written information furnished to the
Company by the Underwriters specifically for use in the preparation thereof. It
is understood that the statements set forth in the Prospectus with respect to
stabilization, under the heading "Underwriting" and regarding the identity of
counsel to
UNDERWRITING AGREEMENT-PAGE 2
the Underwriters under the heading "Legal Matters" constitute the only
information furnished in writing by the Underwriters for inclusion in the
Prospectus.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus and is duly
qualified to do business as a foreign corporation and is in good standing in all
other jurisdictions in which the nature of its business or the character or
location of its properties requires such qualification, except where failure to
so qualify will not materially affect the Company's business, properties or
financial condition.
(d) The authorized, issued and outstanding securities of the Company as of
the date of the Prospectus is as set forth in the Prospectus under
"Capitalization;" all of the issued and outstanding securities of the Company
has been, or will be when issued as set forth in the Prospectus, duly
authorized, validly issued and fully paid and non-assessable; the issuances and
sales of all such securities complied in all material respects with applicable
federal and state securities laws; the holders thereof have no rights of
rescission against the Company with respect thereto, and are not subject to
personal liability by reason of being such holders; 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; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any securities of the Company have been granted or
entered into by the Company; and all of the securities of the Company, issued
and to be issued as set forth in the Registration Statement, conform to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and paid
for pursuant to this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights of any security holder of
the Company. Neither the filing of the Registration Statement nor the offering
or sale of the Securities as contemplated in this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any securities of the Company, except as described in the
Registration Statement and Prospectus.
The Warrants have been duly authorized and, when issued, delivered and paid
for pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreements pursuant to which such Warrants are to be
issued (the "Warrant Agreements"), which will be substantially in the form filed
as exhibits to the Registration Statement. The shares of Common Stock issuable
upon exercise of the Warrants have been reserved for issuance and when issued in
accordance with the terms of the Warrants and Warrant Agreements, will be duly
and validly authorized, validly issued, fully paid and non-assessable, free of
preemptive rights and no personal liability will attach to the ownership
thereof. Except as provided for in the Warrant Agreement, the Warrant exercise
periods and the Warrant exercise prices may not be changed or revised by the
Company without the prior written consent of First London. The
UNDERWRITING AGREEMENT-PAGE 3
Warrant Agreements have been duly authorized and, when executed and delivered
pursuant to this Agreement will constitute valid and legally binding obligations
of the Company enforceable in accordance with their terms.
Each of the Representative Warrants and the Underlying Warrants (each of
which is defined in the Representative's Warrant Agreements described in Section
12 herein and all of which shall be collectively referred to as the
"Representative's Warrants"), has been duly authorized and, when issued,
delivered and paid for pursuant to the Representative's Warrant Agreements, will
have been duly authorized, issued and delivered and will constitute valid and
legally binding instruments of the Company enforceable in accordance with their
terms and entitled to the benefits provided by the Representative's Warrant
Agreements. The shares of Common Stock issuable upon exercise of each of the
Representative Warrants and the Underlying Warrants have been reserved for
issuance and when issued in accordance with the terms of the Representative
Warrants and the Underlying Warrants, will be duly and validly authorized,
validly issued, fully paid and non-assessable, free of preemptive rights and no
personal liability will attach to the ownership thereof. The exercise period
and the exercise price for each of the Representative Warrants and the
Underlying Warrants may not be changed or revised by the Company without the
prior written consent of First London.
(f) This Agreement, the Warrant Agreements and the Representative's
Warrant Agreements have been duly and validly authorized, executed and delivered
by the Company, and assuming due execution of this Agreement by the other party
hereto, constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency or other laws affecting the rights of
creditors generally. The Company has full power and lawful authority to
authorize, issue and sell the Securities to be sold by it hereunder on the terms
and conditions set forth herein, and no consent, approval, authorization or
other order of any third party or any governmental authority is required in
connection with such authorization, execution and delivery or with the
authorization, issuance and sale of the Securities or the securities to be
issued pursuant to the Representative's Warrant Agreements, except such as may
be required under the Act or state securities laws, or as otherwise have been
obtained.
(g) Except as described in the Prospectus, the Company is not in material
violation, breach of or default under, and consummation of the transactions
herein contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a breach of, or constitute a material default under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any of the property or assets of the Company or any of the terms or provisions
of any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets of the Company is subject, nor will
such action result in any material violation of the provisions of the
certificate of incorporation or bylaws as amended of the Company, or any statute
or any order, rule or regulation applicable to the Company of any court or of
any regulatory authority or other governmental body having jurisdiction over the
Company.
UNDERWRITING AGREEMENT-PAGE 4
(h) Subject to the qualifications stated in the Prospectus, the Company
has good and marketable title to all properties and assets described in the
Prospectus as owned by each of them, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to its business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, the Company is not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone, adverse to rights of the
Company as lessor, sublessor, lessee, or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the right of the Company
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus; and
the Company owns or leases all such properties described in the Prospectus as
are necessary to its operations as now conducted and, except as otherwise stated
in the Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) Ernst & Young LLP, which has examined the financial statements,
together with the related schedules and notes, for the Company and any
subsidiary of it for the periods therein stated, which have been filed with the
Commission as a part of the Registration Statement, which are included in the
Prospectus, are with respect to the Company independent accountants within the
meaning of the Act and the Rules and Regulations.
(j) The financial statements, together with the related notes and
schedules forming a part of the Registration Statement and the Prospectus,
fairly present the financial position and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply; and all audited financial statements, together with the related notes and
schedules, and the unaudited financial information of the Company have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be otherwise
stated therein. The selected and summary financial and statistical data included
in the Registration Statement present fairly the information shown therein and
have been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be
included in the Registration Statement. The Company's internal accounting
controls and procedures are sufficient to cause the Company to prepare financial
statements which comply in all material respects with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved. Except as disclosed to the Representative in writing, during the
preceding five year period, nothing has been brought to the attention of the
Company's management that would result in any reportable condition relating to
the Company's internal accounting procedures, weaknesses or controls.
(k) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus and to and including the
Option Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) the Company has not incurred and will not have
incurred any material liabilities or obligations, direct or contingent, and has
not entered into and will not have entered into any material transactions other
than in the ordinary
UNDERWRITING AGREEMENT-PAGE 5
course of business and/or as contemplated in the Registration Statement and the
Prospectus; (ii) the Company has not and will not have paid or declared any
dividends or have made any other distribution on its capital stock; (iii) there
has not been any change in the capital stock of, or any incurrence of long-term
debt by, the Company; (iv) the Company has not issued any options, warrants or
other rights to purchase the capital stock of the Company; and (v) there has not
been and will not have been any material adverse change in the business,
financial condition or results of operations of the Company, or in the book
value of the assets of the Company, arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending or, to the
knowledge of the Company, threatened, any material action, suit, proceeding,
inquiry, arbitration or investigation against the Company, or any of the
officers or directors of the Company, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth, or properties of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid all taxes shown as due thereon; and there is no tax deficiency which has
been or to the knowledge of the Company might be asserted against the Company
that has not been provided for in the financial statements.
(n) Except as set forth in the Prospectus, the Company has material
licenses, permits and other governmental authorizations currently required for
the conduct of its business or the ownership of its property as described in the
Prospectus and is in all material respects in compliance therewith and owns or
possesses adequate right to use all material patents, patent applications,
trademarks, service marks, trade-names, trademark registrations, service ▇▇▇▇
registrations, copyrights, and licenses necessary for the conduct of such
business and has not received any notice of conflict, with the asserted rights
of others in respect thereof. To the best of the Company's knowledge, none of
the activities or business of the Company are in violation of, or cause the
Company to violate, any law, rule, regulation or order of the United States, any
state, county or locality, or of any agency or body of the United States or of
any state, county or locality, the violation of which would have a material
adverse impact upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company.
(o) The Company has not, directly or indirectly, at any time (i) made any
contributions to any candidate for political office, or failed to disclose fully
any such contribution, in violation of law or (ii) made any payment to any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other taxes
(including franchise, capital stock or other tax, other than income taxes,
imposed by any jurisdiction), if any, that are required to be paid in connection
with the sale and transfer of the Securities to the several Underwriters will
have been fully paid or provided for by the Company and all laws imposing such
taxes will have been fully complied with.
UNDERWRITING AGREEMENT-PAGE 6
(q) All contracts and other documents which are required to be described
in or filed as exhibits to the Registration Statement have been so described
and/or filed.
(r) Except as described in the Registration Statement and Prospectus, no
holders of Common Stock or of any other securities of the Company have the right
to include such Common Stock or other securities in the Registration Statement
and Prospectus.
(s) Except as set forth in or contemplated by the Registration Statement
and the Prospectus, the Company has no material contingent liabilities.
(t) The Company has no equity interest in any corporation, limited
liability company, partnership, joint venture, trust or other entity and has not
entered into any binding agreements to obtain any such equity interest.
(u) The Commission has not issued an order preventing or suspending the
use of any Preliminary Prospectus with respect to the offer and sale of the
Securities and each Preliminary Prospectus, as of its date, has conformed fully
in all material respects with the requirements of the Act and the Rules and
Regulations and did not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein not
misleading.
(v) The Company, nor, to the Company's knowledge, any of its officers,
directors, employees or stockholders, has taken or will take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any of the securities of the Company.
(w) Item 26 of Part II of the Registration Statement accurately discloses
all unregistered securities sold by the Company within the three year period
prior to the date as of which information is presented in the Registration
Statement. All of such securities were sold in transactions which were exempt
from the registration provisions of the Act and not in violation of Section 5
thereof.
(x) Other than as set forth in the Prospectus, the Company has not entered
into any agreement pursuant to which any person is entitled, either directly or
indirectly, to compensation from the Company for services as a finder in
connection with the proposed offering, and the Company agrees to indemnify and
hold harmless the Underwriters against any losses, claims, damages or
liabilities, joint or several, which shall include, but not be limited to, all
costs to defend against any such claim, so long as such claim arises out of
agreements made or allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or 5% or greater stockholder of the Company has any direct or
indirect affiliation or association with any member of the National Association
of Securities Dealers, Inc. ("NASD"), except as disclosed to the Representative
in writing, and, to the knowledge of the Company, no beneficial owner of the
Company's unregistered securities has any direct or indirect affiliation or
association with any NASD member except as disclosed to the Representative in
writing. The Company will advise the
UNDERWRITING AGREEMENT-PAGE 7
Representative and the NASD if any 5% or greater stockholder of the Company is
or becomes an affiliate or associated person of an NASD member participating in
the distribution.
(z) The Company is in compliance in all material respects with all
federal, state and local laws and regulations respecting the employment of its
employees and employment practices, terms and conditions of employment and wages
and hours relating thereto. 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 or local 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 the knowledge of
the Company, threatened against or involving the Company, any predecessor
entity. No question concerning representation exists respecting the employees of
the Company and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company.
(aa) The Company does not maintain, sponsor or contribute to, nor is it
required to contribute to, any program or arrangement that is an "employee
pension benefit plan" an "employee benefit plan," or a "multi-employer plan" as
such terms are defined in Sections 3(2), 3(3) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). The Company has not maintained or contributed to a "defined benefit
plan," as defined in Section 3(35) of ERISA.
(bb) Based upon written representations received from the officers and
directors of the Company, except as disclosed in the Prospectus, during the past
five years, none of the officers or directors of the Company have been:
(i) The subject of a petition under the federal bankruptcy laws or
any state insolvency law filed by or against them, or by a receiver, fiscal
agent or similar officer appointed by a court for their business or
property, or any partnership in which any of them was a general partner at
or within two years before the time of such filing, or any corporation or
business association of which any of them was an executive officer at or
within two years before the time of such filing;
(ii) Convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(iii) The subject of any order, judgment, or decree not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining any of them from, or otherwise
limiting, any of the following activities:
(A) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading
UNDERWRITING AGREEMENT-PAGE 8
Commission, or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as
an affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, or engaging
in or continuing any conduct or practice in connection with any such
activity;
(B) engaging in any type of business practice; or
(C) engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation
of federal or state securities law or federal commodity laws.
(iv) The subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated of any federal or state authority barring,
suspending or otherwise limiting for more than 60 days either of their
right to engage in any activity described in paragraph (3)(i) above, or be
associated with persons engaged in any such activity;
(v) Found by any court of competent jurisdiction in a civil action or
by the Commission to have violated any federal or state securities law, and
the judgment in such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated; or
(vi) Found by a court of competent jurisdiction in a civil action or
by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
(cc) Based upon written representations received from the officers and
directors of the Company, each of the officers and directors of the Company has
reviewed the sections in the Prospectus relating to their biographical data and
equity ownership position in the Company, and all information contained therein
is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
---------------------------------------------
(a) Subject to the terms and conditions of this Agreement and upon the
basis of the representations, warranties and agreements herein contained, the
Company hereby agrees to issue and sell to the Underwriters an aggregate of
1,400,000 Units at $4.61, (the Initial Public Offering Price less 10%), at the
place and time hereinafter specified, in accordance with the number of Units set
forth opposite the names of the Underwriters in Schedule A attached hereto plus
any additional Securities which such Underwriters may become obligated to
purchase pursuant to the provisions of Section 9 hereof. The Securities shall
consist of 1,400,000 Units to be purchased from the Company, and the price at
which the Underwriters shall sell the Securities to the public shall be $5.125
per Unit, or $5.00 per Share and $.125 per Warrant.
UNDERWRITING AGREEMENT-PAGE 9
Delivery of the Securities against payment therefor shall take place at the
offices of First London, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (or at such
other place as may be designated by the Representative) at 10:00 a.m., Eastern
Time, on such date after the Effective Date as the Representative shall
designate, but not later than ten business days (holidays excepted) following
the first date that any of the Securities are released to you, such time and
date of payment and delivery for the Securities being herein called the "Closing
Date."
(b) In addition, subject to the terms and conditions of this Agreement,
and upon the basis of the representations, warranties and agreements herein
contained, the Company hereby grants the "Option" to the Underwriters (or, at
the option of the Representative, to the Representative, individually) to
purchase all or any part of an aggregate of an additional 210,000 Units, at the
same price per Unit as the Underwriters shall pay for the Securities being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Securities being referred to herein as the "Option Securities"). This Option may
be exercised within 45 days after the Closing Date upon notice by the
Underwriters (or the Representative, individually) to the Company advising as to
the amount of Option Securities as to which the Option is being exercised, the
names and denominations in which the certificates for such Option Securities are
to be registered and the time and date when such certificates are to be
delivered. Such time and date shall be determined by the Underwriters (or the
Representative, individually) but shall not be later than ten full business days
after the exercise of the Option, nor in any event prior to the Closing Date,
and such time and date is referred to herein as the "Option Closing Date."
Delivery of the Option Securities against payment therefor shall take place at
the offices of First London. The Option granted hereunder may be exercised only
to cover over-allotments in the sale by the Underwriters of the Securities
referred to in subsection (a) above. In the event the Company declares or pays a
dividend or distribution on its Common Stock, whether in the form of cash,
shares of Common Stock or any other consideration, prior to the Option Closing
Date, such dividend or distribution shall also be paid on the Option Securities
on the Option Closing Date.
(c) The Company will make the certificates for the Securities to be sold
hereunder available to you for inspection at least two full business days prior
to the Closing Date and the Option Closing Date, respectively, at the offices of
First London, and such certificates shall be registered in such names and
denominations as you may request. Time shall be of the essence and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Company to each Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriters hereunder will be delivered by the Company to you
for the accounts of the several Underwriters against payment of the respective
purchase prices by the several Underwriters, by certified or bank cashier's
checks in New York Clearing House funds, payable to the order of the Company or
by wire transfer in New York Clearing House funds.
In addition, in the event the Underwriters (or the Representative,
individually) exercise the Option to purchase from the Company all or any
portion of the Option Securities pursuant to the provisions of subsection (b)
above, payment for such Securities shall be made payable in New York Clearing
House funds at the offices of First London, or by wire transfer, at the time and
date of
UNDERWRITING AGREEMENT-PAGE 10
delivery of such Securities as required by the provisions of subsection (b)
above, against receipt of the certificates for such Securities by the
Representative for the respective accounts of the several Underwriters
registered in such names and in such denominations as the Representative may
request.
It is understood that the Representative, individually and not as
Representative of the several Underwriters, may (but shall not be obligated to)
make any and all payments required pursuant to this Section 2 on behalf of any
Underwriters whose check or checks shall not have been received by the
Representative at the time of delivery of the Securities to be purchased by such
Underwriter or Underwriters. Any such payment by the Representative shall not
relieve any such Underwriter or Underwriters of any of its or their obligations
hereunder. It is also understood that the Representative individually, rather
than all of the Underwriters, may (but shall not be obligated to) purchase the
Option Securities referred to in subsection (b) of this Section 2, but only to
cover over-allotments.
It is understood that the several Underwriters propose to offer the
Securities to be purchased hereunder to the public upon the terms and conditions
set forth in the Registration Statement, after the Registration Statement is
declared effective by the Commission.
3. Covenants of the Company. The Company covenants and agrees with the
------------------------
several Underwriters that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not at
any time, whether before or after the Effective Date, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously been advised and furnished with a copy or to which you or your
counsel shall have objected in writing, acting reasonably, or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to the
later of (i) the completion by the Underwriters of the distribution of the
Securities as contemplated hereby; or (ii) 25 days after the date on which the
Registration Statement shall have become or been declared effective, the Company
will prepare and file with the Commission, promptly upon your request, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary or advisable in connection with the distribution of the Securities
and as mutually agreed to by the Company and the Representative.
After the Effective Date and as soon as the Company is advised thereof, the
Company will advise you, and confirm the advice in writing, of the receipt of
any comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission for
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order, and, if
issued, to obtain as soon as possible the lifting thereof.
UNDERWRITING AGREEMENT-PAGE 11
The Company has caused to be delivered to you copies of each Preliminary
Prospectus and Prospectus, and the Company has consented and hereby consents to
the use of such copies for the purposes permitted by the Act. The Company
authorizes the Underwriters and the selected dealers to use the Prospectus in
connection with the sale of the Securities for such period as in the opinion of
counsel to the Underwriters the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of the
happening, at any time within such period as a Prospectus is required under the
Act to be delivered in connection with sales by the Underwriters or the selected
dealers, of any event of which the Company has knowledge and which materially
affects the Company or the Securities, or which in the opinion of counsel for
the Company or counsel for the Underwriters, should be set forth in an amendment
to the Registration Statement or a supplement to the Prospectus, in order to
make the statements therein not then misleading, in light of the circumstances
existing at the time the Prospectus is required to be delivered to a purchaser
of the Securities, or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the Act and the Rules and Regulations, the
Company will notify you promptly and forthwith prepare and furnish to you copies
of such amended Prospectus or of such supplement to be attached to the
Prospectus, in such quantities as you may reasonably request, in order that the
Prospectus, as so amended or supplemented, will not contain any untrue statement
of a material fact or omit to state any material facts necessary in order to
make the statements in the Prospectus, in the light of the circumstances under
which they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters.
The Company will comply with the Act, the Rules and Regulations thereunder,
the Securities Exchange Act of 1934 (the "1934 Act"), and the rules and
regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will qualify to register the Securities for sale under the
securities or "blue sky" laws of such jurisdictions as the Representative may
designate and will make such applications and furnish such information as may be
required for that purpose and to comply with such laws, provided the Company
shall not be required to qualify as a foreign corporation or a dealer in
securities or to execute a general consent to service of process in any
jurisdiction in any action other than one arising out of the offering or sale of
the Securities. The Company will, from time to time, prepare and file such
statements and reports as are or may be required to continue such qualification
in effect for so long a period as the Underwriters may reasonably request.
(c) If the sale of the Securities provided for herein is not consummated,
the Company shall pay all costs and expenses incident to the performance of the
Company's obligations hereunder, including, but not limited to, all such
expenses itemized in Section 8 hereof, and the actual, accountable out-of-pocket
expenses of the Representative if the offering for any reason is terminated. For
the purposes of this sub-paragraph, the Representative shall be deemed to have
assumed such expenses when they are billed or incurred, regardless of whether
such expenses have been paid. The Representative shall not be responsible for
any expenses of the Company or others, or for any charges or claims relative to
the proposed public offering whether or not consummated.
UNDERWRITING AGREEMENT-PAGE 12
(d) The Company will deliver to you at or before the Closing Date two
signed copies of the Registration Statement, including all financial statements
and exhibits filed therewith, and of each amendment or supplement thereto. The
Company will deliver to or upon the order of the several Underwriters, from time
to time until the Effective Date of the Registration Statement, as many copies
of any Preliminary Prospectus filed with the Commission prior to the Effective
Date of the Registration Statement as the Underwriters may reasonably request.
The Company will deliver to the Underwriters on the Effective Date of the
Registration Statement and thereafter for so long as a Prospectus is required to
be delivered under the Act, from time to time, as many copies of the Prospectus,
in final form, or as thereafter amended or supplemented as the several
Underwriters may from time to time reasonably request.
(e) For so long as the Company is a reporting company under either Section
12 or 15 of the 1934 Act, the Company, at its expense, will furnish to the
Representative during the period ending five years from the Effective Date, (i)
as soon as practicable after the end of each fiscal year, a balance sheet of the
Company and any of its subsidiaries as at the end of such fiscal year, together
with statements of income, surplus and cash flow of the Company and any
subsidiaries for such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent accountants; (ii) as
soon as they are available, a copy of all reports (financial or other) mailed to
security holders; (iii) as soon as they are available, a copy of all non-
confidential documents, including annual reports, periodic reports and financial
statements, furnished to or filed with the Commission under the Act and the 1934
Act; (iv) copies of each press release, news item and article with respect to
the Company's affairs released by the Company; and (v) such other information as
you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its Stockholders
generally.
(g) The Company will make generally available to its stockholders and to
the registered holders of its Warrants and deliver to you as soon as it is
practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (which need
not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the necessary action
to become a reporting company under Section 12 of the 1934 Act, and the Company
will make all filings required to, and will have obtained approval for, the
listing of the Shares and Warrants on The Nasdaq SmallCap Market, the Boston
Stock Exchange or a listing on a national market, and will use its best efforts
to maintain such listing for at least five years from the date of this
Agreement.
(i) For such period as the Securities are registered under the 1934 Act,
the Company will hold an annual meeting of Stockholders for the election of
directors within 180 days after the end of
UNDERWRITING AGREEMENT-PAGE 13
each of the Company's fiscal years and, within 150 days after the end of each of
the Company's fiscal years will provide the Company's stockholders with the
audited financial statements of the Company as of the end of the fiscal year
just completed prior thereto. Such financial statements shall be those required
by Rule 14a-3 under the 1934 Act and shall be included in an annual report
pursuant to the requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption "Use
of Proceeds" in the Prospectus, and will file such reports with the Commission
with respect to the sale of the Securities and the application of the proceeds
therefrom as may be required by Sections 12, 13 and/or 15 of the 1934 Act and
pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and file with
the Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
reasonable opinion of counsel to the Underwriters and the Company may be
reasonably necessary or advisable in connection with the distribution of the
Securities and will use its best efforts to cause the same to become effective
as promptly as possible.
(l) On the Closing Date the Company shall execute and deliver to you the
Representative's Warrant Agreements. The Representative's Warrant Agreements
and Warrant Certificates will be substantially in the form of the
Representative's Warrant Agreements and Warrant Certificates filed as an exhibit
to the Registration Statement.
(m) The Company will reserve and keep available for issuance that maximum
number of its authorized but unissued securities which are issuable upon
exercise of the warrants issuable pursuant to the Representative's Warrant
Agreements outstanding from time to time.
(n) Each beneficial owner of the Company's securities (including Warrants,
Options and Common Stock of the Company), as of the Effective Date, shall agree
in writing, in a form satisfactory to the Representative and Nasdaq, not to
sell, transfer or otherwise dispose of any of such securities or underlying
securities (except in a transaction other than on the open market with a
transferee who agrees to be bound by this provision) during the period of time,
commencing on the Effective Date, stated for each such beneficial owner on
Schedule B (the "lock-up period"), or any longer period required by any state or
required by Nasdaq as a condition to listing on The Nasdaq SmallCap Market,
without the prior written consent of First London and Nasdaq. Without the prior
written consent of Nasdaq, the Company shall not, directly or indirectly,
release any individual from his lock-up agreement or effect the transfer on its
books of any shares sold in contravention of a lock-up agreement. Any of such
securities that are originally registered in a name of a original beneficial
owner and are subsequently registered under a different name will be subject to
such original beneficial owner's lock-up period. Sales of the Company's
securities by officers and/or directors of the Company prior to the expiration
of their respective lock-up periods shall be effected through the
Representative.
UNDERWRITING AGREEMENT-PAGE 14
(o) The Company shall pay to the Representative upon the exercise or
redemption of the Warrants a fee equal to 5% of the gross proceeds received by
the Company from the exercise of the Warrants and 5% of the aggregate redemption
price for the Warrants redeemed (collectively, the "Warrant Fee"). Such fee
will be paid to the Representative or their designees no sooner than 12 months
after the Effective Date. Additionally, as a condition to be entitled to
receive the Warrant Fee, the Representative or its designees must be designated
in writing by the Warrant holder as having solicited the Warrant (the
"Solicitation Designation") in order to receive the Warrant Fee and such Warrant
Fee shall not be paid with respect to any Warrant held in a discretionary
account without the prior written approval of such exercise by the discretionary
account holder or with respect to the exercise of any Warrant for which a
Solicitation Designation was not received by the Company before the exercise of
such Warrant.
(p) Prior to the Closing Date, the Company shall at its own expense,
undertake to list the Securities in the appropriate recognized securities manual
or manuals published by Standard & Poor's Corporation and such other manuals as
the Representative may designate, such listings to contain the information
required by such manuals and the Uniform Securities Act. The Company hereby
agrees to use its best efforts to maintain such listing for a period of not less
than five years unless the Securities otherwise qualify for a secondary market
trading exemption. The Company shall take such action as may be reasonably
requested by the Representative to obtain a secondary market trading exemption
in such states as may be reasonably requested by the Representative.
(q) During the one year period commencing on the Effective Date, the
Company will not, without the prior written consent of First London, which
consent will not be unreasonably withheld, offer, sell, contract to sell, grant
options or warrants to purchase or otherwise dispose of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock except for securities issued in connection with an acquisition or
merger by the Company or upon the issuance of Common Stock upon the exercise of
the Warrants presently outstanding securities or securities issued in connection
with the Company's employee stock option or director stock option plans.
(r) Prior to the Closing Date, the Company will not issue, directly or
indirectly, without the prior consent of First London, any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering of the Securities other than routine customary
advertising of the Company's products and services, and except as required by
any applicable law or the directives of any relevant regulatory authority in any
relevant jurisdiction.
(s) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the financial
statements to be included in any registration statement or similar disclosure
document to be filed by the Company hereunder, or any amendment or supplement
thereto. For a period of five years from the Effective Date, the Company, at
its expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) the Company's financial statements for
each of the first three fiscal quarters prior to the announcement of quarterly
financial information, the filing of the Company's quarterly report and the
filing of quarterly financial information to stockholders.
UNDERWRITING AGREEMENT-PAGE 15
(t) The Company shall retain _________________________ as the transfer
agent for the securities of the Company, or such other transfer agent as First
London may agree to in writing. In addition, the Company shall direct such
transfer agent to furnish the Representative with daily transfer sheets as to
each of the Company's securities as prepared by the Company's transfer agent and
copies of lists of stockholders and warrant holders as reasonably requested by
the Representative, for a five year period commencing from the Closing Date.
(u) The Company shall cause the Depository Trust Company, or such other
depository of the Company's securities, to deliver a "special security position
report" to the Representative on a daily and weekly basis at the expense of the
Company, for a five year period from the Effective Date.
(v) Following the Effective Date, the Company shall, at its sole cost and
expense, prepare and file such Blue Sky applications with such jurisdictions as
the Representative shall designate and the Company may reasonably agree.
(w) On the Effective Date and for a period of three years thereafter, the
Company's Board of Directors shall consist of a minimum of five persons, two of
whom shall be independent and not otherwise affiliated with the Company or
associated with any of the Company's affiliates.
(x) For such period as any Warrants are outstanding, the Company shall use
its best efforts to cause post-effective amendments to the Registration
Statement or a new Registration Statement to become effective in compliance with
the Act and without any lapse of time between the effectiveness of any such
post-effective amendments and cause a copy of each Prospectus, as then amended,
to be delivered to each holder of record of a Warrant and to furnish to each of
the Underwriters and each dealer as many copies of each such Prospectus as such
Underwriter or such dealer may reasonably request. Such post-effective
amendments or new Registration Statements shall also register the
Representative's Warrant and all the securities underlying the Representative's
Warrant. The Company shall not call for redemption of any of the Warrants
unless a Registration Statement covering the securities underlying the Warrants
or Representative's Warrant has been declared effective by the Commission and
remains current at least until the date fixed for redemption. In addition, the
Warrants or Representative's Warrant shall not be redeemable during the first
year after the Effective Date without the written consent of First London, which
consent will not be unreasonably withheld.
(y) Until such time as the securities of the Company are listed or quoted
on either the New York Stock Exchange, Nasdaq National Market or the American
Stock Exchange, the Company shall engage the Company's legal counsel to deliver
to the Representative a written opinion detailing those states in which the
Shares and Warrants of the Company may be traded in non-issuer transactions
under the Blue Sky laws of the fifty states ("Secondary Market Trading
Opinion"). The initial Secondary Market Trading opinion shall be delivered to
the Representative on the Effective Date, and the Company shall continue to
update such opinion and deliver same to the Representative on a timely basis,
but in any event at the beginning of each fiscal year, for a five year period,
if requested.
UNDERWRITING AGREEMENT-PAGE 16
4. Conditions of Underwriters, Obligations. The obligations of the
---------------------------------------
several Underwriters to purchase and pay for the Securities which they have
agreed to purchase hereunder from the Company are subject, as of the date hereof
and as of the Closing Date and the Option Closing Date, as the case may be, to
the continuing accuracy of, and compliance with, the representations and
warranties of the Company herein, to the accuracy of statements of officers of
the Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become effective not later
than 5:00 p.m., Eastern Time, on the date of this Agreement, or at such later
time or on such later date as you may agree to in writing; (ii) at or prior to
the Closing Date or Option Closing Date, as the case may be, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and no proceeding for that purpose shall have been
initiated or pending, or shall be threatened, or to the knowledge of the
Company, contemplated by the Commission; (iii) no stop order suspending the
effectiveness of the qualification or registration of the Securities under the
securities or "blue sky" laws of any jurisdiction (whether or not a jurisdiction
which you shall have specified) shall be threatened or to the knowledge of the
Company contemplated by the authorities of any such jurisdiction or shall have
been issued and in effect; (iv) any request for additional information on the
part of the Commission or any such authorities shall have been complied with to
the satisfaction of the Commission and any such authorities, and to the
satisfaction of counsel to the Underwriters; and (v) after the date hereof no
amendment or supplement to the Registration Statement or the Prospectus shall
have been filed unless a copy thereof was first submitted to the Underwriters
and the Underwriters did not object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any material adverse change in the long-term debt
of the Company except as set forth in or contemplated by the Registration
Statement, (ii) there shall not have been any material adverse change in the
general affairs, business, properties, condition (financial or otherwise),
management, or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth in or contemplated by the Registration Statement or Prospectus; (iii) the
Company shall not have sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or not covered
by insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Registration
Statement and Prospectus; and (iv) the Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall 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 circumstance under
which they are made, not misleading.
UNDERWRITING AGREEMENT-PAGE 17
(c) Except as set forth in the Prospectus, there is not pending or, to the
knowledge of the Company, threatened, any material action, suit, proceeding,
inquiry, arbitration or investigation against the Company, or any of the
officers or directors of the Company, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth, or properties of the Company.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct as of this date and at the Closing Date as if
made at the Closing Date, and all covenants and agreements herein contained to
be performed on the part of the Company and all conditions herein contained to
be fulfilled or complied with by the Company at or prior to the Closing Date and
Option Closing Date shall have been duly performed, fulfilled or complied with.
(e) At each Closing Date, you shall have received the opinion, together
with copies of such opinion for each of the other several Underwriters, dated as
of each Closing Date, from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.P., counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters, to the effect
that:
(i) the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation with full corporate power and authority to own its properties
and conduct its business as described in the Registration Statement and
Prospectus and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each other jurisdiction in which the
ownership or leasing of its properties or conduct of its business requires
such qualification except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company as a whole;
(ii) the authorized capitalization of the Company is as set forth
under "Capitalization" in the Prospectus; all shares of the Company's
outstanding stock and other securities requiring authorization for issuance
by the Company's Board of Directors have been duly authorized, validly
issued, are fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; the outstanding shares of Common Stock
of the Company and other securities have not been issued in violation of
the preemptive rights of any stockholder and the stockholders of the
Company do not have any preemptive rights or, to such counsel's knowledge,
other rights to subscribe for or to purchase securities of the Company,
nor, to such counsel's knowledge, are there any restrictions upon the
voting or transfer of any of the securities of the Company, except as
disclosed in the Prospectus; the Common Stock, the Shares, the Warrants,
and the securities contained in the Representative's Warrant Agreements
conform to the respective descriptions thereof contained in the Prospectus;
the Common Stock, the Shares, the Warrants, the Representative's Warrants,
the shares of Common Stock to be issued upon exercise of the Warrants and
the Underlying Warrants, have been duly authorized and, when issued,
delivered and paid for, will be duly authorized, validly issued, fully
paid, non-assessable, free of preemptive rights and no personal liability
will attach to the ownership thereof; all prior sales by the Company of the
Company's securities have been made in compliance with or under an
exemption from registration under
UNDERWRITING AGREEMENT-PAGE 18
the Act and applicable state securities laws and no stockholders of the
Company have any rescission rights against the Company with respect to the
Company's securities; a sufficient number of shares of Common Stock has
been reserved for issuance upon exercise of the Warrants, the
Representative Warrants and the Underlying Warrants, and to the best of
such counsel's knowledge, neither the filing of the Registration Statement
nor the offering or sale of the Securities as contemplated by this
Agreement gives rise to any registration rights or other rights, other than
those which have been waived or satisfied or described in the Registration
Statement;
(iii) this Agreement, the Representative's Warrant Agreements and the
Warrant Agreements have been duly and validly authorized, executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by the Representative, are the valid and legally
binding obligations of the Company, enforceable in accordance with their
terms, except (a) as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws from
time to time in effect which effect creditors, rights generally; and (b) no
opinion is expressed as to the enforceability of the indemnity provisions
or the contribution provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding securities of the
Company, the Shares, the Common Stock, the Warrants and the
Representative's Warrants are in valid and proper legal form;
(v) to the best of such counsel's knowledge, except as set forth in
the Prospectus, there is not pending or threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company
or any of the officers or directors of the Company, nor any material
action, suit, proceeding, inquiry, arbitration, or investigation, which
might materially and adversely affect the condition (financial or
otherwise), business prospects, net worth, or properties of the Company;
(vi) the execution and delivery of this Agreement, the
Representative's Warrant Agreements, and the Warrant Agreements, and the
incurrence of the obligations herein and therein set forth and the
consummation of the transactions herein or therein contemplated, will not
result in a violation of, or constitute a default under (a) the Certificate
of Incorporation or Bylaws of the Company; (b) to the best of such
counsel's knowledge, any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness or in any contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreement or instrument to which the Company
is a party or by which it or any of its properties is bound; or (c) to the
best of such counsel's knowledge, any material order, rule, regulation,
writ, injunction, or decree of any government, governmental instrumentality
or court, domestic or foreign;
(vii) the Registration Statement has become effective under the Act,
and to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in effect, and no
proceedings for that purpose have been instituted or are pending
UNDERWRITER AGREEMENT - PAGE 19
before, or threatened by, the Commission; the Registration Statement and
the Prospectus (except for the financial statements and other financial
data contained therein, or omitted therefrom, as to which such counsel need
express no opinion) comply as to form in all material respects with the
applicable requirements of the Act and the Rules and Regulations;
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in connection
with the authorization, issuance, transfer, sale or delivery of the
Securities by the Company, in connection with the execution, delivery and
performance of this Agreement by the Company or in connection with the
taking of any action contemplated herein, or the issuance of the
Representative's Warrants or the securities underlying the Representative's
Warrants, other than registrations or qualifications of the securities
under applicable state or foreign securities or Blue Sky laws and
registration under the Act; and
Such opinion shall also cover such matters incident to the transactions
contemplated hereby as the Representative or counsel for the Representative
shall reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law, upon opinions of counsel
satisfactory to you and counsel to the Underwriters. The opinion of such
counsel to the Company shall state that the opinion of any such other counsel is
in form satisfactory to such counsel and that the Representative and they are
justified in relying thereon.
Such counsel shall also include a statement to the effect that such counsel
has participated in the preparation of the Registration Statement and the
Prospectus and nothing has come to the attention of such counsel to lead such
counsel to believe that the Registration Statement or any amendment thereto at
the time it became effective contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading or that the Prospectus or any supplement thereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make statements
therein, in light of the circumstances under which they are made, not misleading
(except, in the case of both the Registration Statement and any amendment
thereto and the Prospectus and any supplement thereto, for the financial
statements, notes thereto and other financial information and statistical data
contained therein, as to which such counsel need express no opinion).
(f) You and the several Underwriters shall have received on each Closing
Date a certificate dated as of each Closing Date, signed by the Chief Executive
Officer and the Chief Financial Officer of the Company and such other officers
of the Company as the Underwriters may request, certifying that:
(i) No order suspending the effectiveness of the Registration
Statement or stop order regarding the sale of the Securities is in effect
and no proceedings for such purpose are pending or are, to their knowledge,
threatened by the Commission;
UNDERWRITER AGREEMENT - PAGE 20
(ii) To their knowledge there is no litigation instituted or
threatened against the Company, or any officer or director of the Company
of a character required to be disclosed in the Registration Statement which
is not disclosed therein; to their knowledge there are no contracts which
are required to be summarized in the Prospectus which are not so
summarized; and to their knowledge there are no material contracts required
to be filed as exhibits to the Registration Statement which are not so
filed;
(iii) They have each carefully examined the Registration Statement
and the Prospectus and, to the best of their knowledge, neither the
Registration Statement nor the Prospectus nor any amendment or supplement
to either of the foregoing contains an untrue statement of any material
fact or omits to state any material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances
under which they are made, not misleading; and since the Effective Date, to
the best of their knowledge, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been so set
forth;
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition of the Company, financial or
otherwise, or in the results of its operations, except as reflected in or
contemplated by the Registration Statement and the Prospectus and except as
so reflected or contemplated since such date, there has not been any
material transaction entered into by the Company;
(v) The representations and warranties set forth in this Agreement
are true and correct in all material respects and the Company has complied
with all of its agreements herein contained;
(vi) The Company is not delinquent in the filing of any federal,
state and municipal tax return or the payment of any federal, state or
municipal taxes; they know of no proposed re-determination or reassessment
of taxes, adverse to the Company, and the Company has paid or provided by
adequate reserves for all known tax liabilities except such delinquency
that will not have a material adverse affect on the Company;
(vii) They know of no material obligation or liability of the
Company, contingent or otherwise, not disclosed in the Registration
Statement and Prospectus;
(viii) This Agreement, the Representative's Warrant Agreements and
the Warrant Agreements, the consummation of the transactions herein or
therein contemplated, and the fulfillment of the terms hereof or thereof,
will not result in a breach by the Company of any terms of, or constitute a
default under, its Certificate of Incorporation or Bylaws, any indenture,
mortgage, lease, deed of trust, bank loan or credit agreement or any other
material agreement or undertaking of the Company including, by way of
specification but not by way of limitation, any agreement or instrument to
which the Company is now a party or pursuant to which the Company has
acquired any right and/or obligations by succession or otherwise;
UNDERWRITER AGREEMENT - PAGE 21
(ix) The financial statements, together with the related notes and
schedules forming a part of the Registration Statement and the Prospectus,
fairly present the financial position and the results of operations of the
Company at the respective dates and for the respective periods to which
they apply; and all audited financial statements, together with the related
notes and schedules, and the unaudited financial consolidated financial
information of the Company have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration
Statement present fairly the information shown therein and have been
compiled on a basis consistent with the audited financial statements
presented therein. Since the respective dates of such financial
statements, there have been no material adverse change in the condition or
general affairs of the Company, financial or otherwise, other than as
referred to in the Prospectus;
(x) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as may otherwise
be indicated therein, the Company has not, prior to the Closing Date,
either (i) issued any securities or incurred any material liability or
obligation, direct or contingent, for borrowed money, or (ii) entered into
any material transaction other than in the ordinary course of business.
The Company has not declared, paid or made any dividend or distribution of
any kind on its capital stock except as disclosed in the Registration
Statement;
(xi) Based upon written representation from the officers and
directors of the Company they have reviewed the sections in the Prospectus
relating to their biographical data and equity ownership position in the
Company, and all information contained therein is true and accurate; and
(xii) Based upon written representation from the officers and
directors of the Company except as disclosed in the Prospectus, during the
past five years, the officers and directors of the Company have not been:
(A) Subject of a petition under the federal bankruptcy laws or
any state insolvency law filed by or against them, or by a receiver,
fiscal agent or similar officer appointed by a court for their
business or property, or any partnership in which any of them was a
general partner at or within two years before the time of such filing,
or any corporation or business association of which any of them was an
executive officer at or within two years before the time of such
filing;
(B) Convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
(C) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently
UNDERWRITER AGREEMENT - PAGE 22
or temporarily enjoining either of them from, or otherwise limiting,
any of the following activities:
(1) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor
broker, leverage transaction merchant, any other person regulated
by the Commodity Futures Trading Commission, or an associated
person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank,
savings and loan association or insurance company, or engaging in
or continuing any conduct or practice in connection with any such
activity;
(2) engaging in any type of business practice; or
(3) engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any
violation of federal or state securities law or federal commodity
laws.
(D) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or state
authority barring, suspending or otherwise limiting for more than 60
days any of their right to engage in any activity described in
paragraph (3) (i) above, or be associated with persons engaged in any
such activity;
(E) Found by any court of competent jurisdiction in a civil
action or by the Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by
the Commission has not been subsequently reversed, suspended or
vacated; or
(F) Found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated.
(g) The Underwriters shall have received from Ernst & Young LLP,
independent auditors to the Company, certificates or letters, one dated and
delivered on the date hereof and one dated and delivered on the Closing Date, in
form and substance satisfactory to the Underwriters, stating, that:
(i) They are independent certified public accountants with respect to
the Company within the meaning of the Act and the applicable Rules and
Regulations;
(ii) The financial statements and the schedules included in the
Registration Statement and the Prospectus were examined by them and, in
their opinion, comply as to form in all material respects with the
applicable accounting requirements of the Act, the Rules and
UNDERWRITER AGREEMENT - PAGE 23
Regulations and instructions of the Commission with respect to Registration
Statements on Form SB-2;
(iii) On the basis of inquiries and procedures conducted by them (not
constituting an examination in accordance with generally accepted auditing
standards), including a reading of the latest available unaudited interim
financial statements or other financial information of the Company (with an
indication of the date of the latest available unaudited interim financial
statements), inquiries of officers of the Company who have responsibility
for financial and accounting matters, review of minutes of all meetings of
the stockholders and the Board of Directors of the Company and other
specified inquiries and procedures, nothing has come to their attention as
a result of the foregoing inquiries and procedures that causes them to
believe that:
(A) During the period from (and including) the date of the
financial statements in the Registration Statement and the Prospectus
to a specified date not more than five days prior to the date of such
letters, there has been any change in the Common Stock, long-term debt
or other securities of the Company (except as specifically
contemplated in the Registration Statement and Prospectus) or any
material decreases in net current assets, net assets, stockholder's
equity, working capital or in any other item appearing in the
Company's financial statements as to which the Underwriters may
request advice, in each case as compared with amounts shown in the
balance sheet as of the date of the financial statement in the
Prospectus, except in each case for changes, increases or decreases
which the Prospectus discloses have occurred or will occur;
(B) During the period from (and including) the date of the
financial statements in the Registration Statement and the Prospectus
to such specified date there was any material decrease in revenues or
in the total or per share amounts of income or loss before
extraordinary items or net income or loss, or any other material
change in such other items appearing in the Company's financial
statements as to which the Underwriters may request advice, in each
case as compared with the corresponding period in the preceding year,
except in each case for increases, changes or decreases which the
Prospectus discloses have occurred or will occur;
(iv) 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.
UNDERWRITER AGREEMENT - PAGE 24
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriters. Any changes, increases or decreases
in the items set forth in such letters which, in the judgment of the several
Underwriters, are materially adverse with respect to the financial position or
results of operations of the Company shall be deemed to constitute a failure of
the Company to comply with the conditions of the obligations to the several
Underwriters hereunder.
(h) Upon exercise of the Option provided for in Section 2(b) hereof, the
obligation of the several Underwriters (or, at its option, the Representative,
individually) to purchase and pay for the Option Securities referred to therein
will be subject (as of the date hereof and as of the Option Closing Date) to the
following additional conditions:
(i) The Registration Statement shall remain effective at the Option
Closing Date, and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been
instituted or shall be pending, or, to the knowledge of the Company, shall
be contemplated by the Commission, and any reasonable request on the part
of the Commission for additional information shall have been complied with
to the satisfaction of counsel to the Underwriters.
(ii) At the Option Closing Date, there shall have been delivered to
you the signed opinion from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.P., counsel for the
Company, dated as of the Option Closing Date, in form and substance
satisfactory to counsel to the Underwriters, which opinion shall be
substantially the same in scope and substance as the opinion furnished to
you at the Closing Date pursuant to Section 4(e) hereof, except that such
opinion, where appropriate, shall cover the Option Securities.
(iii) At the Option Closing Date, there shall have been delivered to
you a certificate of the Chief Executive Officer and Chief Financial
Officer of the Company, dated the Option Closing Date, in form and
substance satisfactory to counsel to the Underwriters, substantially the
same in scope and substance as the certificate furnished to you at the
Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been delivered to
you a letter in form and substance satisfactory to you from Ernst & Young
LLP, independent auditors to the Company, dated the Option Closing Date and
addressed to the several Underwriters confirming the information in their
letter referred to in Section 4(g) hereof and stating that nothing has come
to their attention during the period from the ending date of their review
referred to in said letter to a date not more than five business days prior
to the Option Closing Date, which would require any change in said letter
if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date in
connection with the sale and issuance of the Option Securities shall be
satisfactory in form and substance to the Underwriters, and the
Underwriters and counsel to the Underwriters shall have been furnished with
all such documents, certificates, and opinions as you may request in
connection
UNDERWRITER AGREEMENT - PAGE 25
with this transaction in order to evidence the accuracy and completeness of
any of the representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD, the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Securities and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the several Underwriters
or the Company, shall be contemplated by the Commission or the NASD. The
Company represents that at the date hereof it has no knowledge that any such
action is in fact contemplated by the Commission or the NASD. The Company shall
advise the Representative of any NASD affiliations of any of its officers,
directors, or Stockholders or their affiliates in accordance with paragraph 1(y)
of this Agreement.
(j) At the date of this Agreement, you shall have received from counsel to
the Company, dated as of the date hereof, in form and substance satisfactory to
counsel for the Underwriter, a written Secondary Market Trading Opinion
detailing those states in which the Shares and Warrants may be traded in non-
issuer transactions under the Blue Sky laws of the 50 states after the Effective
Date, in accordance with Section 3(y) of this Agreement.
(k) The authorization and issuance of the Securities and delivery thereof,
the Registration Statement, the Prospectus, and all corporate proceedings
incident thereto shall be satisfactory in all respects to counsel for the
several Underwriters, and such counsel shall be furnished with such documents,
certificates and opinions as they may reasonably request to enable them to pass
upon the matters referred to in this subparagraph.
(l) Prior to the Effective Date, the Representative shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Representative, as described in the Registration Statement.
(m) If any of the conditions herein provided for in this Section shall not
have been fulfilled as of the date indicated, this Agreement and all obligations
of the several Underwriters under this Agreement may be canceled at, or at any
time prior to, the Closing Date and/or the Option Closing Date by the
Representative and/or the Underwriters notifying the Company of such
cancellation in writing or by telegram at or prior to the applicable Closing
Date. Any such cancellation shall be without liability of the several
Underwriters to the Company.
5. Conditions of the Obligations of the Company. The obligation of the
--------------------------------------------
Company to sell and deliver the Securities is subject to the following
conditions:
(i) The Registration Statement shall have become effective not later
than 5:00 p.m., Eastern Time, on the date of this Agreement, or on such
later time or date as the Company and the Representative may agree in
writing; and
UNDERWRITER AGREEMENT - PAGE 26
(ii) At the Closing Date and the Option Closing Date, no stop orders
suspending the effectiveness of the Registration Statement shall have been
issued under the Act or any proceedings therefore initiated or threatened
by the Commission.
If the conditions to the obligations of the Company provided for in this
Section have been fulfilled on the Closing Date but are not fulfilled after the
Closing Date and prior to the Option Closing Date, then only the obligation of
the Company to sell and deliver the Securities on exercise of the Option
provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds harmless each
----------------
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include but not be
limited to, all reasonable costs of defense and investigation and all attorneys'
fees), to which the Underwriter or such controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
(i) the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement thereto, (ii) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such cases to the extent, but only to the
extent, that any such losses, claim, damages or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Underwriters
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such Preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto. Notwithstanding the foregoing, the Company shall have no
liability under this Section if such untrue statement or omission made in a
Preliminary Prospectus is cured in the Prospectus and the Prospectus is
delivered within the time required by the Act to the person or persons alleging
the liability upon which indemnification is being sought. This indemnity will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter, severally, but not jointly, indemnifies and holds
harmless the Company, each of its directors, each nominee (if any) for director
named in the Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages or liabilities (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages, or
UNDERWRITER AGREEMENT - PAGE 27
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statements or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by you or by any Underwriter through you specifically
for use in the preparation thereof. Notwithstanding the foregoing, the
Underwriters shall have no liability under this Section if such untrue statement
or omission made in a Preliminary Prospectus is cured in the Prospectus and the
Prospectus is not delivered to the person or persons alleging the liability upon
which indemnification is being sought through no fault of the Underwriter. This
indemnity will be in addition to any liability which the Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the reasonable judgment of
the Representative, it is advisable for the Representative or such Underwriters
or controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Underwriter or such controlling person, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall be
designated
UNDERWRITER AGREEMENT - PAGE 28
in writing by you). No settlement of any action against an indemnified party
shall be made without the consent of the indemnifying party, which shall not be
unreasonably withheld in light of all factors of importance to such indemnifying
party.
7. Contribution. In order to provide for just and equitable contribution
-------------
under the Act in any case in which (i) each Underwriter makes claim for
indemnification pursuant to Section 6 but it is judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that the express provisions of Section 6 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys, fees) in either
such case (after contribution from others) in such proportions that all such
Underwriters are responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per Share appearing on the cover page of the Prospectus
bears to the public offering price appearing thereon, and the Company shall be
responsible for the remaining portion, provided, however, that (a) if such
allocation is not permitted by applicable law then the relative fault of the
Company and the Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company, or the Underwriter and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriters to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriters and their
controlling persons in the aggregate were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the first sentence of this Section; and
(b) that the contribution of each contributing Underwriter shall not be in
excess of its proportionate share (based on the ratio of the number of
Securities purchased by such Underwriter to the number of Securities purchased
by all contributing Underwriters) of the portion of such losses, claims, damages
or liabilities for which the Underwriters are responsible. No person ultimately
determined to be guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
is not ultimately determined to be guilty of such fraudulent misrepresentation.
As used in this paragraph, the term "Underwriter" includes any officer,
director, or other person who controls the Underwriter within the meaning of
Section 15 of the Act, and the word "Company" includes any officer, director, or
person who controls the Company within the meaning of Section 15 of the Act. If
the full amount of the contribution specified in this Section is not permitted
by law, then the Underwriter and each person who controls the Underwriter shall
be entitled to contribution from the Company, its officers, directors and
controlling persons to the full extent permitted by law.
UNDERWRITER AGREEMENT - PAGE 29
This foregoing agreement shall in no way affect the contribution liabilities of
any persons having liability under Section 11 of the Act other than the Company
and the Underwriter. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the settlement;
provided, however, that such consent shall not be unreasonably withheld in light
of all factors of importance to such party.
8. Costs and Expenses. (a) Whether or not this Agreement becomes
------------------
effective or the sale of the Securities to the Underwriters is consummated, the
Company will pay all costs and expenses incident to the performance of this
Agreement by the Company including but not limited to the fees and expenses of
the counsel to the Company or of the Company's accountants; the costs and
expenses incident to the preparation, printing, filing and distribution under
the Act of the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), Preliminary Prospectus and the
Prospectus, as amended or supplemented; the fee of the NASD in connection with
the filing required by the NASD relating to the offering of the Securities
contemplated hereby; all state filing fees, expenses and disbursements and legal
fees of counsel to the Company who shall serve as Blue Sky counsel to the
Company in connection with the filing of applications to register the Securities
under the state securities or blue sky laws; the cost of printing and furnishing
to the several Underwriters copies of the Registration Statement, each
Preliminary Prospectus, the Prospectus, this Agreement, the Selected Dealers
Agreement, the Agreement Among Underwriters, Underwriters Questionnaire,
Underwriters Power of Attorney and the Blue Sky Memorandum; the cost of printing
the certificates evidencing the securities comprising the Securities; the cost
of preparing and delivering to the Underwriters and its counsel of their bound
volumes containing copies of all documents and appropriate correspondence filed
with or received from the Commission and the NASD and all closing documents; and
the fees and disbursements of the transfer agent for the Company's securities.
The Company shall pay any and all taxes (including any original issue, transfer,
franchise, capital stock or other tax imposed by any jurisdiction) on sales to
the Underwriters hereunder. The Company will also pay all costs and expenses
incident to the furnishing of any amended Prospectus or of any supplement to be
attached to the Prospectus. The Company shall also engage the Company's counsel
to provide the Representative with a written Secondary Market Trading Opinion in
accordance with paragraphs 3(y) and 4(j) of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at the Closing
Date pay to the Representative a non-accountable expense allowance equal to 3%
of the gross proceeds received from the sale of the Securities, of which $30,000
has been paid, $30,000 will be due and payable upon the filing of the
Registration Statement with the Commission and the remainder shall be paid on
the Closing Date. In the event the over-allotment option is exercised, the
Company shall pay to the Representative at the Option Closing Date an additional
amount equal to 3% of the gross proceeds received upon exercise of the over-
allotment option.
(c) Other than as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Representative or from any other person for services as a finder in
connection with the proposed offering, and the Company agrees to indemnify and
hold harmless the Representative and the other Underwriters against any losses,
claims,
UNDERWRITER AGREEMENT - PAGE 30
damages or liabilities, joint or several which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys, fees, to which the Representative or such other
Underwriter may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
claim of any person (other than an employee of the party claiming indemnity) or
entity that he or it is entitled to a finder's fee in connection with the
proposed offering by reason of such person's or entity's influence or prior
contact with the indemnifying party.
9. Substitution of Underwriters. If any of the Underwriters shall for
----------------------------
any reason not permitted hereunder cancel their obligations to purchase the
Securities hereunder, or shall fail to take up and pay for the number of
Securities set forth opposite their respective names in Schedule A hereto upon
----------
tender of such Securities in accordance with the terms hereof, then:
(a) If the aggregate number of Securities which such Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
number of Securities, the other Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Securities
which such defaulting Underwriter or Underwriters agreed but failed to purchase.
(b) If any Underwriter or Underwriters so default and the agreed number of
Securities with respect to which such default or defaults occurs is more than
10% of the total number of Securities, the remaining Underwriters shall have the
right to take up and pay for (in such proportion as may be agreed upon among
them) the Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase. If such remaining Underwriters do not, at the Closing Date,
take up and pay for the Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase, the time for delivery of the
Securities shall be extended to the next business day to allow the several
Underwriters the privilege of substituting within twenty-four hours (including
non-business hours) another Underwriter or Underwriters satisfactory to the
Company. If no such Underwriter or Underwriters shall have been substituted as
aforesaid, within such twenty-four period, the time of delivery of the
Securities may, at the option of the Company, be again extended to the next
following business day, if necessary, to allow the Company the privilege of
finding within twenty-four hours (including non-business hours) another
Underwriter or Underwriters to purchase the Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase. If it shall be
arranged for the remaining Underwriters or substituted Underwriters to take up
the Securities of the defaulting Underwriter or Underwriters as provided in this
Section, (i) the Company or the Representative shall have the right to postpone
the time of delivery for a period of not more than seven business days, in order
to effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees promptly to file any amendments to the Registration Statement or
supplements to the Prospectus which may thereby be made necessary; and (ii) the
respective numbers of Securities to be purchased by the remaining Underwriters
or substituted Underwriters shall be taken at the basis of the underwriting
obligation for all purposes of this Agreement.
If in the event of a default by one or more Underwriters and the remaining
Underwriters shall not take up and pay for all the Securities agreed to be
purchased by the defaulting Underwriters or
UNDERWRITER AGREEMENT - PAGE 31
substitute another Underwriter or Underwriters as aforesaid, and the Company
shall not find or shall not elect to seek another Underwriter or Underwriters
for such Securities as aforesaid, then this Agreement shall terminate.
If, following exercise of the Option provided in Section 2(b) hereof, any
Underwriter or Underwriters shall for any reason not permitted hereunder cancel
their obligations to purchase Option Securities at the Option Closing Date, or
shall fail to take up and pay for the number of Option Securities, which they
become obligated to purchase at the Option Closing Date upon tender of such
Option Securities in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Securities of the defaulting Underwriters in the manner provided in Section 9(b)
hereof. If the remaining Underwriters or substituted Underwriters shall not
take up and pay for all Option Securities, the Underwriters shall be entitled to
purchase the number of Option Securities for which there is no default or, at
their election, the option shall terminate, the exercise thereof shall be of no
effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any non-defaulting Underwriter to the
Company, provided that the provisions of this Section 9 shall not in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
10. Effective Date. The Agreement shall become effective upon its
--------------
execution except that you may, at your option, delay its effectiveness until
11:00 a.m., Eastern time, on the first full business day following the Effective
Date of the Registration Statement, or at such earlier time after the Effective
Date of the Registration Statement as you in your discretion shall first
commence the public offering by the Underwriters of any of the Securities. The
time of the public offering shall mean the time after the effectiveness of the
Registration Statement when the Securities are first generally offered by you to
the other Underwriters and the selected dealers. This Agreement may be
terminated by you at any time before it becomes effective as provided above,
except that Sections 3(c), 6, 7, 8, 13, 14, 15, 16, 17 and 18 shall remain in
effect notwithstanding such termination.
11. Termination. (a) This Agreement, except for Sections 3(c), 6, 7, 8,
-----------
13, 14, 15, 16, 17, and 18 hereof, may be terminated at any time prior to the
Closing Date, and the Option referred to in Section 2(b) hereof, if exercised,
may be canceled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriters for the resale of the Securities agreed to be purchased
hereunder by reason of: (i) the Company having sustained a material adverse
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action, order
or decree; (ii) trading in securities on the Nasdaq SmallCap Market ir the
Boston Stock Exchange having been suspended or limited; (iii) material
governmental restrictions having been imposed on trading in securities generally
(not in force and effect on the date hereof); (iv) a banking moratorium having
been declared by federal or Texas state authorities; (v) an outbreak of major
international hostilities or other national or international calamity having
occurred which is reasonably believed likely by the Representative to have a
material adverse impact on the business, financial
UNDERWRITER AGREEMENT - PAGE 32
condition or financial statements of the Company or the market for the
securities offered hereby; (vi) the passage by the Congress of the United States
or by any state legislative body of similar impact, of any act or measure, or
the adoption of any orders, rules or regulations by any governmental body or any
authoritative accounting institute or board, or any governmental executive;
(vii) any material adverse change in the financial or securities markets beyond
normal market fluctuations having occurred since the date of this Agreement;
(viii) a pending or threatened legal or governmental proceeding or action
relating generally to the Company's business, or a notification having been
received by the Company of the threat of any such proceeding or action, which
could, in the reasonable judgment of the Representative, materially adversely
affect the Company; (ix) except as contemplated by the Prospectus, the Company
is merged or consolidated into or acquired by another company or group or there
exists a binding legal commitment for the foregoing or any other material change
of ownership or control occurs; or (x) the Company shall not have complied in
all material respects with any term, condition or provisions on its part to be
performed, complied with or fulfilled (including but not limited to those set
forth in this Agreement) within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section, the Company shall be
promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
12. Representative's Warrant Agreements. At the Closing Date, the Company
-----------------------------------
will issue to the Representative and/or persons related to the Representative,
for an aggregate purchase price of $100, and upon the terms and conditions set
forth in the form of Representative's Warrant Agreements annexed as an exhibit
to the Registration Statement, Representative's Warrants to purchase up to an
aggregate of 140,000 Units, in such denominations as the Representative shall
designate. In the event of conflict in the terms of this Agreement and the
Representative's Warrant Agreements, the language of the form of
Representative's Warrant Agreements shall control.
13. Representations, Warranties and Agreements to Survive Delivery. The
--------------------------------------------------------------
respective indemnities, agreements, representations, warranties and other
statements of the Company and its principal officers, where appropriate, and the
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriters, the Company or any of its officers or directors or any controlling
person and will survive delivery of and payment for the Securities and the
termination of this Agreement.
14. Notice. All communications hereunder will be in writing and, except
------
as otherwise expressly provided herein, will be mailed, delivered or telegraphed
and confirmed:
If to the Underwriters: First London Securities Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
UNDERWRITER AGREEMENT - PAGE 33
Copy to: Jakes Jordaan
Jordaan & ▇▇▇▇▇▇▇▇▇▇, PLLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to the Company: U.S. Remodelers, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
15. Parties in Interest. This Agreement herein set forth is made solely
-------------------
for the benefit of the several Underwriters, the Company and, to the extent
expressed, any person controlling the Company or any of the Underwriters, and
directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser of the Securities, as
such purchaser, from the several Underwriters. All of the obligations of the
Underwriters hereunder are several and not joint.
16. Applicable Law. This Agreement shall be governed and construed in
--------------
accordance with the laws of the State of Texas applicable to contracts made and
to be performed entirely within the State of Texas. The parties agree that any
action brought by any party against another party in connection with any rights
or obligations arising out of this Agreement shall be instituted properly in a
federal or state court of competent jurisdiction with venue only in the State
District Court of Dallas, County, Texas or the United States District Court for
the Northern District of Texas. A party to this Agreement named as a Defendant
in any action brought in connection with this Agreement in any court outside of
the above named designated county or district shall have the right to have the
venue of said action changed to the above designated county or district or, if
necessary, have the case dismissed, requiring the other party to re-file such
action in an appropriate court in the above designated county or federal
district.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counter-parts shall together constitute but one and the
same instrument.
18. Entire Agreement. This Agreement and the agreements referred to
----------------
within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreement, understanding, negotiations and discussions,
whether written or oral, of the parties hereto.
UNDERWRITER AGREEMENT - PAGE 34
19. Representative as Underwriter. In the event the Representative acts
-----------------------------
as the sole Underwriter in connection with the underwriting of the securities
being offered pursuant to the Registration Statement, all references to the
Representative in this Agreement shall be replaced by reference to the
"Underwriters," and (i) any consents required to be obtained from the
Representative shall be required to be obtained solely from the Underwriters;
(ii) all compensation to be received by the Representative shall instead be
received by the Underwriters; and (iii) the provisions of Section 9 of this
Agreement shall not apply.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this Agreement, whereupon it will become a binding
Agreement between the Company and the several Underwriters in accordance with
its terms.
Very truly yours,
U.S. REMODELERS, INC.
BY: __________________________________
Name: _________________________
Title: ________________________
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
FIRST LONDON SECURITIES CORPORATION
BY: __________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
UNDERWRITER AGREEMENT - PAGE 35