FORM OF UNDERWRITING AGREEMENT BETWEEN PACIFIC RESTAURANT HOLDINGS, INC. AND JESUP & LAMONT SECURITIES CORPORATION DATED: ____________, 2008
Exhibit
1.1
FORM
OF
BETWEEN
PACIFIC
RESTAURANT HOLDINGS, INC.
AND
JESUP
& ▇▇▇▇▇▇ SECURITIES CORPORATION
DATED:
____________, 2008
PACIFIC
RESTAURANT HOLDINGS, INC.
1,700,000
UNITS
_________,
2008
Jesup
& ▇▇▇▇▇▇ Securities Corporation
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
The
undersigned, Pacific Restaurant Holdings, Inc., a Delaware corporation (the
“Company”),
hereby confirms its agreement with Jesup & ▇▇▇▇▇▇ Securities Corporation
(being referred to herein variously as “you,”
“Jesup”
or
the
“Representative”)
and
the other underwriters named on Schedule I hereto for which Jesup is acting
as
Representative (the Representative and the other Underwriters being collectively
called the “Underwriters”
or,
individually, an “Underwriter”)
as
follows:
1. PURCHASE
AND SALE OF SECURITIES.
1.1 FIRM
SECURITIES.
1.1.1 PURCHASE
OF FIRM SECURITIES.
On the
basis of the representations and warranties herein contained, but subject to
the
terms and conditions herein set forth, the Company agrees to issue and sell,
severally and not jointly, to the several Underwriters an aggregate of 1,700,000
units (the “Firm
Securities”),
with
each unit (the “Unit”)
consisting of one share of the Company’s common stock, $0.001 par value (the
“Common
Stock”)
and
one warrant (the “Warrant”)
at a
purchase price (net of discounts and commissions) of $[___] per Unit. Each
Warrant will entitle the holder thereof to purchase one share of Common Stock
at
a purchase price of $7.20 per share. The
shares of Common Stock and the Warrants included in the Firm Units will not
be
separately transferable until six months after the closing of the offering
(the
“Closing”)
unless
Jesup informs the Company of its decision to allow earlier separate trading,
whereupon the Company will issue a press release announcing that separate
trading will begin. The
Underwriters, severally and not jointly, agree to purchase from the Company
the
number of Firm Securities set forth opposite their respective names on Schedule
I attached hereto and made a part hereof. The Firm Securities are to be offered
initially to the public (the “Offering”)
at the
offering price set forth on the cover page of the Prospectus (as defined in
Section 2.1.1 hereof).
1.1.2 DELIVERY
AND PAYMENT.
Delivery
and payment for the Firm Securities shall be made at 10:00 A.M., New York time,
on or before the third business day following the date that the Firm Securities
commence trading or at such earlier time as the Representative shall determine,
or at such other time as shall be agreed upon by the Representative and the
Company, at the offices of counsel to the Representative or at such other place
as shall be agreed upon by the Representative and the Company. The hour and
date
of delivery and payment for the Firm Securities are called the “Closing
Date.”
Payment
for the Firm Securities shall be made on the Closing Date by wire transfer
in
immediately available funds, payable to the order of the Company upon delivery
to you by either electronic transfer of the Firm Securities or of certificates
(in form and substance reasonably satisfactory to the Underwriters) representing
the Firm Securities for the account of the Underwriters. Any certificates
representing the Firm Securities shall be registered in such name or names
and
in such authorized denominations as the Representative may request in writing
at
least two full business days prior to the Closing Date. The Company will permit
the Representative to examine and package the Firm Securities for delivery
at
least one full business day prior to the Closing Date. The Company shall not
be
obligated to sell or deliver the Firm Securities except upon tender of payment
by the Representative for all the Firm Securities.
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1.2 OVER-ALLOTMENT
OPTION.
1.2.1 OPTION
SECURITIES.
For the
purposes of covering any over-allotments in connection with the distribution
and
sale of the Firm Securities, the Underwriters are hereby granted an option
to
purchase up to an additional 15%, or 225,000 Units from the Company
(“Over-allotment
Option”).
Such
additional 225,000 Units are hereinafter referred to as the “Option
Securities.”
The Firm
Securities and the Option Securities, together with the shares of Common Stock
issuable upon exercise of the Warrants, are hereinafter referred to collectively
as the “Public
Securities.”
The
purchase price to be paid for the Option Securities will be the same price
per
Option Security as the price per Firm Security set forth in Section 1.1.1
hereof.
1.2.2 EXERCISE
OF OPTION.
The
Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised
by the Representative as to all (at any time) or any part (from time to time)
of
the Option Securities within 45 days after the Effective Date. The Underwriters
will not be under any obligation to purchase any Option Securities prior to
the
exercise of the Over-allotment Option. The Over-allotment Option granted hereby
may be exercised by the giving of oral notice to the Company by the
Representative, which must be confirmed in writing by overnight mail or
facsimile transmission setting forth the number of Option Securities to be
purchased and the date and time for delivery of and payment for the Option
Securities (the “Option
Closing Date”),
which
will not be later than five full business days after the date of the notice
or
such other time as shall be agreed upon by the Company and the Representative,
at the offices of the Representative or at such other place as shall be agreed
upon by the Company and the Representative. Upon exercise of the Over-allotment
Option, the Company will become obligated to convey to the Underwriters, and,
subject to the terms and conditions set forth herein, the Underwriters will
become obligated to purchase, the number of Option Securities specified in
such
notice.
1.2.3 PAYMENT
AND DELIVERY.
Payment
for the Option Securities will be at the Representative’s election by wire
transfer in immediately available funds, payable to the order of the Company
at
the offices of the Representative or at such other place as shall be agreed
upon
by the Representative and the Company upon delivery to you by either
certificates representing such securities or electronic delivery of the
securities for the Underwriters. The certificates representing the Option
Securities to be delivered will be in such denominations and registered in
such
names as the Representative requests not less than two full business days prior
to the Closing Date or the Option Closing Date, as the case may be. The Company
will permit the Representative to examine and package the Option Securities
for
delivery not less than one full business day prior to such Closing Date.
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1.3 REPRESENTATIVE’S
PURCHASE OPTION. At the Closing, the Company shall sell to Jesup (or its
designated affiliates), for $100, an option (the “Representative’s
Purchase Option”)
for
the purchase of up to a total of 170,000 Units (10% of the total number of
Units
being sold in the Offering, not including the Over-allotment Option) (the
“Representative
Units”)
at a
per Unit price of $[___] (120% of the public offering price of the Firm
Securities). Each of the Representative’s Units is identical to the Firm
Securities except that the Warrants included in the Representative’s Units (the
“Representative’s
Warrants”)
shall
have an exercise price of $8.64 (120% of the exercise price of the Warrants
included in the Firm Securities). The Representative’s Purchase Option will be
non-exercisable for six months after the Effective Date and will expire in
five
years from the Effective Date. The Representative’s Purchase Option may not be
transferred, assigned or hypothecated for a period of one year following the
Effective Date, except that they may be assigned, in whole or in part, to any
successor, officer, manager or member of the Underwriters (or to officers,
managers or members of any such successor or member), and to members of the
selling group. The Representative’s Purchase Option may be exercised as to all
or a lesser number of shares of Common Stock at the Company’s expense, and shall
contain net exercise provisions, one demand registration at the Company’s
expense, one additional demand registration at the warrantholder’s expense, and
unlimited “piggyback” registration rights for a period of five years after the
Closing at the Company’s expense. The Representative’s Purchase Option shall
further provide for (a) weighted average adjustment in the number and price
of such warrants (and the shares of Common Stock underlying such warrants)
for a
period of two years from the Closing for issuances of securities at less than
the public offering price in the Offering, subject to customary adjustments,
and
(b) for the entire term of the Representative’s Purchase Option, further
customary adjustments to prevent dilution. The Representative’s Purchase Option,
the Representative’s Units, the Representative’s Warrants and the shares of
Common Stock issuable upon exercise of the Representative’s Warrants are
hereinafter referred to collectively as the “Representative’s
Securities.”
The
Public Securities and the Representative’s Securities are hereinafter referred
to collectively as the “Securities.”
The
Representative understands and agrees that there are significant restrictions
against transferring the Representative’s Purchase Option during the first year
after the Effective Date, as set forth in Section 3 of the Representative’s
Purchase Option.
2. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to the Underwriters as follows:
2.1 FILING
OF
REGISTRATION STATEMENT.
2.1.1 PURSUANT
TO THE ACT.
The
Company has filed with the Securities and Exchange Commission (the “Commission”)
a
registration statement and an amendment or amendments thereto, on Form SB-2
(File No. 333-146299),
including any related preliminary prospectus (“Preliminary
Prospectus”),
for
the registration of the Public Securities under the Securities Act of 1933,
as
amended (the “Act”),
which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations (the “Regulations”)
of the
Commission under the Act. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time
the
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein and all information deemed to be a part thereof as
of
such time pursuant to paragraph (b) of Rule 430A of the Regulations), is
hereinafter called the “Registration
Statement,”
and
the form of the final prospectus dated the Effective Date or such later date
as
may be determined by the Representative (or, if applicable, the form of final
prospectus filed with the Commission pursuant to Rule 424 of the Regulations),
is hereinafter called the “Prospectus.”
The
Registration Statement has been declared effective by the Commission on the
date
hereof.
2.1.2 PURSUANT
TO THE EXCHANGE ACT. The
Company has filed with the Commission a registration statement on Form 8-A
(File
No. 000-____) providing for the registration under the Securities Exchange
Act
of 1934, as amended (“Exchange
Act”),
of
the Common Stock and Warrants. Such registration of the Common Stock and
Warrants has been declared effective by the Commission on the date hereof.
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2.2 NO
STOP
ORDERS, ETC.
Neither
the Commission nor, to the Company’s knowledge, any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or has instituted or, to the Company’s knowledge,
threatened to institute any proceedings with respect to such an
order.
2.3 DISCLOSURES
IN REGISTRATION STATEMENT.
2.3.1 SECURITIES
ACT REPRESENTATION.
At the
time the Registration Statement becomes effective and at the Closing Date and
the Option Closing Date, if any, the Registration Statement and the Prospectus
and any amendment or supplement thereto, will conform in all material respects
to the requirements of the Act and the Regulations; neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on such
dates, will contain any untrue statement of a material fact or will omit to
state any material fact required to be stated therein or necessary to make
the
statements therein not misleading. When any Preliminary Prospectus was first
filed with the Commission (whether filed as part of the Registration Statement
or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and
when
any amendment thereof or supplement thereto was first filed with the Commission,
such Preliminary Prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act
and
the Regulations. The representation and warranty made in this Section 2.3.1
does
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished (or not furnished in the case
of
an omission) to the Company with respect to the Underwriters by the
Representative expressly for use in the Registration Statement or Prospectus
or
any amendment thereof or supplement thereto.
2.3.2 DISCLOSURE
OF CONTRACTS.
The
description in the Registration Statement and the Prospectus of contracts and
other documents is accurate in all material respects and presents fairly the
information required to be disclosed and there are no contracts or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement that have not been so described or filed. Each contract or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and that
is
(i) referred to in the Prospectus, or (ii) material to the Company’s
business, has been duly and validly executed by the Company and, to the
Company’s knowledge, the other parties thereto, is in full force and effect and
is enforceable against the Company and, to the Company’s knowledge, the other
parties thereto in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, moratorium, fraudulent
transfer, fraudulent conveyance, reorganization or similar laws affecting
creditors’ rights generally, (y) as enforceability of any indemnification
or contribution provision may be limited under the federal and state securities
laws, and (z) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to the equitable defenses and
to
the discretion of the court before which any proceeding therefor may be brought.
None of such contracts or instruments has been assigned by the Company, and
neither the Company nor, to the Company’s knowledge, any other party is in
default thereunder and, to the Company’s knowledge, no event has occurred that,
with the lapse of time or the giving of notice, or both, would constitute a
default thereunder. None of the material provisions of such contracts or
instruments violates or will result in a violation of any existing applicable
law, rule, regulation, judgment, order or decree of any governmental agency
or
court having jurisdiction over the Company or any of its assets or businesses,
including, without limitation, those relating to environmental laws and
regulations.
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2.3.3 PRIOR
SECURITIES TRANSACTIONS.
No
securities of the Company have been sold by the Company or by or on behalf
of,
or for the benefit of, any person or persons controlling, controlled by, or
under common control with the Company within the three years prior to the date
hereof, except as disclosed in the Registration Statement.
2.4 CHANGES
AFTER DATES IN REGISTRATION STATEMENT.
2.4.1 NO
MATERIAL ADVERSE CHANGE.
Since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise may be specifically stated
therein, (i) there has been no material adverse change in the condition,
financial or otherwise, or in the results of operations, business or business
prospects of the Company and (ii) there have been no transactions entered
into by the Company, other than those in the ordinary course of business, that
are material with respect to the condition, financial or otherwise, or to the
results of operations, business or business prospects of the
Company.
2.4.2 RECENT
SECURITIES TRANSACTIONS, ETC.
Since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not (i) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money; or (ii) declared or paid any dividend or made any other
distribution on or in respect to its capital stock.
2.5 INDEPENDENT
ACCOUNTANTS.
Tschopp,
▇▇▇▇▇▇▇▇ & ▇▇▇, P.A. (“TWO”),
whose
report is filed with the Commission as part of the Registration Statement,
are
independent accountants as required by the Act and the Regulations. TWO has
not,
during the periods covered by the financial statements included in the
Prospectus, provided to the Company any prohibited non-audit services, as such
term is used in Section 10A(g) of the Exchange Act.
2.6 FINANCIAL
STATEMENTS. The
financial statements, together with the notes thereto and supporting schedules
included in the Registration Statement and Prospectus, present fairly the
financial position and the results of operations of the Company at the dates
and
for the periods to which they apply; and such financial statements have been
prepared in conformity with United States generally accepted accounting
principles, consistently applied throughout the periods involved; and the
supporting schedules, if any, included in the Registration Statement present
fairly the information required to be stated therein. The pro forma financial
information set forth in the Registration Statement and Prospectus reflects
all
significant assumptions and adjustments relating to the business and operations
of the Company.
2.7 AUTHORIZED
CAPITAL; OPTIONS; ETC.
The
Company had at the date or dates indicated in the Prospectus duly authorized,
issued and outstanding capitalization as set forth in the Registration Statement
and the Prospectus. Based on the assumptions and adjustments stated in the
Registration Statement and the Prospectus, the Company will have on the Closing
Date the adjusted stock capitalization set forth therein. Except as may be
set
forth in the Registration Statement and the Prospectus, on the Effective Date
and on the Closing Date there will be no outstanding or authorized
subscriptions, options, warrants or other rights to purchase or otherwise
acquire, or preemptive rights with respect to the issuance or sale of any Common
Stock of the Company, including any obligations to issue any shares pursuant
to
anti-dilution provisions, or any security convertible into shares of Common
Stock of the Company, or any contracts or commitments to issue or sell shares
of
Common Stock or any such options, warrants, rights or convertible securities.
Except as may be set forth in the Registration Statement and the Prospectus,
on
the Effective Date and on the Closing Date, the Company will not have any
then-current obligations to pay principal, interest, or other monetary
obligation on any class of equity securities or debt obligation of the
Company.
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2.8 VALID
ISSUANCE OF SECURITIES; ETC.
2.8.1 OUTSTANDING
SECURITIES.
All
issued and outstanding securities of the Company have been duly authorized
and
validly issued and are fully paid and non-assessable; the holders thereof have
no rights of rescission with respect thereto, and are not subject to personal
liability solely by reason of being such holders; and none of such securities
were issued in violation of the preemptive rights of any holders of any security
of the Company or similar contractual rights granted by the Company. The
outstanding options and warrants to purchase shares of Common Stock constitute
valid and binding obligations of the Company, enforceable in accordance with
their terms. The authorized Common Stock and outstanding options and warrants
to
purchase shares of Common Stock conform in all material respects to all
statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales by the Company of the outstanding Common Stock,
options and warrants to purchase shares of Common Stock, and securities
convertible into shares of Common Stock, were at all relevant times registered
under the Act and registered or qualified under the applicable state securities
or Blue Sky laws or exempt from such registration or qualification
requirements.
2.8.2 SECURITIES
SOLD PURSUANT TO THIS AGREEMENT.
The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not
and
will not be subject to personal liability solely by reason of being such
holders; the Securities are not and will not be subject to the preemptive rights
of any holders of any security of the Company or similar contractual rights
granted by the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Securities conform in all material respects to all statements with
respect thereto contained in the Registration Statement. When issued, the
Representative’s Purchase Option, the Representative’s Warrants and the Warrants
will constitute valid and binding obligations of the Company to issue and sell,
upon exercise thereof and payment therefor, the number and type of securities
of
the Company called for thereby and the Representative’s Purchase Option, the
Representative’s Units, the Representative’s Warrants and the Warrants will be
enforceable against the Company in accordance with their respective terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally,
(ii) as enforceability of any indemnification or contribution provision may
be limited under the federal and state securities laws, and (iii) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
2.9 REGISTRATION
RIGHTS OF THIRD PARTIES.
Except
as may be set forth in the Prospectus, no holders of any securities of the
Company or of any options or warrants of the Company or other rights exercisable
for or convertible or exchangeable into securities of the Company have the
right
to require the Company to register any such securities of the Company under
the
Act or to include any such securities in the Registration
Statement.
2.10 VALIDITY
AND BINDING EFFECT OF AGREEMENTS.
This
Agreement, the Warrant Agreement (as hereinafter defined) and the Advisory
Agreement (as hereinafter defined) have been duly and validly authorized by
the
Company and constitute, and the Representative’s Purchase Option, has been duly
and validly authorized by the Company and, when executed and delivered, will
constitute, the valid and binding agreements of the Company, enforceable against
the Company in accordance with their respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally, (ii) as enforceability
of any indemnification or contribution provision may be limited under the
federal and state securities laws, and (iii) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
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2.11 NO
CONFLICTS, ETC.
The
execution, delivery, and performance by the Company of this Agreement, the
Representative’s Purchase Option, the Warrant Agreement, and the Advisory
Agreement, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof
and
thereof do not and will not, with or without the giving of notice or the lapse
of time or both, (i) result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms
of
any indenture, mortgage, deed of trust, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money,
or
any other agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the property or assets of the
Company is subject, except which could not reasonably be expected to have a
material adverse effect on the Company; (ii) result in any violation of the
provisions of the Certificate of Incorporation or the By-Laws of the Company;
(iii) violate any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or businesses, except
where such violation could not reasonably be expected to have a material adverse
effect on the Company; or (iv) have a material adverse effect on any
permit, license, certificate, registration, approval, consent, license or
franchise of or concerning the Company.
2.12 NO
DEFAULTS; VIOLATIONS.
Except
as may be described in the Prospectus, no material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of
the
properties or assets of the Company is subject. Except as may be described
in
the Prospectus, the Company is not in violation of any term or provision of
its
Certificate of Incorporation or By-Laws or in violation of any material
franchise, license, permit, applicable law, rule, regulation, judgment or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or businesses.
2.13 CORPORATE
POWER; LICENSES; CONSENTS.
2.13.1 CONDUCT
OF BUSINESS.
The
Company has all requisite corporate power and authority, and has all necessary
and material authorizations, approvals, orders, licenses, certificates and
permits of and from all applicable governmental regulatory officials and bodies
to own or lease its properties and conduct its business as described in the
Prospectus, and the Company is and has been doing business in compliance with
all such material authorizations, approvals, orders, licenses, certificates
and
permits and all federal, state and local laws, rules and regulations. Any
disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the Company’s business as currently contemplated
are correct in all material respects and do not omit to state a material
fact.
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2.13.2 TRANSACTIONS
CONTEMPLATED HEREIN. The
Company has all corporate power and authority to enter into this Agreement
and
to carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have
been
obtained. No consent, approval, authorization or order of, and no filing with,
any court, government agency or other body is required for the valid
authorization, issuance, sale and delivery, of the Securities and the
consummation of the transactions and agreements contemplated by this Agreement,
the Warrant Agreement, the Representative’s Purchase Option, the Advisory
Agreement and the Prospectus, except with respect to applicable federal and
state securities laws.
2.14 TITLE
TO
PROPERTY; INSURANCE.
The
Company has good and marketable title to, or valid and enforceable leasehold
estates in, all items of real and personal property (tangible and intangible)
owned or leased by it, free and clear of all liens, encumbrances, claims,
security interests, defects and restrictions of any material nature whatsoever,
other than (i) those referred to in the Prospectus, (ii) liens for
taxes not yet due and payable or (iii) those which do not materially effect
the value of such property and do not materially interfere with the use made
of
such property by the Company. The Company has adequately insured its properties
against loss or damage by fire or other casualty and maintains, in adequate
amounts, such other insurance as is usually maintained by companies engaged
in
the same or similar business.
2.15 LITIGATION;
GOVERNMENTAL PROCEEDINGS.
Except
as may be set forth in the Prospectus, there is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental proceeding
pending or, to the Company’s knowledge, threatened against, or involving the
properties or business of, the Company that might materially and adversely
affect the financial position, value or the operation of the properties or
the
business of the Company, or that questions the validity of the capital stock
of
the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to, or in connection with, this Agreement. There are no
outstanding orders, judgments or decrees of any court, governmental agency
or
other tribunal, domestic or foreign, naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, its properties or business is bound or subject.
2.16 GOOD
STANDING.
The
Company has been duly organized and validly exists as a corporation and is
in
good standing under the laws of the state of its incorporation. The Company
is
duly qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which ownership or leasing of any properties or the
character of its operations requires such qualification or licensing, except
where the failure to qualify would not have a material adverse effect on the
financial position or value or the operation of the properties or the business
of the Company.
2.17 TAXES.
The
Company has filed all returns (as hereinafter defined) required to be filed
with
taxing authorities prior to the date hereof or has duly obtained extensions
of
time for the filing thereof. The Company has paid all undisputed portions of
all
taxes (as hereinafter defined) shown as due on such returns that were filed
and,
except as may be set forth in the Prospectus, has paid all taxes imposed on
or
assessed against the Company. The provisions for taxes payable, if any, shown
on
the financial statements filed with or as part of the Registration Statement,
are sufficient for all accrued and unpaid taxes, whether or not disputed, and
for all periods to and including the dates of such consolidated financial
statements. Except as disclosed in writing to the Underwriter, (i) to the
Company’s knowledge, no issues have been raised (and are currently pending) by
any taxing authority in connection with any of the returns or taxes asserted
as
due from the Company, and (ii) no waivers of statutes of limitation with
respect to the returns or collection of taxes have been given by or requested
from the Company. The term “taxes” refers to all federal, state, local, foreign,
and other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees, assessments, or charges
of any kind whatever, together with any interest and any penalties, additions
to
tax, or additional amounts with respect thereto. The term “returns” refers to
all returns, declarations, reports, statements, and other documents required
to
be filed in respect to taxes.
8
2.18 EMPLOYEES’
OPTIONS.
Except
as may be set forth in the Prospectus, no shares of Common Stock (underlying
outstanding options to purchase Common Stock) are eligible for sale pursuant
to
Rule 701 promulgated under the Act in the 12-month period following the
Effective Date.
2.19 TRANSACTIONS
AFFECTING DISCLOSURE TO FINRA.
2.19.1 FINDER’S
FEES.
Except
as may be set forth in the Prospectus, the Company has not received any notice
of claims, payments, issuances, arrangements or understandings for services
in
the nature of a finder’s, consulting or origination fee with respect to the
introduction of the Company to the Underwriters or the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments or
issuances with respect to the Company that may affect the Underwriters’
compensation, as determined by the Financial Industry Regulatory Authority
(“FINRA”).
2.19.2 PAYMENTS
WITHIN TWELVE MONTHS.
Except
as may be set forth in the Prospectus, and other than payments to the
Representative set forth in this Agreement, the Company has not made any direct
or indirect payments (in cash, securities or otherwise) to (i) any person,
as a finder’s fee, investing fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company persons who
provided capital to the Company, (ii) any FINRA member, or (iii) any
person or entity that has any direct or indirect affiliation or association
with
any FINRA member within the 12-month period prior to the date on which the
Registration Statement was filed with the Commission (“Filing
Date”)
or
thereafter, assuming the accuracy of the information contained in the FINRA
questionnaires received from each of the Company’s security
holders.
2.19.3 USE
OF
PROCEEDS.
None of
the net proceeds of the offering will be paid by the Company to any
participating FINRA member or any affiliate or associate of any participating
FINRA member, except as specifically authorized herein.
2.19.4 INSIDERS’
FINRA AFFILIATION.
Except
as may be set forth in the Prospectus, no officer or director of the Company
or
owner of any of the Company’s unregistered securities has any direct or indirect
affiliation or association with any FINRA member. The Company will advise the
Representative and FINRA if prior to the Closing Date or Option Closing Date,
if
any, it learns that any officer, director or stockholder of the Company is
or
becomes an affiliate or associated person of an FINRA member participating
in
the offering.
2.19.5 FINANCIAL
ADVISORY AGREEMENT.
On the
Closing Date, the Company will enter into Jesup’s form of financial advisory
agreement (the “Advisory
Agreement”),
pursuant to which Jesup shall be retained and shall serve as the Company’s
exclusive financial advisor and investment banker. Jesup shall be compensated
at
the rate of six thousand dollars ($6,000) per month for a 24 month period;
provided, however, the total amount under the advisory agreement, or $144,000,
shall be paid upon the execution of the Advisory Agreement. If, during the
period of the Advisory Agreement, a merger, acquisition, joint venture,
strategic alliance, licensing or marketing arrangement or other business
transaction or sale opportunity (the “Transaction”)
arises
for the Company, and if the services of an investment firm or business valuation
firm are to be utilized, Jesup shall be retained to advise the Company. Fees
to
Jesup shall be five percent (5%) of the Legal Consideration, as such term is
defined in the Engagement Letter between the Company and Jesup. All amounts
payable to Jesup pursuant to this paragraph 2.19.5 are due and payable to the
Underwriter, in cash or by certified check if the consideration is cash, or
properly executed certificates or other writings evidencing beneficial ownership
of Jesup if the consideration is other than cash, at the closing or closings
of
any Transaction. In the event that the Company does not retain Jesup’s advisory
services, the Company shall pay Jesup a fee equal to two percent (2%) of the
Legal Consideration upon closing of such transaction as a “Breakaway
Fee.”
9
2.20 FOREIGN
CORRUPT PRACTICES ACT.
None of
the Company or any of its officers, directors, or, to its knowledge, any of
its
employees, agents or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate
for
office (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position
to
help or hinder the business of the Company (or assist it in connection with
any
actual or proposed transaction) that (i) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had a material
adverse effect on the assets, business or operations of the Company as reflected
in any of the financial statements contained in the Prospectus or (iii) if
not continued in the future, might adversely affect the assets, business,
operations or prospects of the Company. The Company’s internal accounting
controls and procedures are sufficient to cause the Company to comply with
the
Foreign Corrupt Practices Act of 1977, as amended.
2.21 AMERICAN
STOCK EXCHANGE ELIGIBILITY.
As of
the Effective Date, the Public Securities will have been approved for listing
on
the American Stock Exchange (“AMEX”).
2.22 INTANGIBLES.
The
Company owns or possesses the requisite licenses or rights to use all
trademarks, service marks, service names, trade names, patents and patent
applications, copyrights and other rights (collectively, “Intangibles”)
described as being licensed to or owned by it in the Registration Statement.
Except as described in the Prospectus, there is no claim or action by any person
pertaining to, or proceeding pending or, to the Company’s knowledge, threatened
relating to, and the Company has not received any notice of conflict with the
asserted rights of others that challenges the exclusive right of the Company
with respect to, any Intangibles used in the conduct of the Company’s business.
To the Company’s knowledge, after due inquiry, the Intangibles and the Company’s
current products, services and processes do not infringe on any Intangibles
held
by any third party. To the Company’s knowledge, no others have infringed upon
the Intangibles of the Company.
2.23 RELATIONS
WITH EMPLOYEES.
2.23.1 EMPLOYEE
MATTERS.
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. To the Company’s knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state
and local laws and regulations. Except as may be set forth in the Registration
Statement and the Prospectus, to the Company’s knowledge, there is no unfair
labor practice charge or complaint against the Company pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the Company
or
any predecessor entity, and none has ever occurred. To the Company’s knowledge,
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, if any.
10
2.23.2 EMPLOYEE
BENEFIT PLANS.
Other
than as may be set forth in the Registration Statement and the Prospectus,
the
Company neither maintains, sponsors nor contributes to, nor is it required
to
contribute to, any program or arrangement that is an “employee pension benefit
plan,” an “employee welfare benefit plan,” or a, “multi-employer plan” as such
terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)
(“ERISA
Plans”).
The
Company does not maintain or contribute to, and has at no time maintained or
contributed to, a defined benefit plan, as defined in Section 3(35) of ERISA.
No
ERISA Plan (or any trust created thereunder) has engaged in a “prohibited
transaction” within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended (“Code”),
that
could subject the Company to any material tax penalty for prohibited
transactions and that has not adequately been corrected. Each ERISA Plan is
in
compliance with all material reporting, disclosure and other requirements of
the
Code and ERISA as they relate to any such ERISA Plan. Determination letters
have
been received from the Internal Revenue Service with respect to each ERISA
Plan
that is intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a “multi-employer plan.”
2.24 OFFICERS’
CERTIFICATE.
Any
certificate signed by any duly authorized officer of the Company and delivered
directly to you or to your counsel shall be deemed a representation and warranty
by the Company to the Underwriters as to the matters covered thereby and as
of
the date given.
2.25 WARRANT
AGREEMENT.
The
Company has entered into a warrant agreement with respect to the Warrants and
the Representative’s Warrants substantially in the form filed as an exhibit to
the Registration Statement (“Warrant
Agreement”)
with
American Stock Transfer & Trust Company, providing for, among other things,
no redemption of the Warrants without the consent of the
Representative.
2.26 LOCK-UP
AGREEMENTS.
The
Company has caused to be duly executed legally binding and enforceable
agreements pursuant to which all of the officers and directors of the Company
and all holders of more than 5% of the outstanding Common Stock of the Company,
or securities exercisable for or convertible into, shares of Common Stock
(including their family members and affiliates) (collectively, the “Insiders”),
agree
not to sell any shares of Common Stock or warrants or options to purchase,
or
other securities convertible into Common Stock owned by them (either pursuant
to
Rule 144 of the Regulations or otherwise) for a period of 12 months following
the Closing except with the prior written consent of the
Representative.
2.27 SUBSIDIARIES.
Except
as set forth on SCHEDULE 2.27, the Company does not own, in whole or in part,
an
interest in any corporation, partnership, limited liability company, joint
venture, trust or other business entity (each a “Subsidiary”
and
collectively the “Subsidiaries”).
The
Subsidiaries set forth on SCHEDULE 2.27 are each duly organized and validly
existing under the laws of the jurisdiction of its incorporation or formation.
The Company owns all of the capital stock or other ownership interest of the
Subsidiaries free and clear of all liens, security interests and other
encumbrances of any nature whatsoever, except as set forth on SCHEDULE 2.27
and
in the Prospectus. The representations and warranties made by the Company in
this Agreement shall also apply and be true with respect to each Subsidiary,
taken as a whole with the Company and all other Subsidiaries, as if each
representation and warranty contained herein made specific reference to the
Subsidiaries each time the term “Company” is used.
11
2.28 ENVIRONMENTAL
MATTERS.
The
Company has complied in all material respects with all applicable environmental
laws.
2.29 LIABILITY
INSURANCE.
The
Company maintains liability insurance of the type and in the amounts typically
maintained by similar companies operating in the industry in which the Company
operates.
2.30 Intentionally
Omitted.
2.31 RELATED
PARTY TRANSACTIONS.
There
are no business relationships or related party transactions involving the
Company or any other person required to be described in the Registration
Statement and Prospectus that have not been described as required.
2.32 STANDARD
& POOR’S LISTING. Intentionally
Omitted.
2.33 REGULATORY
COMPLIANCE.
The
Company’s operations and ownership interests are in compliance in all material
respects with all federal, state and agency standards, rules, regulations and
requirements that are applicable to the Company as of the Effective Date, and
comparable standards and agencies in the countries in which the Company
operates.
2.34 BOARD
OF
DIRECTORS.
The
Board of Directors of the Company is comprised of the persons set forth in
the
“Management” section of the Prospectus. The qualifications of the persons
serving as Board members and the overall composition of the Board comply with
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules promulgated thereunder and with
the
listing requirements of the AMEX (including those requirements that have been
finalized or issued as of the date hereof with a date certain for effectiveness,
but which are not yet effective). At least one member of the Board qualifies
as
a “financial expert” as such term is defined under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002 and the rules promulgated thereunder.
2.35 NO
STOP
ORDERS.
The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus or any part thereof.
2.36 NO
NON-COMPETITION OBLIGATIONS.
No
director, officer or other employee of the Company is subject to any
noncompetition agreement or non-solicitation agreement with any employer or
prior employer that could materially affect his ability to be an employee,
officer and/or director of the Company.
12
2.37 ▇▇▇▇▇▇▇▇-▇▇▇▇▇
COMPLIANCE.
2.37.1 DISCLOSURE
CONTROLS.
The
Company has developed and currently maintains disclosure controls and procedures
that will comply with Rule 13a-15 or 15d-15 of the Exchange Act, and such
controls and procedures are effective to ensure that all material information
concerning the Company will be made known on a timely basis to the individuals
responsible for the preparation of the Company’s Exchange Act filings and other
public disclosure documents.
2.37.2 COMPLIANCE.
The
Company and each of its directors and its senior financial officers has
consulted with the Company’s independent auditors and outside counsel with
respect to, and is familiar in all material respects with, the requirements
of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. The Company is, or will be on the Effective
Date, in compliance with the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
applicable to it, and has implemented or will implement such programs and taken
reasonable steps to ensure the Company’s future compliance (not later than the
relevant statutory and regulatory deadlines therefor) with all the provisions
of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
3. COVENANTS
OF THE COMPANY.
The
Company covenants and agrees as follows:
3.1 AMENDMENTS
TO REGISTRATION STATEMENT.
The
Company will deliver to the Representative, prior to filing, any amendment
or
supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and not file any such amendment or supplement to which
the Representative shall reasonably object in writing.
3.2 FEDERAL
SECURITIES LAWS.
3.2.1 COMPLIANCE.
During
the time when a Prospectus is required to be delivered under the Act, the
Company will use all best efforts to comply with all requirements imposed upon
it by the Act, the Regulations and the Exchange Act and by the regulations
under
the Exchange Act, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Public Securities in accordance
with the provisions hereof, and the Prospectus. If at any time when a Prospectus
relating to the Public Securities is required to be delivered under the Act,
any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Underwriters, the Prospectus, as then amended
or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify the Representative promptly and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the
Act.
3.2.2 FILING
OF
FINAL PROSPECTUS
The
Company will file the Prospectus (in form and substance reasonably satisfactory
to the Representative) with the Commission pursuant to the requirements of
Rule
424 of the Regulations.
3.2.3 EXCHANGE
ACT REGISTRATION.
For a
period of five years from the Effective Date, the Company will use its best
efforts to maintain the registration of the Units and underlying securities
pursuant to the provisions of Section 12 of the Exchange Act.
13
3.3 BLUE
SKY
FILINGS. Intentionally
Omitted.
3.4 DELIVERY
TO THE UNDERWRITERS OF PROSPECTUSES.
The
Company will deliver to each of the several Underwriters, without charge, from
time to time during the period when the Prospectus is required to be delivered
under the Act or the Exchange Act such number of copies of each Preliminary
Prospectus and the Prospectus as such Underwriter may reasonably
request.
3.5 EVENTS
REQUIRING NOTICE TO THE REPRESENTATIVE.
The
Company will notify the Representative immediately and confirm the notice in
writing (i) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding for that purpose, (ii) if
it becomes aware of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Public Securities
for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose, (iii) of the mailing and delivery to
the Commission for filing of any post-effective amendment or supplement to
the
Registration Statement or Prospectus, (iv) of the receipt of any comments
or request for any additional information from the Commission, and (v) of
the happening of any event during the period described in Section 3.4 hereof
that, in the judgment of the Company, makes any statement of a material fact
made in the Registration Statement or the Prospectus untrue or that requires
the
making of any changes in the Registration Statement or the Prospectus in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. If the Commission or any state securities commission
shall enter a stop order or suspend such qualification at any time, the Company
will make every reasonable effort to obtain promptly the lifting of such
order.
3.6 REVIEW
OF
FINANCIAL STATEMENTS.
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
(as described in Statement on Audited Standards No. 71 -- Interim Financial
Information), 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 Form 10-Q or Form 10-QSB quarterly
reports and the mailing of any quarterly financial information to
stockholders.
3.7 AMEX
MAINTENANCE.
For a
period of five years from the date hereof, the Company will use its best efforts
to maintain the listing by the AMEX of the Units, the Common Stock, and, if
outstanding, the Warrants.
3.8 STANDARD
& POOR’S AND SECONDARY MARKET TRADING. Intentionally
Omitted.
3.9 REGISTRATION
OF COMMON STOCK UNDERLYING THE WARRANTS.
The
Company agrees that so long as the Warrants are exercisable, it shall file
with
the Commission post-effective amendments to the Registration Statement as
necessary to maintain effectiveness of the Registration Statement (or new
Registration Statements covering the Warrants and the Common Stock issuable
upon
exercise thereof) and it shall take such action as is necessary to qualify
and/or maintain qualification for sale, in those states in which the Warrants
were initially offered by the Company, the Common Stock issuable upon exercise
of the Warrants. The Company shall maintain the effectiveness of such
registration statement and keep current a prospectus thereunder and maintain
such qualification until the expiration of the Warrants in accordance with
the
provisions of the Warrant Agreement. The provisions of this Section 3.9.2 may
not be modified, amended or deleted without the prior written consent of the
Underwriter.
14
3.10 REPORTS
TO THE REPRESENTATIVE.
3.10.1 PERIODIC
REPORTS, ETC.
For a
period of five years from the Effective Date, the Company will promptly furnish
to the Representative copies of such financial statements and other periodic
and
special reports as the Company from time to time files with any governmental
authority or furnishes generally to holders of any class of its securities,
and
promptly furnish to the Representative (i) a copy of each periodic report
the Company shall be required to file with the Commission, (ii) a copy of
every press release and every news item and article with respect to the Company
or its affairs that was released by the Company and (iii) a copy of each
Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the
Company.
3.10.2 TRANSFER
SHEETS AND WEEKLY POSITION LISTINGS.
Until
the earlier of (i) the date the Company’s securities are listed on the
AMEX, or (ii) the third anniversary of the Closing Date, the Company will
furnish to the Representative at the Company’s sole expense such transfer sheets
and position listings of the Company’s securities as the Representative may
request, including the daily, weekly and monthly consolidated transfer sheets
of
the transfer agent of the Company and the weekly position listings of the
Depository Trust Company.
3.10.3 SECONDARY
MARKET TRADING MEMORANDUM.
Intentionally Omitted.
3.11 AGREEMENTS
BETWEEN THE REPRESENTATIVE AND THE COMPANY.
3.11.1 REPRESENTATIVE’S
PURCHASE OPTION.
On the
Closing Date, the Company will execute and deliver the Representative’s Purchase
Option to Jesup or its designees in the form filed as an exhibit to the
Registration Statement.
3.12 OFFER
AND
SALE OF SECURITIES. The Company will not, for a period of two (2) years
following the Closing, offer, sell or distribute any of its securities, other
than pursuant to the Company’s existing incentive compensation plan, at the
then-fair market value without the prior written consent of Jesup. The sale
of
such securities shall be executed by Jesup. “Fair
Market Value” shall
mean the greater of (a) the average of the volume weighted average price of
the Company’s Common Stock for each of the 20 trading days prior to the date of
the original sale; and (b) the last sale price of the Common Stock, during
normal operating hours, as reported on the AMEX or any other exchange or
electronic quotation system on which the Common Stock is listed.
3.13 DISQUALIFICATION
OF FORM SB-2 OR FORM S-1 (OR OTHER APPROPRIATE FORM).
For a
period equal to five years from the date hereof, the Company will not take
any
action or actions that may prevent or disqualify the Company’s use of Form SB-2
or Form S-1 (or other appropriate form) for the registration of the Warrants
and
the Representative’s Warrants and the securities issuable upon exercise of those
Warrants under the Act.
15
3.14 PAYMENT
OF EXPENSES.
3.14.1 GENERAL
EXPENSES.
The
Company hereby agrees to pay on the Closing Date and, to the extent not paid
on
the Closing Date, on the Option Closing Date, (i) all expenses incident to
the performance of the obligations of the Company under this Agreement,
including but not limited to, all filing fees and communication expenses
relating to the registration of the Securities with the Commission and the
filing of the offering materials with FINRA (including all COBRADesk fees when
required); (ii) all fees and expenses relating to the listing of the Units,
Common Stock and Warrants on AMEX and on such stock exchanges as the Company
and
Jesup together determine; it being agreed that the Company shall make a onetime
payment of $5,000 to ▇▇▇▇▇▇’▇ counsel in connection with such AMEX listing;
(iii) the costs of all mailing, express mailing and printing of the
underwriting documents (including this agreement, and, if appropriate, any
agreement among underwriters, selected dealers’ agreement, underwriters’
questionnaires and powers of attorney), Registration Statements, Prospectuses
and all amendments, supplements and exhibits thereto and as many preliminary
and
final Prospectuses as Jesup may reasonably deem necessary; (iv) the costs
and expenses of a financial public relations firm; (v) the costs associated
with “road shows,” including, without limitation, travel, meals, entertainment
and lodging, and presentation forum expenses associated with such trips;
(vi) the costs of preparing, printing and delivering certificates for the
shares of Common Stock and the Warrants included in the Public Securities and
the Representative’s Purchase Option; (vii) all fees, expenses and
disbursements relating to background checks of the Company’s officers and
directors in an amount not to exceed $3,000 per individual; (viii) fees and
expenses of the transfer agent and warrant agent; (ix) transfer taxes, if
any, payable upon the transfer of securities from the Company to Jesup;
(x) the costs associated with post-Closing Date advertising of the offering
in the national edition of the Wall Street Journal and the New York Times;
(xi) the preparation, binding and delivery of three (3) bound volumes of
the public offering materials and transaction Lucite cubes or similar
commorative items in a quantity as reasonably requested by the Representative;
(xii) the fees and expenses of the Company’s accountants; and
(xiii) the fees and expenses of the Company’s legal counsel and other
agents and such representatives. The Company also agrees to engage and pay
for
an investigative search firm of the Representative’s choice (______)
to
conduct an investigation of the officers and directors of the Company, which
amount will be credited against the Representative’s non-accountable expense
allowance if the offering is consummated as provided herein. Upon Jesup’s
reasonable request, the Company shall provide funds to pay all such fees,
expenses, and disbursements, other than accounting and legal, in advance. The
Representative may deduct from the net proceeds of the offering payable to
the
Company on the Closing Date, or the Option Closing Date, if any, the expenses
set forth herein and elsewhere in this Agreement to be paid by the Company
to
Jesup and/or to third parties.
3.14.2 NON-ACCOUNTABLE
EXPENSES.
The
Company further agrees that, in addition to the expenses payable pursuant to
Section 3.14.1, it will pay to the Representative a non-accountable expense
allowance equal to three (3%) percent of the gross proceeds received by the
Company from the sale of the Firm Securities, of which $________
has been
paid to date, and the Company will pay the balance on the Closing Date by
certified or bank cashier’s check or, at the election of the Representative, by
deduction from the proceeds of the offering contemplated herein. If the offering
contemplated by this Agreement is not consummated for any reason whatsoever
then
the following provisions shall apply: The Company’s liability for payment to the
Representative of the non-accountable expense allowance shall be equal to the
sum of the Representative’s actual out-of-pocket expenses (including, but not
limited to, counsel fees, “road-show” and due diligence expenses). The
Representative shall retain such part of the non-accountable expense allowance
previously paid as shall equal such actual out-of-pocket expenses. If the amount
previously paid is insufficient to cover such actual out-of-pocket expenses,
the
Company shall remain liable for and promptly pay any other actual out-of-pocket
expenses. If the amount previously paid exceeds the amount of actual
out-of-pocket expenses, the Representative shall promptly remit to the Company
any such excess.
16
3.15 APPLICATION
OF NET PROCEEDS.
The
Company will apply the net proceeds from the offering received by it in a manner
consistent with the application described under the caption “Use of Proceeds” in
the Prospectus. The Company hereby agrees that, without the express prior
written consent of the Representative, the Company will not apply any net
proceeds from the offering to pay (i) any debt for borrowed funds or
(ii) any debt or obligation owed to any Insider, except as described in the
“Use of Proceeds” section of the Prospectus.
3.16 DELIVERY
OF EARNINGS STATEMENTS TO SECURITY HOLDERS.
The
Company will make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent certified public accountants unless required by the
Act
or the Regulations, but which shall satisfy the provisions of Rule 158(a) under
Section 11(a) of the Act) covering a period of at least twelve consecutive
months beginning after the Effective Date.
3.17 KEY
PERSON LIFE INSURANCE.
The
Company will maintain key person life insurance in an amount not less than
$1,000,000 on the life of ▇▇▇▇ ▇. ▇▇▇▇▇, to be in effect as of the Effective
Date, and pay the annual premiums therefor and name the Company as the sole
beneficiary thereof for at least three years following the Effective
Date.
3.18 STABILIZATION.
Neither
the Company, nor, to its knowledge, any of its employees, directors or
stockholders has taken or will take, directly or indirectly, any action designed
to or that has constituted or that might reasonably be expected to cause or
result in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale
of
the Public Securities.
3.19 INTERNAL
CONTROLS.
The
Company maintains and will continue to maintain a system of internal accounting
controls that comply with the requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
(and the rules promulgated thereunder) and which are sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance
with management’s general or specific authorization, (ii) transactions are
recorded as necessary in order to permit preparation of financial statements
in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect
to
any differences.
3.20 ACCOUNTANTS
AND LAWYERS.
For a
period of five years from the Effective Date, the Company shall retain
independent public accountants and securities lawyers reasonably acceptable
to
the Representative. TWO and Pillsbury ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ LLP (“Pillsbury
Winthrop”) are acceptable to the Representative.
3.21 TRANSFER
AGENT.
For a
period of five years from the Effective Date, the Company shall retain a
transfer agent (“Transfer Agent”) for the Common Stock and Warrants reasonably
acceptable to the Representative. American Stock Transfer & Trust Company is
acceptable to the Representative.
17
3.22 FINRA.
The
Company shall advise the Representative if it is aware that any 5% or greater
stockholder of the Company becomes an affiliate or associated person of a FINRA
member participating in the distribution of the Company’s Public
Securities.
3.23 SALE
OF
SECURITIES.
Subject
to Section 2.26 hereof, the Company agrees not to permit or cause a private
or
public sale or private or public offering of any of its securities (in any
manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for the time periods set forth in Section 2.26
following the Effective Date without obtaining the prior written consent of
the
Representative.
3.24 FORM
S-8.
The
Company shall not file a registration statement on Form S-8 (or successor form)
for a period of two years after the Effective Date, without the prior written
consent of the Representative.
3.25 EMPLOYEE
BENEFIT PLANS.
The
Company shall not increase the number of shares of common stock eligible for
awards under any general employee benefit plan or adopt a new employee benefit
plan for stock-based awards for a period of two years after the Effective Date,
without the prior written consent of the Representative.
4. CONDITIONS
OF THE UNDERWRITERS’ OBLIGATIONS.
The
obligations of the several Underwriters to purchase and pay for the Securities,
as provided herein, shall be subject to the continuing accuracy (in all material
respects) of the representations and warranties of the Company as of the date
hereof and as of each of the Closing Date and the Option Closing Date, if any,
to the accuracy of the statements of officers of the Company made pursuant
to
the provisions hereof and to the performance by the Company of its obligations
hereunder and to the following conditions:
4.1 REGULATORY
MATTERS.
4.1.1 EFFECTIVENESS
OF REGISTRATION STATEMENT.
The
Registration Statement has been declared effective on the date of this Agreement
and, at each of the Closing Date and the Option Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for such purpose shall have been instituted or shall
be pending or, to the Company’s knowledge, contemplated by the Commission and
any request on the part of the Commission for additional information shall
have
been complied with to the reasonable satisfaction of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, counsel
to the Underwriters.
4.1.2 FINRA
CLEARANCE.
By the
Effective Date, the Representative shall have received clearance from FINRA
as
to the amount of compensation allowable or payable to the Underwriters as
described in the Registration Statement.
4.2 COMPANY
COUNSEL MATTERS.
4.2.1 EFFECTIVE
DATE OPINION OF COUNSEL.
On the
Effective Date, the Representative shall have received the opinions of Pillsbury
Winthrop, general counsel to the Company, dated the Effective Date, addressed
to
the Representative and in form and substance satisfactory to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
LLP,
counsel to the Representative.
18
4.2.2 CLOSING
DATE AND OPTION CLOSING DATE OPINION OF COUNSEL.
On each
of the Closing Date and the Option Closing Date, if any, the Representative
shall have received the opinion of Pillsbury Winthrop, dated the Closing Date
or
the Option Closing Date, as the case may be, addressed to the Representative
and
in form and substance satisfactory to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, counsel to the
Underwriters, confirming as of the Closing Date and, if applicable, the Option
Closing Date, the respective statements made by it in its opinion delivered
on
the Effective Date.
4.2.3 RELIANCE.
In
rendering such opinion, such counsel may rely (i) as to matters involving
the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriters’
counsel) of other counsel reasonably acceptable to Underwriter’s counsel,
familiar with the applicable laws, and (ii) as to matters of fact, to the
extent they deem proper, on certificates or other written statements of officers
of departments of various jurisdiction having custody of documents respecting
the corporate existence or good standing of the Company, provided that copies
of
any such statements or certificates shall be delivered to Underwriters’ counsel
if requested. The opinion of counsel for the Company shall include a statement
to the effect that it may be relied upon by counsel for the Underwriters in
its
opinion delivered to the Underwriters.
4.3 COLD
COMFORT LETTER.
At the
time this Agreement is executed, and at each of the Closing Date and the Option
Closing Date, if any, you shall have received a letter, addressed to the
Representative and in form and substance satisfactory in all respects (including
the non-material nature of the changes or decreases, if any, referred to in
clause (iii) below) to you and to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, counsel for the
Underwriters, from TWO, dated, respectively, as of the date of this Agreement
and as of the Closing Date and the Option Closing Date, if any:
(i) confirming
that they are independent accountants with respect to the Company within the
meaning of the Act and the applicable Regulations;
(ii) stating
that, (a) based on the performance of procedures specified by the American
Institute of Certified Public Accountants for a review of the latest available
unaudited interim financial statements of the Company (as described in Statement
on Auditing Standards (“SAS”) No. 100 - “Interim Financial Information”),
(b) with an indication of the date of the latest available unaudited
interim financial statements, a reading of the latest available minutes of
the
stockholders and board of directors and the various committees of the board
of
directors, consultations with officers and other employees of the Company
responsible for financial and accounting matters and other specified procedures
and inquiries, nothing has come to their attention that would lead them to
believe that at a date not later than five days prior to the Effective Date,
Closing Date or Option Closing Date, as the case may be, there was any change
in
the capital stock or long-term debt of the Company, or any decrease in the
stockholders’ equity of the Company as compared with amounts shown in the
October 7, 2007 balance sheet included in the Registration Statement, other
than
as set forth in or contemplated by the Registration Statement, or, if there
was
any decrease, setting forth the amount of such decrease, and (c) during the
period from October 7, 2007 to a specified date not later than five days prior
to the Effective Date, Closing Date or Option Closing Date, as the case may
be,
there was any decrease in revenues, net earnings or net earnings per share
of
Common Stock, in each case as compared with the corresponding period in the
preceding year and as compared with the corresponding period in the preceding
quarter, other than as set forth in or contemplated by the Registration
Statement, or, in the case of clauses (b) and (c), if there was any such change
or decrease, setting forth the amount of such decrease;
19
(iii) stating
that they have compared specific dollar amounts, numbers of shares, percentages
of revenues and earnings, statements and other financial information pertaining
to the Company set forth in the Prospectus in each case to the extent that
such
amounts, numbers, percentages, statements and information may be derived from
the general accounting records, and work sheets, of the Company with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement; and
(iv) statements
as to such other matters incident to the transaction contemplated hereby as
you
may reasonably request and as are typically included in auditor’s “comfort
letters” to underwriters.
4.4 OFFICERS’
CERTIFICATES.
4.4.1 OFFICERS’
CERTIFICATE.
At each
of the Closing Date and the Option Closing Date, if any, the Representative
shall have received a certificate, that is true and correct in fact, of the
Company signed by the Chairman of the Board or the President and the Secretary
of the Company, dated the Closing Date or the Option Closing Date, as the case
may be, respectively, to the effect that the Company has performed all covenants
and complied with all conditions (subject to any materiality qualifications
in
any such covenants and conditions and in the representations and warranties)
required by this Agreement to be performed or complied with by the Company
prior
to and as of the Closing Date, or the Option Closing Date, as the case may
be,
and that the conditions set forth in Section 4.4 hereof have been satisfied
as
of such date and that, as of Closing Date and the Option Closing Date, as the
case may be, the representations and warranties of the Company set forth in
Section 2 hereof are true and correct. In addition, the Representative will
have
received such other and further certificates of officers of the Company as
the
Representative may reasonably request, including a certificate certifying
without any qualifications that no shareholder, officer or director of the
Company has any affiliation with a member or affiliate of a member of FINRA,
which certificate will be signed by each of the CEO, COO, CFO and Secretary
of
the Company.
4.4.2 SECRETARY’S
CERTIFICATE.
At each
of the Closing Date and the Option Closing Date, if any, the Representative
shall have received a certificate of the Company signed by the Secretary of
the
Company, dated the Closing Date or the Option Date, as the case may be,
respectively, certifying (i) that the By-Laws and Certificate of
Incorporation of the Company are true and complete, have not been modified
and
are in full force and effect, (ii) that the resolutions relating to the
public offering contemplated by this Agreement are in full force and effect
and
have not been modified, (iii) all correspondence between the Company or its
counsel and the Commission and (iv) as to the incumbency of the officers of
the Company. The documents referred to in such certificate shall be attached
to
such certificate.
20
4.5 NO
MATERIAL CHANGES.
Prior to
and on each of the Closing Date and the Option Closing Date, if any,
(i) there shall have been no material adverse change or development
involving a prospective material change in the condition or prospects or the
business activities, financial or otherwise, of the Company from the latest
dates as of which such condition is set forth in the Registration Statement
and
Prospectus, (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company from the latest date as of
which
the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is materially adverse to the Company, taken
as a
whole, (iii) the Company shall not be in default under any provision of any
instrument relating to any outstanding indebtedness which default would have
a
material adverse effect on the Company, (iv) no material amount of the
assets of the Company shall have been pledged or mortgaged, except as set forth
in the Registration Statement and Prospectus, (v) no action suit or
proceeding, at law or in equity, shall have been pending or threatened against
the Company or any Initial Stockholders or affecting any of the Company’s
property or business before or by any court or federal or state commission,
board or other administrative agency wherein an unfavorable decision, ruling
or
finding may materially adversely affect the business, operations, prospects
or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus, (vi) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated
or
threatened by the Commission, and (vii) the Registration Statement and the
Prospectus and any amendments or supplements thereto contain all material
statements that are required to be stated therein in accordance with the Act
and
the Regulations and conform in all material respects to the requirements of
the
Act and the Regulations, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.6 DELIVERY
OF AGREEMENTS.
The
Company has delivered to the Representative an executed copy of the
Representative’s Purchase Option.
4.7 OPINION
OF COUNSEL FOR THE UNDERWRITERS.
All
proceedings taken in connection with the authorization, issuance or sale of
the
Securities as herein contemplated shall be reasonably satisfactory in form
and
substance to you and to ▇▇▇▇▇▇▇ Savage LLP, counsel to the Underwriters, and
you
shall have received from such counsel a favorable opinion, dated the Closing
Date and the Option Closing Date, if any, with respect to such of these
proceedings as you may reasonably require. On or prior to the Effective Date,
the Closing Date and the Option Closing Date, as the case may be, counsel for
the Underwriters shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in this Section 4.7, or in order
to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
21
5. INDEMNIFICATION.
5.1 INDEMNIFICATION
OF UNDERWRITERS.
5.1.1 GENERAL.
Subject
to the conditions set forth below, the Company agrees to indemnify and hold
harmless each of the Underwriters, their respective directors, officers and
employees and each person, if any, who controls any such Underwriter
(“controlling
person”)
within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all legal or other expenses reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, whether arising out of any
action between any of the Underwriters and the Company or between any of the
Underwriters and any third party or otherwise) to which they or any of them
may
become subject under the Act, the Exchange Act or any other statute or at common
law or otherwise or under the laws of foreign countries, arising out of or
based
upon any untrue statement or alleged untrue statement of a material fact
contained in (i) any Preliminary Prospectus, the Registration Statement or
the Prospectus (as from time to time each may be amended and supplemented);
(ii) any post-effective amendment or amendments or any new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the Representative’s Purchase Option; or
(iii) any application or other document or written communication (in this
Section 5 collectively called “application”)
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Public Securities under
the
securities laws thereof or filed with the Commission, any state securities
commission or agency, or the AMEX; or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company with
respect to an Underwriter by or on behalf of such Underwriter expressly for
use
in any Preliminary Prospectus, the Registration Statement or Prospectus, or
any
amendment or supplement thereof, or in any application, as the case may be.
With
respect to any untrue statement or omission or alleged untrue statement or
omission made in the Preliminary Prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of any Underwriter to the
extent that any loss, liability, claim, damage or expense of such Underwriter
results from the fact that a copy of the Prospectus was not given or sent to
the
person asserting any such loss, liability, claim or damage at or prior to the
written confirmation of sale of the Securities to such person as required by
the
Act and the Regulations, and if the untrue statement or omission has been
corrected in the Prospectus, unless such failure to deliver the Prospectus
was a
result of non-compliance by the Company with its obligations under Section
3.4
hereof. The Company agrees promptly to notify the Representative of the
commencement of any litigation or proceedings against the Company or any of
its
officers, directors or controlling persons in connection with the issue and
sale
of the Securities or in connection with the Registration Statement or
Prospectus.
5.1.2 PROCEDURE.
If any
action is brought against an Underwriter or controlling person in respect of
which indemnity may be sought against the Company pursuant to Section 5.1.1,
such Underwriter shall promptly notify the Company in writing of the institution
of such action and the Company shall assume the defense of such action,
including the employment and fees of counsel (subject to the reasonable approval
of such Underwriter) and payment of actual expenses. Such Underwriter or
controlling person shall have the right to employ its or their own counsel
in
any such case, but the fees and expenses of such counsel shall be at the expense
of such Underwriter or such controlling person unless: (i) the employment
of such counsel at the expense of the Company shall have been authorized in
writing by the Company in connection with the defense of such action;
(ii) the Company shall not have employed counsel to have charge of the
defense of such action; or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
the reasonable fees and expenses of not more than one additional firm of
attorneys selected by the Underwriter and/or controlling person shall be borne
by the Company. Notwithstanding anything to the contrary contained herein,
if
the Underwriter or controlling person shall assume the defense of such action
as
provided above, the Company shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably
withheld.
5.1.3 INDEMNIFICATION
OF THE COMPANY.
Each
Underwriter, severally and not jointly, agrees to indemnify and hold harmless
the Company, its directors, officers and employees and agents who control the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense
described in Section 5.1, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions made in
any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any application, in reliance upon, and
in
strict conformity with, written information furnished to the Company with
respect to such Underwriter by or on behalf of the Underwriter expressly for
use
in such Preliminary Prospectus, the Registration Statement or Prospectus or
any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based
on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have
the
rights and duties given to the Company, and the Company and each other person
so
indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5.1.2.
22
5.2 CONTRIBUTION.
5.2.1 CONTRIBUTION
RIGHTS.
In order
to provide for just and equitable contribution under the Act in any case in
which (i) any person entitled to indemnification under this Section 5 makes
claim for indemnification pursuant hereto 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 this Section 5 provides for indemnification in such case, or
(ii) contribution under the Act, the Exchange Act or otherwise may be
required on the part of any such person in circumstances for which
indemnification is provided under this Section 5, then, and in each such case,
the Company and the Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company and the Underwriters, as incurred,
in such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial offering price appearing
thereon (to the extent that it shall have actually been paid from the Trust
Fund
to the Underwriters as of each date a contribution obligation is payable
hereunder; otherwise, the Underwriters’ contribution shall be limited to the
underwriting discount paid on the Closing Date) ( the “Underwriters’
Contribution Percentage”)
and the
Company is responsible for the balance; provided, that, no person guilty of
a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section
5.3.1, no Underwriter shall be required to contribute any amount in excess
of
the amount by which the total price at which the Public Securities underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to
pay
in respect of such losses, liabilities, claims, damages and expenses. For
purposes of this Section, each director, officer and employee of an Underwriter
or the Company, as applicable, and each person, if any, who controls an
Underwriter or the Company, as applicable, within the meaning of Section 15
of
the Act shall have the same rights to contribution as the Underwriters or the
Company, as applicable.
5.2.2 CONTRIBUTION
PROCEDURE.
Within
fifteen days after receipt by any party to this Agreement (or its
representative) of notice of the commencement of any action, suit or proceeding,
such party will, if a claim for contribution in respect thereof is to be made
against another party (“contributing party”), notify the contributing party of
the commencement thereof, but the omission to so notify the contributing party
will not relieve it from any liability which it may have to any other party
other than for contribution hereunder. In case any such action, suit or
proceeding is brought against any party, and such party notifies a contributing
party or its representative of the commencement thereof within the aforesaid
fifteen days, the contributing party will be entitled to participate therein
with the notifying party and any other contributing party similarly notified.
Any such contributing party shall not be liable to any party seeking
contribution on account of any settlement of any claim, action or proceeding
effected by such party seeking contribution without the written consent of
such
contributing party. The contribution provisions contained in this Section are
intended to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available. The Underwriters’
obligations to contribute pursuant to this Section 5.2 are several and not
joint.
23
6. DEFAULT
BY AN UNDERWRITER.
6.1 DEFAULT
NOT EXCEEDING 10% OF FIRM SECURITIES OR OPTION SECURITIES.
If any
Underwriter or Underwriters shall default in its or their obligations to
purchase the Firm Securities or the Option Securities, if the over-allotment
option is exercised, hereunder, and if the number of the Firm Securities or
Option Securities with respect to which such default relates does not exceed
in
the aggregate 10% of the number of Firm Securities or Option Securities that
all
Underwriters have agreed to purchase hereunder, then such Firm Securities or
Option Securities to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to their respective commitments
hereunder.
6.2 DEFAULT
EXCEEDING 10% OF FIRM SECURITIES OR OPTION SECURITIES.
In the
event that the default addressed in Section 6.1 above relates to more than
10%
of the Firm Securities or Option Securities, you may in your discretion arrange
for yourself or for another party or parties to purchase such Firm Securities
or
Option Securities to which such default relates on the terms contained herein.
If within one business day after such default relating to more than 10% of
the
Firm Securities or Option Securities you do not arrange for the purchase of
such
Firm Securities or Option Securities, then the Company shall be entitled to
a
further period of one business day within which to procure another party or
parties satisfactory to you to purchase said Firm Securities or Option
Securities on such terms. In the event that neither you nor the Company arrange
for the purchase of the Firm Securities or Option Securities to which a default
relates as provided in this Section 6, this Agreement may be terminated by
you
or the Company without liability on the part of the Company (except as provided
in Sections 3.14.2 and 5 hereof) or the several Underwriters (except as provided
in Section 5 hereof); provided, however, that if such default occurs with
respect to the Option Securities, this Agreement will not terminate as to the
Firm Securities; and provided further that nothing herein shall relieve a
defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default
hereunder.
6.3 POSTPONEMENT
OF CLOSING DATE.
In the
event that the Firm Securities or Option Securities to which the default relates
are to be purchased by the non-defaulting Underwriters, or are to be purchased
by another party or parties as aforesaid, you or the Company shall have the
right to postpone the Closing Date or Option Closing Date for a reasonable
period, but not in any event exceeding five 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 and arrangements, and the Company
agrees to file promptly any amendment to the Registration Statement or the
Prospectus that in the opinion of counsel for the Underwriter may thereby be
made necessary. The term “Underwriter” as used in this Agreement shall include
any party substituted under this Section 6 with like effect as if it had
originally been a party to this Agreement with respect to such
Securities.
24
7. RIGHT
TO
APPOINT REPRESENTATIVES.
7.1 DESIGNATION
OF ADVISOR AND OBSERVER. For a period of no less than two years from the
Effective Date, the Company will engage a designee of Jesup as an advisor (the
“Advisor”) to its Board of Directors, and one designee of Jesup as an observer
(the “Observer”) to its Board of Directors where such Advisor and Observer shall
attend meetings of the Board of Directors, receive all notices and other
correspondence and communications sent by the Company to members of its Board
of
Directors. During the two year period, the Company shall schedule no less than
four quarterly meetings of its Board of Directors in each such year, at which
meetings such Advisor and Observer shall be permitted to attend or otherwise
participate as set forth herein. The Advisor and Observer shall sign a
Regulation FD-compliant confidentiality agreement which is reasonably acceptable
to Jesup and its counsel in connection with such representative’s attendance at
meetings of the Board of Directors; and provided further that upon written
notice to Jesup, the Company may exclude the Advisor and the Observer from
meetings (i) for the portions of the meeting held in “executive session”
and (ii) where, in the written opinion of counsel for the Company, the
Advisor and Observer’s presence would jeopardize the attorney-client privilege.
The Company agrees to give Jesup 10 days advance written notice of each such
meeting and to provide Jesup with an agenda and minutes of the meeting no later
than it provides such items to the other directors, and reimburse the Advisor
and Observer of Jesup for their reasonable out-of-pocket expenses incurred
in
connection with its attendance at the meeting, including but not limited to,
food, lodging and transportation. During the two-year period, the Company shall
give notice to Jesup with respect to any proposed acquisitions, mergers,
reorganizations or other similar transactions.
7.2 DESIGNATION
OF DIRECTOR. In lieu of Jesup’s right to designate an Advisor and Observer,
Jesup shall have the right, during the two year period, in its sole discretion,
to designate one person for election as a director (the “Director”) of the
Company and the Company will utilize its best commercial efforts to obtain
the
election of such person, who shall be entitled to receive compensation equal
to
the highest compensation of other non-employees of the Company, excluding the
Chairperson of the Company’s Audit Committee of the Board of
Directors.
7.3 INDEMNIFICATION
OF ADVISOR, OBSERVER, OR DIRECTOR. The Company agrees to indemnify and hold
such
Advisor, Observer or Director harmless against any and all claims, actions,
damages, costs, expenses and judgments arising solely out of the attendance
and
participation of the Advisor, Observer or Director, at any meeting of the Board
of Directors described in this Section 7. The Company shall maintain Director
and Officer liability insurance in the minimum amount of $10,000,000, affording
coverage for the acts of its officers, directors and the Advisor, Observer
or
Director, for a period of three years from the Effective Date.
8. ADDITIONAL
COVENANTS.
8.1 BOARD
COMPOSITION AND BOARD DESIGNATIONS.
For a
period of two years from the Effective Date, the Company shall ensure that
(i) the qualifications of the persons serving as board members and the
overall composition of the board comply with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
and
the rules promulgated thereunder and with the listing requirements of the AMEX,
(ii) at least one member of the board of directors qualifies as a
“financial expert” as such term is defined under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
and the rules promulgated thereunder, and (iii) the Board of Directors shall
be
comprised of at least five members.
25
8.2 Intentionally
Omitted.
8.3 PRESS
RELEASES.
The
Company will not issue a press release or engage in any other publicity until
40
days after the Effective Date without the Representative’s prior written
consent, other than normal and customary releases issued in the ordinary course
of the Company’s business, each of which Jesup shall have a right to review in
advance of publication.
9. REPRESENTATIONS
AND AGREEMENTS TO SURVIVE DELIVERY.
Except
as the context otherwise requires, all representations, warranties and
agreements contained in this Agreement shall be deemed to be representations,
warranties and agreements at the Closing Dates and such representations,
warranties and agreements of the Underwriters and Company, including the
indemnity agreements contained in Section 5 hereof, shall remain operative
and
in full force and effect regardless of any investigation made by or on behalf
of
the Underwriters, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities
to
the several Underwriters until the earlier of the expiration of any applicable
statute of limitations and the seventh anniversary of the later of the Closing
Date or the Option Closing Date, if any, at which time the representations,
warranties and agreements shall terminate and be of no further force and
effect.
10. EFFECTIVE
DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
10.1 EFFECTIVE
DATE.
This
Agreement shall become effective on the Effective Date at the time that the
Registration Statement is declared effective.
10.2 TERMINATION.
The
Underwriters shall have the right to terminate this Agreement at any time prior
to any Closing Date, (i) if any domestic or international event or act or
occurrence has materially disrupted, or in the Representative’s opinion will in
the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the
American Stock Exchange or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed,
or
maximum ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities shall have been required on the
over-the-counter market by FINRA or by order of the Commission or any other
government authority having jurisdiction, or (iii) if the United States
shall have become involved in a war other than in Afghanistan or Iraq or there
are other major hostilities in or outside those countries, or (iv) if a
banking moratorium has been declared by a New York State or federal authority,
or (v) if a moratorium on foreign exchange trading has been declared which
materially adversely impacts the United States securities market, or
(vi) if the Company shall have sustained a material loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in your
opinion, make it inadvisable to proceed with the delivery of the Securities,
or
(vii) if the Company has breached any of its representations, warranties or
obligations hereunder (subject to any materiality qualifications contained
therein), or (viii) if the Underwriter shall have become aware after the
date hereof of such a material adverse change in the condition (financial or
otherwise), business, or prospects of the Company, or such adverse material
change in general market conditions as in the Representative’s reasonable
judgment would make it impracticable to proceed with the offering, sale and/or
delivery of the Securities or to enforce contracts made by the Underwriters
for
the sale of the Securities.
26
10.3 NOTICE.
If you
elect to prevent this Agreement from becoming effective or to terminate this
Agreement as provided in this Section 10, the Company shall be notified on
the
same day as such election is made by you by telephone or facsimile transmission,
confirmed by letter.
10.4 EXPENSES.
In the
event that this Agreement shall not be carried out for any reason whatsoever,
within the time specified herein or any extensions thereof pursuant to the
terms
hereof, the obligations of the Company to pay the expenses related to the
transactions contemplated herein shall be governed by Section 3.14
hereof.
10.5 INDEMNIFICATION.
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement, and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 shall not be
in
any way effected by, such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. MISCELLANEOUS.
11.1 NOTICES.
All
communications hereunder, except as herein otherwise specifically provided,
shall be in writing and shall be mailed, personally delivered or sent by
facsimile transmission and confirmed and shall be deemed given when so delivered
or faxed and confirmed, or, if mailed, two days after such mailing.
If
to the
Representative:
Jesup
& ▇▇▇▇▇▇ Securities Corporation
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Copy
to:
▇▇▇▇▇▇▇,
▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to the
Company:
▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇
Facsimile:
[________]
Copy
to:
Pillsbury
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
27
11.2 HEADINGS.
The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of any
of
the terms or provisions of this Agreement.
11.3 AMENDMENT.
This
Agreement may be amended only by a written instrument executed by each of the
parties hereto.
11.4 ENTIRE
AGREEMENT.
This
Agreement (together with the other agreements and documents being delivered
pursuant to or in connection with this Agreement) constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings of the parties, oral and
written, with respect to the subject matter hereof.
11.5 BINDING
EFFECT.
This
Agreement shall inure solely to the benefit of and shall be binding upon, the
Representative, the other Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 5 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have
or
be construed to have any legal or equitable right, remedy or claim under or
in
respect of or by virtue of this Agreement or any provisions herein
contained.
11.6 GOVERNING
LAW, JURISDICTION.
This
Agreement shall be governed by and construed and enforced in accordance with
the
law of the State of New York, without giving effect to conflicts of law. The
Company hereby agrees that any action, proceeding or claim against it arising
out of or relating in any way to this Agreement shall be brought and enforced
in
the courts of the State of New York or the United States District Court for
the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
11.1 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the Company in any action, proceeding or claim. The parties
agree that the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable attorneys’ fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
11.7 EXECUTION
IN COUNTERPARTS.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which shall be deemed to be
an
original, but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
11.8 WAIVER,
ETC.
The
failure of any of the parties hereto at any time to enforce any of the
provisions of this Agreement shall not be deemed or construed to be a waiver
of
any such provision, nor in any way to affect the validity of this Agreement
or
any provision hereof or the right of any of the parties hereto thereafter to
enforce each and every provision of this Agreement. No waiver of any breach,
non-compliance or non-fulfillment of any of the provisions of this Agreement
shall be effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver is sought;
and
no waiver of any such breach, non-compliance or non-fulfillment shall be
construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
28
If
the
foregoing correctly sets forth the understanding between the Underwriters and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between
us.
|
Very
truly yours,
|
|||||||
|
PACIFIC
RESTAURANT HOLDINGS, INC.
|
|||||||
|
By:
|
|||||||
|
Name:
|
▇▇▇▇
▇▇▇▇▇
|
||||||
|
Title:
|
Chief
Executive Officer
|
||||||
|
Accepted
as of the date first above written.
|
|||||||
|
JESUP
& ▇▇▇▇▇▇ SECURITIES CORPORATION
|
|||||||
|
By:
|
|||||||
|
Name:
|
▇▇▇▇▇▇
▇▇▇▇▇
|
||||||
|
Title:
|
Senior
Managing Director
|
||||||
29
SCHEDULE
I
|
Underwriter
|
Number
of Firm Securities to be Purchased
|
|
|
Jesup
& ▇▇▇▇▇▇ Securities Corporation
|
||
|
Empire
Financial Group, Inc.
|
_____________________________________
|
|
|
1,700,000
|
30