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EXHIBIT 1.1
1,200,000 UNITS
PERFORMANCE PRINTING CORPORATION
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK AND
ONE REDEEMABLE COMMON STOCK PURCHASE WARRANT
UNDERWRITING AGREEMENT
Dallas, Texas
_______, 1998
First London Securities Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Performance Printing Corporation (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell to such Underwriters as named in Schedule A (the
"Underwriters") to this Underwriting Agreement (the "Agreement"), for whom
First London Securities Corporation is acting as the representative (the
"Representative"), pursuant to the terms of this Agreement, on a "firm
commitment" basis, 1,200,000 Units (the "Units"), each Unit consisting of one
share of Common Stock (the "Shares") and one Redeemable Common Stock Purchase
Warrant (the "Warrants"). The Units, the Shares and the Warrants are
collectively referred to as the "Securities". Each Warrant is exercisable to
purchase one (1) share of Common Stock (the "Common Stock") at $7.50, subject
to possible adjustment, at any time during the period between the Effective
Date and five (5) years from the Effective Date. The date upon which the
Securities and Exchange Commission ("Commission") shall declare the
registration statement of the Company effective shall be the "Effective Date".
The Warrants are subject to redemption under certain circumstances. In
addition, the Company proposes to grant to the Underwriters (or, at the option
of the Representative, to the Representative, individually) the option referred
to in Section 2(b) to purchase all or any part of an aggregate of 180,000
additional Units (the "Option Securities").
You have advised the Company that you and the other Underwriters
desire to purchase, severally, the Securities, and that you have been
authorized by the Underwriters to execute this Agreement on their behalf. The
Company confirms the agreements made by it with respect to the purchase of the
Securities by the several Underwriters on whose behalf you are signing this
Agreement, as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with each of the
Underwriters as of the Effective Date (as defined above), the Closing Date (as
hereinafter defined) and the Option Closing Date (as hereinafter defined) that:
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(1) A registration statement (File No. 333-_____________) on Form
SB-2 relating to the public offering of the Securities, including a preliminary
form of the prospectus, copies of which have heretofore been delivered to you,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Commission thereunder, and has been filed
with the Commission under the Act. The Company has prepared in the same manner
and proposes to file, prior to the Effective Date of such registration
statement, an additional amendment or amendments to such registration
statement, including a final form of Prospectus, copies of which shall be
delivered to you. "Preliminary Prospectus" shall mean each prospectus filed
pursuant to the Rules and Regulations under the Act prior to the Effective
Date. The registration statement (including all financial schedules and
exhibits) as amended at the time it becomes effective and the final prospectus
included therein are respectively referred to as the "Registration Statement"
and the "Prospectus", except that (i) if the prospectus first filed by the
Company pursuant to Rule 424(b) of the Rules and Regulations shall differ from
said prospectus as then amended, the term "Prospectus" shall mean the
prospectus first filed pursuant to Rule 424(b), and (ii) if such registration
statement or prospectus is amended or such prospectus is supplemented, after
the effective date of such registration statement and prior to the Option
Closing Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus" shall include such registration statement and prospectus as so
amended, and the term "Prospectus" shall include the prospectus as so
supplemented, or both, as the case may be.
(2) At the Effective Date and at all times subsequent thereto up
to the Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or Selected Dealers: (i) the Registration Statement and Prospectus
will in all respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make statements
therein, in light of the circumstances under which they are made, not
misleading; provided, however, that the Company makes no representations,
warranties or agreement as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by the Underwriters specifically
for use in the preparation thereof. It is understood that the statements set
forth in the Prospectus with respect to stabilization, under the heading
"Underwriting" and regarding the identity of counsel to the Underwriters under
the heading "Legal Matters" constitute the only information furnished in
writing by the Underwriters for inclusion in the Prospectus.
(3) Each of the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority (corporate and other) to own its properties and conduct its business
as described in the Prospectus and is duly qualified to do business as a
foreign corporation and is in good standing in all other jurisdictions in which
the nature of its business or the character or location of its properties
requires such qualification, except where failure to so qualify will not
materially affect the Company's business, properties or financial condition.
(4) The authorized, issued and outstanding securities of the
Company as of the date of the Prospectus is as set forth in the Prospectus
under "Capitalization"; all of the issued and outstanding securities of the
Company have been, or will be when issued as set forth in the
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Prospectus, duly authorized, validly issued and fully paid and non-assessable;
the issuances and sales of all such securities complied in all material
respects with applicable Federal and state securities laws; the holders thereof
have no rights of rescission against the Company with respect thereto, and are
not subject to personal liability by reason of being such holders; none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company; except as set forth in the Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or agreements or
other rights to convert any obligation into, any securities of the Company have
been granted or entered into by the Company; and all of the securities of the
Company, issued and to be issued as set forth in the Registration Statement,
conform to all statements relating thereto contained in the Registration
Statement and Prospectus.
(5) The Securities are duly authorized, and when issued, delivered
and paid for pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights of any
security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Securities as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any securities of the
Company, except as described in the Registration Statement and Prospectus.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form filed
as an exhibit to the Registration Statement. The shares of Common Stock
issuable upon exercise of the Warrants have been reserved for issuance and when
issued in accordance with the terms of the Warrants and Warrant Agreement, will
be duly and validly authorized, validly issued, fully paid and non-assessable,
free of preemptive rights and no personal liability will attach to the
ownership thereof. The Warrant exercise period and the Warrant exercise price
may not be changed or revised by the Company without the prior written consent
of the Representative. The Warrant Agreement has been duly authorized and,
when executed and delivered pursuant to this Agreement will constitute the
valid and legally binding obligation of the Company enforceable in accordance
with its terms.
The Representative's Warrants, the Representative's Units, the
Underlying Warrants, the shares of Common Stock issuable upon exercise of the
Common Stock Representative's Warrants, and the shares of Common Stock issuable
upon exercise of the Underlying Warrants (all as defined in the
Representative's Warrant Agreement described in Section 12 herein), have been
duly authorized and, when issued, delivered and paid for, will be validly
issued, fully paid, non- assessable, free of preemptive rights and no personal
liability will attach to the ownership thereof, and will constitute valid and
legally binding obligations of the Company enforceable in accordance with their
terms and entitled to the benefits provided by the Representative's Warrant
Agreement.
(6) This Agreement, the Warrant Agreement and the Representative's
Warrant Agreement have been duly and validly authorized, executed and delivered
by the Company, and assuming due execution of this Agreement by the other party
hereto, constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or other laws affecting the rights of
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creditors generally. The Company has full power and lawful authority to
authorize, issue and sell the Securities to be sold by it hereunder on the
terms and conditions set forth herein, and no consent, approval, authorization
or other order of any third party or any governmental authority is required in
connection with such authorization, execution and delivery or with the
authorization, issuance and sale of the Securities or the securities to be
issued pursuant to the Representative's Warrant Agreement, except such as may
be required under the Act or state securities laws, or as otherwise have been
obtained.
(7) Except as described in the Prospectus, neither the Company nor
any subsidiary is in material violation, breach of or default under, and
consummation of the transactions herein contemplated and the fulfillment of the
terms of this Agreement will not conflict with, or result in a breach of, or
constitute a material default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the property or assets of the
Company or each subsidiary or any of the terms or provisions of any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or each subsidiary is a party or by which the Company or each
subsidiary may be bound or to which any of the property or assets of the
Company or each subsidiary is subject, nor will such action result in any
material violation of the provisions of the articles of incorporation or bylaws
as amended of the Company or each subsidiary, or any statute or any order, rule
or regulation applicable to the Company or subsidiary of any court or of any
regulatory authority or other governmental body having jurisdiction over the
Company or each subsidiary.
(8) Subject to the qualifications stated in the Prospectus, the
Company and each subsidiary have good and marketable title to all properties
and assets described in the Prospectus as owned by each of them, free and clear
of all liens, charges, encumbrances or restrictions, except such as are not
materially significant or important in relation to its business; all of the
material leases and subleases under which the Company or each subsidiary is the
lessor or sublessor of properties or assets or under which the Company or each
subsidiary holds properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, neither the Company nor each subsidiary is in default in any
material respect with respect to any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone, adverse to
rights of the Company or each subsidiary as lessor, sublessor, lessee, or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or each subsidiary to continued possession
of the leased or subleased premises or assets under any such lease or sublease
except as described or referred to in the Prospectus; and the Company and each
subsidiary owns or leases all such properties described in the Prospectus as
are necessary to its operations as now conducted and, except as otherwise
stated in the Prospectus, as proposed to be conducted as set forth in the
Prospectus.
(9) ▇▇▇▇▇▇, ▇▇▇▇▇ & Company, LLP, who have given their report on
certain financial statements filed and to be filed with the Commission as part
of the Registration Statement, and which are included in the Prospectus, are
with respect to the Company, independent public accountants as required by the
Act and the Rules and Regulations.
(10) The financial statements and schedules, together with related
notes, set forth in the Prospectus and the Registration Statement present
fairly the financial position and results of operations and changes in
financial position of the Company on the basis stated in the Registration
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Statement, at the respective dates and for the respective periods to which they
apply. Said statements and related notes and schedules have been prepared in
accordance with generally accepted accounting principles applied on a basis
which is consistent during the periods involved. The Company's internal
accounting controls and procedures are sufficient to cause the Company and each
subsidiary to prepare financial statements which comply in all material
respects with generally accepted accounting principles applied on a basis which
is consistent during the periods involved. During the preceding five (5) year
period, nothing has been brought to the attention of the Company's management
that would result in any reportable condition relating to the Company's
internal accounting procedures, weaknesses or controls.
(11) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and the Prospectus and to and including
the Option Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) neither the Company nor any
subsidiary has incurred and will not have incurred any material liabilities or
obligations, direct or contingent, and has not entered into and will not have
entered into any material transactions other than in the ordinary course of
business and/or as contemplated in the Registration Statement and the
Prospectus; (ii) neither the Company nor any subsidiary has and will not have
paid or declared any dividends or have made any other distribution on its
capital stock; (iii) there has not been any change in the capital stock of, or
any incurrence of long-term debt by, the Company or any subsidiary; (iv)
neither the Company nor any subsidiary has issued any options, warrants or
other rights to purchase the capital stock of the Company or any subsidiary;
and (v) there has not been and will not have been any material adverse change
in the business, financial condition or results of operations of the Company or
any subsidiary, or in the book value of the assets of the Company or any
subsidiary, arising for any reason whatsoever.
(12) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company or any subsidiary, threatened, any material
action, suit, proceeding, inquiry, arbitration or investigation against the
Company or any subsidiary, or any of the officers or directors of the Company
or any subsidiary, or any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might result in any material adverse
change in the condition (financial or other), business prospects, net worth, or
properties of the Company or any subsidiary.
(13) Except as disclosed in the Prospectus, each of the Company and
each subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid all taxes shown as due thereon; and there is
no tax deficiency which has been or to the knowledge of the Company might be
asserted against the Company or any subsidiary that has not been provided for
in the financial statements.
(14) Except as set forth in the Prospectus, each of the Company and
each subsidiary has material licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all material
respects in compliance therewith and owns or possesses adequate right to use
all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service ▇▇▇▇ registrations, copyrights,
and licenses necessary for the conduct of such business and has not received
any notice of conflict, with the asserted rights of others in respect thereof.
To the best of the Company's knowledge, none of the activities or business of
the Company or any subsidiary are in violation of, or cause the Company or any
subsidiary to violate, any law, rule, regulation or order
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of the United States, any state, county or locality, or of any agency or body
of the United States or of any state, county or locality, the violation of
which would have a material adverse impact upon the condition (financial or
otherwise), business, property, prospective results of operations, or net worth
of the Company and any subsidiary.
(15) Neither the Company nor any subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public
or quasi-public duties, other than payments or contributions required or
allowed by applicable law.
(16) On the Closing Dates (herein defined) all transfer or other
taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the several
Underwriters hereunder will have been fully paid or provided for by the Company
and all laws imposing such taxes will have been fully complied with.
(17) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been so
described and/or filed.
(18) Except as described in the Registration Statement and
Prospectus, no holders of Common Stock or of any other securities of the
Company have the right to include such Common Stock or other securities in the
Registration Statement and Prospectus.
(19) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, neither the Company nor any subsidiary has any
material contingent liabilities.
(20) The Company has no subsidiary corporations except as disclosed
in the Registration Statement and Prospectus, nor has it any equity interest in
any partnership, joint venture, association or other entity except as disclosed
in the Registration Statement or Prospectus. Except as described in the
Registration Statement and Prospectus, the Company owns all of the outstanding
securities of each of its subsidiaries.
(21) The Commission has not issued an order preventing or
suspending the use of any Preliminary Prospectus with respect to the offer and
sale of the Securities and each Preliminary Prospectus, as of its date, has
conformed fully in all material respects with the requirements of the Act and
the Rules and Regulations and did not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading.
(22) Neither the Company, nor, to the Company's knowledge, any of
its officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(23) Item 26 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three year
period prior to the date as of which information
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is presented in the Registration Statement. All of such securities were sold
in transactions which were exempt from the registration provisions of the Act
and not in violation of Section 5 thereof.
(24) Other than as set forth in the Prospectus, the Company has not
entered into any agreement pursuant to which any person is entitled, either
directly or indirectly, to compensation from the Company for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriters against any losses, claims,
damages or liabilities, joint or several, which shall include, but not be
limited to, all costs to defend against any such claim, so long as such claim
arises out of agreements made or allegedly made by the Company.
(25) Based upon written representations received by the Company, no
officer, director or five percent (5%) or greater stockholder of the Company or
any subsidiary has any direct or indirect affiliation or association with any
member of the National Association of Securities Dealers, Inc. ("NASD"), except
as disclosed to the Representatives in writing, and no beneficial owner of the
Company's unregistered securities has any direct or indirect affiliation or
association with any NASD member except as disclosed to the Representatives in
writing. The Company will advise the Representatives and the NASD if any five
percent (5%) or greater shareholder of the Company or any subsidiary is or
becomes an affiliate or associated person of an NASD member participating in
the distribution.
(26) The Company and each subsidiary is in compliance in all
material respects with all federal, state and local laws and regulations
respecting the employment of its employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. There are no
pending investigations involving the Company or any subsidiary by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state or local laws and regulations. There is no
unfair labor practice charge or complaint against the Company or any subsidiary
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or to the knowledge of the
Company, threatened against or involving the Company or any subsidiary or any
predecessor entity. No question concerning representation exists respecting
the employees of the Company or any subsidiary and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
or any subsidiary. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any
subsidiary, if any.
(27) Neither the Company nor any subsidiary 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(i) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). Neither the Company nor any subsidiary
maintained or contributed to a defined benefit plan, as defined in Section
3(35) of ERISA.
(28) Based upon written representations received from the officers
and directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors of
the Company or any subsidiary have been:
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(1) Subject of a petition under the Federal bankruptcy
laws or any state insolvency law filed by or against them, or by a
receiver, fiscal agent or similar officer appointed by a court for
their business or property, or any partnership in which either or them
was a general partner at or within two years before the time of such
filing, or any corporation or business association of which either of
them was an executive officer at or within two years before the time
of such filing;
(2) Convicted in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining either of them
from, or otherwise limiting, any of the following activities:
(1) acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant, any
other person regulated by the Commodity Futures Trading
Commission, or an associated person of any of the foregoing,
or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee
of any investment company, bank, savings and loan association
or insurance company, or engaging in or continuing any conduct
or practice in connection with any such activity;
(2) engaging in any type of business practice; or
(3) engaging in any activity in connection with
the purchase or sale of any security or commodity or in
connection with any violation of Federal or State securities
law or Federal Commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any Federal or State
authority barring, suspending or otherwise limiting for more than
sixty (60) days either of their right to engage in any activity
described in paragraph (3)(i) above, or be associated with persons
engaged in any such activity;
(5) Found by any court of competent jurisdiction in a
civil action or by the Securities and Exchange Commission to have
violated any Federal or State securities law, and the judgment in such
civil action or finding by the Commission has not been subsequently
reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated
any Federal Commodities Law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated.
(29) Based upon written representations received from the officers
and directors of the Company, each of the officers and directors of the Company
has reviewed the sections in the Prospectus relating to their
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biographical data and equity ownership position in the Company, and all
information contained therein is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(1) Subject to the terms and conditions of this Agreement and upon
the basis of the representations, warranties and agreements herein contained,
the Company hereby agrees to issue and sell to the Underwriters an aggregate of
1,200,000 Units at $5.125 per Unit, at the place and time hereinafter
specified, in accordance with the number of Units set forth opposite the names
of the Underwriters in Schedule A attached hereto plus any additional
Securities which such Underwriters may become obligated to purchase pursuant to
the provisions of Section 9 hereof. The price at which the Underwriters shall
sell the Units to the public shall be $__________ per Unit.
Delivery of the Securities against payment therefor shall
take place at the offices of First London Securities
Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (or at
such other place as may be designated by the Representatives)
at 10:00 a.m., Eastern Time, on such date after the Effective
date as the Representatives shall designate, but not later
than ten (10) business days (holidays excepted) following the
first date that any of the Securities are released to you,
such time and date of payment and delivery for the Securities
being herein called the "Closing Date".
(2) In addition, subject to the terms and
conditions of this Agreement, and upon the basis of the
representations, warranties and agreements herein contained,
the Company hereby grants the "Option" to the Underwriters
(or, at the option of the Representatives, to the
Representatives, individually) to purchase all or any part of
an aggregate of an additional 180,000 Units, each Unit
consisting of one Share and one Warrant at the same price per
Unit as the Underwriters shall pay for the Securities being
sold pursuant to the provisions of subsection (a) of this
Section 2 (such additional Securities being referred to herein
as the "Option Securities"). This Option may be exercised
within 30 days after the Effective Date upon notice by the
Underwriters (or the Representatives, individually) to the
Company advising as to the amount of Option Securities as to
which the Option is being exercised, the names and
denominations in which the certificates for such Option
Securities are to be registered and the time and date when
such certificates are to be delivered. Such time and date
shall be determined by the Underwriters (or the
Representatives, individually) but shall not be later than ten
(10) full business days after the exercise of the Option, nor
in any event prior to the Closing Date, and such time and date
is referred to herein as the "Option Closing Date". Delivery
of the Option Securities against payment therefor shall take
place at the offices of the Representatives. The Option
granted hereunder may be exercised only to cover over
allotments in the sale by the Underwriters of the Securities
referred to in subsection (a) above. In the event the Company
declares or pays a dividend or distribution on its Common
Stock, whether in the form of cash, shares of Common Stock or
any other consideration, prior to the Option Closing Date,
such dividend or distribution shall also be paid on the Option
Closing Date.
(3) The Company will make the certificates for
the Securities to be sold hereunder available to you for
inspection at least two (2) full business days prior to the
Closing Date and the Option closing date at the offices of the
Representatives, and such certificates shall be registered in
such names and denominations as you may request. Time shall
be of the essence and delivery at the time and place specified
in this Agreement is a further condition to the obligations of
the Company to each Underwriter.
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Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriters hereunder will be delivered by the Company to you
for the accounts of the several Underwriters against payment of the respective
purchase prices by the several Underwriters, by certified or bank cashier's
checks in New York Clearing House funds, payable to the order of the Company or
by wire transfer in New York Clearing House funds.
In addition, in the event the Underwriters (or the Representatives,
individually) exercise the Option to purchase from the Company all or any
portion of the Option Securities pursuant to the provisions of subsection (b)
above, payment for such Securities shall be made payable in New York Clearing
House funds at the offices of the Representatives, or by wire transfer, at the
time and date of delivery of such Securities as required by the provisions of
subsection (b) above, against receipt of the certificates for such Securities
by the Representatives for the respective accounts of the several Underwriters
registered in such names and in such denominations as the Representatives may
request.
It is understood that the Representatives, individually and not as
Representatives of the several Underwriters, may (but shall not be obligated
to) make any and all payments required pursuant to this Section 2 on behalf of
any Underwriters whose check or checks shall not have been received by the
Representatives at the time of delivery of the Securities to be purchased by
such Underwriter or Underwriters. Any such payment by the Representatives
shall not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder. It is also understood that the Representatives
individually, rather than all of the Underwriters, may (but shall not be
obligated to) purchase the Option Securities referred to in subsection (b) of
this Section 2, but only to cover over allotments.
It is understood that the several Underwriters propose to offer the
Securities to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement is declared effective by the Commission.
3. Covenants of the Company. The Company covenants and agrees
with the several Underwriters that:
(1) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not at
any time, whether before or after the Effective Date, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously been advised and furnished with a copy or to which you or your
counsel shall have objected in writing, acting reasonably, or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to
the later of (i) the completion by the Underwriters of the distribution of the
Securities as contemplated hereby; or (ii) 25 days after the date on which the
Registration Statement shall have become or been declared effective, the
Company will prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or Prospectus which
may be necessary or advisable in connection with the distribution of the
Securities and as mutually agreed to by the Company and the Representatives.
After the Effective Date and as soon as the Company is advised
thereof, the Company will advise you, and confirm the advice in writing, of the
receipt of any comments of the Commission,
11
of the effectiveness of any post-effective amendment to the Registration
Statement, of the filing of any supplement to the Prospectus or any amended
Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any
state or regulatory body of any stop order or other order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any Preliminary Prospectus, or of the suspension of the
qualification of the Securities for offering in any jurisdiction, or of the
institution of any proceedings for any of such purposes, and will use its best
efforts to prevent the issuance of any such order, and, if issued, to obtain as
soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus and Definitive Prospectus, and the Company has consented
and hereby consents to the use of such copies for the purposes permitted by the
Act. The Company authorizes the Underwriters and Selected Dealers to use the
Prospectus in connection with the sale of the Securities for such period as in
the opinion of counsel to the Underwriters the use thereof is required to
comply with the applicable provisions of the Act and the Rules and Regulations.
In case of the happening, at any time within such period as a Prospectus is
required under the Act to be delivered in connection with sales by the
Underwriters or Selected Dealers, of any event of which the Company has
knowledge and which materially affects the Company or the securities of the
Company, or which in the opinion of counsel for the Company or counsel for the
Underwriters, should be set forth in an amendment to the Registration Statement
or a supplement to the Prospectus, in order to make the statements therein not
then misleading, in light of the circumstances existing at the time the
Prospectus is required to be delivered to a purchaser of the Securities, or in
case it shall be necessary to amend or supplement the Prospectus to comply with
law or with the Act and the Rules and Regulations, the Company will notify you
promptly and forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which
they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters.
The Company will comply with the Act, the Rules and Regulations
thereunder, the Securities Exchange Act of 1934 (the "1934 Act"), and the rules
and regulations thereunder in connection with the offering and issuance of the
Securities.
(2) The Company will qualify to register the Securities for sale
under the securities or "blue sky" laws of such jurisdictions as the
Representatives may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities or to execute a general consent to service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the Securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriters may reasonably
request.
12
(3) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not limited
to, all such expenses itemized in Section 8(a) and 8(c) hereof, and the
out-of-pocket expenses up to $25,000 of the Representatives and expenses up to
$25,000 of the counsel to the Representatives, if the offering for any reason
is terminated. For the purposes of this sub-paragraph, the Representatives
shall be deemed to have assumed such expenses when they are billed or incurred,
regardless of whether such expenses have been paid. The Representatives shall
not be responsible for any expenses of the Company or others, or for any
charges or claims relative to the proposed public offering whether or not
consummated.
(4) The Company will deliver to you at or before the Closing Date
two signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith, and of each amendment or supplement
thereto. The Company will deliver to or upon the order of the several
Underwriters, from time to time until the Effective Date of the Registration
Statement, as many copies of any Preliminary Prospectus filed with the
Commission prior to the Effective Date of the Registration Statement as the
Underwriters may reasonably request. The Company will deliver to the
Underwriters on the Effective Date of the Registration Statement and thereafter
for so long as a Prospectus is required to be delivered under the Act, from
time to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented as the several Underwriters may from time to time
reasonably request.
(5) For so long as the Company is a reporting company under either
Section 12 or 15 of the 1934 Act, the Company, at its expense, will furnish to
the Representatives during the period ending five (5) years from the Effective
Date, (i) as soon as practicable after the end of each fiscal year, a balance
sheet of the Company and any of its subsidiaries as at the end of such fiscal
year, together with statements of income, surplus and cash flow of the Company
and any subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as they are available, a copy of all reports
(financial or other) mailed to security holders; (iii) as soon as they are
available, a copy of all non-confidential documents, including annual reports,
periodic reports and financial statements, furnished to or filed with the
Commission under the Act and the 1934 Act; (iv) copies of each press release,
news item and article with respect to the Company's affairs released by the
Company; and (v) such other information as you may from time to time reasonably
request.
(6) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(7) The Company will make generally available to its stockholders
and to the registered holders of its Warrants and deliver to you as soon as it
is practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (which need
not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
13
(8) On the Closing Date, the Company shall have taken the
necessary action to become a reporting company under Section 12 of the 1934
Act, and the Company will make all filings required to, and will have obtained
approval for, the listing of the Shares and Warrants on The Nasdaq Small Cap
Market or a listing on a national market, and will use its best efforts to
maintain such listing for at least five (5) years from the date of this
Agreement.
(9) For such period as the Company's securities are registered
under the 1934 Act, the Company will hold an annual meeting of stockholders for
the election of Directors within 180 days after the end of each of the
Company's fiscal years and, within 150 days after the end of each of the
Company's fiscal years will provide the Company's stockholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements shall be those required by
Rule 14a-3 under the 1934 Act and shall be included in an annual report
pursuant to the requirements of such Rule.
(10) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption
"Use of Proceeds" in the Prospectus, and will file such reports with the
Commission with respect to the sale of the Securities and the application of
the proceeds therefrom as may be required by Sections 12, 13 and/or 15 of the
1934 Act and pursuant to Rule 463 under the Act.
(11) The Company will, promptly upon your request, prepare and file
with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of counsel to the Underwriters and the Company
may be reasonably necessary or advisable in connection with the distribution of
the Securities and will use its best efforts to cause the same to become
effective as promptly as possible.
(12) On the Closing Date the Company shall execute and deliver to
you the Representative's Warrant Agreement. The Representative's Warrant
Agreement and Warrant Certificates will be substantially in the form of the
Representative's Warrant Agreement and Warrant Certificates filed, as an
exhibit to the Registration Statement.
(13) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Representative's Warrants outstanding from time to time.
(14) All beneficial owners of the Company's securities (including
Warrants, Options and Common Stock of the Company), as of the Effective Date,
shall agree in writing, in a form satisfactory to the Representatives, not to
sell, transfer or otherwise dispose of any of such securities or underlying
securities (except to a transferee who agrees to be bound by this provision)
for a period of twelve (12) months from the Effective Date (the "lock-up
period"), or any longer period required by any State, without the prior written
consent of the Representatives. Any of such securities which are originally
registered in a name of a original beneficial owner and are subsequently
registered under a different name will be subject to the twelve (12) month
lock-up period. Sales of the Company's securities by officers and/or directors
of the Company prior to the expiration of the lock-up period shall be effected
through the Representatives.
14
(15) The Company shall pay to the Representatives upon the exercise
or redemption of the Warrants a fee equal to 5% of the gross proceeds received
by the Company from the exercise of the Warrants and 5% of the aggregate
redemption price for the Warrants redeemed. Such fee will be paid to the
Representatives or its designees no soon than 12 months after the Effective
Date. Additionally, the Representatives or its designee must be designated in
writing by the Warrant holder as having solicited the Warrant in order to
receive the fee.
(16) Prior to the Closing Date, the Company shall at its own
expense, undertake to list the Company's securities in the appropriate
recognized securities manual or manuals published by Standard & Poor's
Corporation and such other manuals as the Representatives may designate, such
listings to contain the information required by such manuals and the Uniform
Securities Act. The Company hereby agrees to use its best efforts to maintain
such listing for a period of not less than five (5) years unless the Company's
securities otherwise qualify for a secondary market trading exemption. The
Company shall take such action as may be reasonably requested by the
Representatives to obtain a secondary market trading exemption in such states
as may be reasonably requested by the Representatives.
(17) During the one hundred eighty (180) day period commencing on
the Closing Date, the Company will not, without the prior written consent of
the Representatives, grant options or warrants to purchase the Company's Common
Stock at a price less than the initial per share public offering price.
(18) During the twelve month period commencing on the closing Date,
the Company will not, without the prior written consent of the Representatives,
issue any additional securities of the Company except for securities issued in
connection with an acquisition or merger by the Company or upon the issuance of
Common Stock upon the exercise of Warrants.
(19) Prior to the Closing Date, neither the Company nor any
subsidiary will issue, directly or indirectly, without your prior consent, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering of the Securities other than
routine customary advertising of the Company's products and services, and
except as required by any applicable law or the directives of any relevant
regulatory authority in any relevant jurisdiction.
(20) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the
financial statements to be included in any registration statement or similar
disclosure document to be filed by the Company hereunder, or any amendment or
supplement thereto. For a period of five (5) years from the Effective Date,
the Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's financial
statements for each of the first three (3) fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
quarterly report and the filing of quarterly financial information to
stockholders.
(21) The Company shall retain Securities Transfer Corp. as the
transfer agent for the securities of the Company, or such other transfer agent
as you may agree to in writing. In addition, the Company shall direct such
transfer agent to furnish the Representatives with daily transfer sheets as to
each of the Company's securities as prepared by the Company's transfer agent
and copies of
15
lists of stockholders and warrantholders as reasonably requested by the
Underwriter, for a five (5) year period commencing from the Closing Date.
(22) The Company shall cause the Depository Trust Company, or such
other depository of the Company's securities, to deliver a "special security
position report" to the Representatives on a daily and weekly basis at the
expense of the Company, for a five (5) year period from the Effective Date.
(23) Following the Effective Date, the Company shall, at its sole
cost and expense, prepare and file such Blue Sky applications with such
jurisdictions as the Representatives shall designate and the Company may
reasonably agree.
(24) On the Effective Date and for a period of three (3) years
thereafter, the Company's Board of Directors shall consist of a minimum of five
(5) persons, two (2) of whom shall be independent and not otherwise affiliated
with the Company or associated with any of the Company's affiliates. First
London Securities Corporation shall have the right for a period of three (3)
years from the Effective Date to nominate one Advisory Director to the Board of
Directors. The Advisory Director will have all of the same privileges as a
normal Director, including equal compensation, but will forfeit the right to
vote on Board issues.
(25) For such period as any Warrants are outstanding, the Company
shall use its best efforts to cause post- effective amendments to the
Registration Statement or a new Registration Statement to become effective in
compliance with the Act and without any lapse of time between the effectiveness
of any such post-effective amendments and cause a copy of each Prospectus, as
then amended, to be delivered to each holder of record of a Warrant and to
furnish to each of the Underwriters and each dealer as many copies of each such
Prospectus as such Underwriter or such dealer may reasonably request. Such
post-effective amendments or new Registration Statements shall also register
the Representative's Warrants and all the securities underlying the
Representative's Warrants. The Company shall not call for redemption of any of
the Warrants unless a Registration Statement covering the securities underlying
the Warrants or Representative's Warrants has been declared effective by the
Commission and remains current at least until the date fixed for redemption.
In addition, the Warrants or Representative's Warrants shall not be redeemable
during the first year after the Effective Date without the written consent of
the Representatives.
(26) Until such time as the securities of the Company are listed or
quoted on either the New York Stock Exchange, Nasdaq National Market or the
American Stock Exchange, the Company shall engage the Company's legal counsel
to deliver to the Representatives a written opinion detailing those states in
which the Units, Shares and Warrants of the Company may be traded in non-issuer
transactions under the Blue Sky laws of the fifty states ("Secondary Market
Trading Opinion"). The initial Secondary Market Trading opinion shall be
delivered to the Representatives on the Effective Date, and the Company shall
continue to update such opinion and deliver same to the Representatives on a
timely basis, but in any event at the beginning of each fiscal year, for a five
(5) year period, if required.
4. Conditions of Underwriters, Obligations. The obligations of
the several Underwriters to purchase and pay for the Securities which they have
agreed to purchase hereunder from the Company are subject, as of the date
hereof and as of the Closing Date and the Option Closing Date,
16
to the continuing accuracy of, and compliance with, the representations and
warranties of the Company herein, to the accuracy of statements of officers of
the Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(1) (i) The Registration Statement shall have become effective
not later than 5:00 p.m., Eastern Time, on the date of this Agreement, or at
such later time or on such later date as you may agree to in writing; (ii) at
or prior to the Closing Date or Option Closing Date, no stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
Commission and no proceeding for that purpose shall have been initiated or
pending, or shall be threatened, or to the knowledge of the Company,
contemplated by the Commission; (iii) no stop order suspending the
effectiveness of the qualification or registration of the Securities under the
securities or "blue sky" laws of any jurisdiction (whether or not a
jurisdiction which you shall have specified) shall be threatened or to the
knowledge of the Company contemplated by the authorities of any such
jurisdiction or shall have been issued and in effect; (iv) any request for
additional information on the part of the Commission or any such authorities
shall have been complied with to the satisfaction of the Commission and any
such authorities, and to the satisfaction of counsel to the Underwriters; and
(v) after the date hereof no amendment or supplement to the Registration
Statement or the Prospectus shall have been filed unless a copy thereof was
first submitted to the Underwriters and the Underwriters did not object
thereto.
(2) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any subsidiary or any material adverse change in
the long-term debt of the Company or any subsidiary except as set forth in or
contemplated by the Registration Statement, (ii) there shall not have been any
material adverse change in the general affairs, business, properties, condition
(financial or otherwise), management, or results of operations of the Company
or any subsidiary, whether or not arising from transactions in the ordinary
course of business, in each case other than as set forth in or contemplated by
the Registration Statement or Prospectus; (iii) neither the Company nor any
subsidiary shall have sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree, which is not set forth in the
Registration Statement and Prospectus; and (iv) the Registration Statement and
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and shall in all material respects conform to
the requirements thereof, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstance under which they are made, not misleading.
(3) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company or any subsidiary, threatened, any material
action, suit, proceeding, inquiry, arbitration or investigation against the
Company or any subsidiary, or any of the officers or directors of the Company
or any subsidiary, or any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might result in any material adverse
change in the condition (financial or other), business prospects, net worth, or
properties of the Company or any subsidiary.
17
(4) Each of the representations and warranties of the Company
contained herein shall be true and correct as of this date and at the Closing
Date as if made at the Closing Date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
contained to be fulfilled or complied with by the Company at or prior to the
Closing Date and Option Closing Date shall have been duly performed, fulfilled
or complied with.
(5) At each Closing Date, you shall have received the opinion,
together with copies of such opinion for each of the other several
Underwriters, dated as of each Closing Date, from ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.,
counsel for the Company, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(1) the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation,
with full corporate power and authority to own its properties
and conduct its business as described in the Registration
Statement and Prospectus and is duly qualified or licensed to
do business as a foreign corporation and is in good standing
in each other jurisdiction in which the ownership or leasing
of its properties or conduct of its business requires such
qualification except for jurisdictions in which the failure to
so qualify would not have a material adverse effect on the
Company and each subsidiary as a whole;
(2) the authorized capitalization of the Company
is as set forth under "Capitalization" in the Prospectus; all
shares of the Company's outstanding stock and other securities
requiring authorization for issuance by the Company's Board of
Directors have been duly authorized, validly issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; the outstanding shares of Common
Stock of the Company and other securities have not been issued
in violation of the preemptive rights of any shareholder and
the shareholders of the Company do not have any preemptive
rights or, to such counsel's knowledge, other rights to
subscribe for or to purchase securities of the Company, nor,
to such counsel's knowledge, are there any restrictions upon
the voting or transfer of any of the securities of the
Company, except as disclosed in the Prospectus; the Units,
Common Stock, the Shares, the Warrants, and the securities
contained in the Representative's Warrant Agreement conform to
the respective descriptions thereof contained in the
Prospectus; the Units, Common Stock, the Shares, the Warrants,
the shares of Common Stock to be issued upon exercise of the
Warrants and the securities contained in the Representative's
Warrant Agreement, have been duly authorized and, when issued,
delivered and paid for, will be duly authorized, validly
issued, fully paid, non-assessable, free of preemptive rights
and no personal liability will attach to the ownership
thereof; all prior sales by the Company of the Company's
securities have been made in compliance with or under an
exemption from registration under the Act and applicable state
securities laws and no shareholders of the Company have any
rescission rights against the Company with respect to the
Company's securities; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the
Warrants and the Representative's Warrants, and to the best of
such counsel's knowledge, neither the filing of the
18
Registration Statement nor the offering or sale of the
Securities as contemplated by this Agreement gives rise to any
registration rights or other rights, other than those which
have been waived or satisfied or described in the Registration
Statement;
(3) this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement have been duly and validly
authorized, executed and delivered by the Company and,
assuming the due authorization, execution and delivery of this
Agreement by the Representatives, are the valid and legally
binding obligations of the Company, enforceable in accordance
with their terms, except (a) as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect
which effect creditors, rights generally; and (b) no opinion
is expressed as to the enforceability of the indemnity
provisions or the contribution provisions contained in this
Agreement;
(4) the certificates evidencing the outstanding
securities of the Company, the Units, the Shares, the Common
Stock and the Warrants are in valid and proper legal form;
(5) to the best of such counsel's knowledge,
except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company, threatened, any material
action, suit, proceeding, inquiry, arbitration or
investigation against the Company or any subsidiary or any of
the officers of directors of the Company or any subsidiary,
nor any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might materially and
adversely affect the condition (financial or otherwise),
business prospects, net worth, or properties of the Company or
any subsidiary;
(6) the execution and delivery of this Agreement,
the Representative's Warrant Agreement and the Warrant
Agreement, and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions
herein or therein contemplated, will not result in a violation
of, or constitute a default under (a) the Articles of
Incorporation or By-Laws of the Company and each subsidiary;
(b) to the best of such counsel's knowledge, any material
obligations, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in
any contract, indenture, mortgage, loan agreement, lease,
joint venture or other agreement or instrument to which the
Company or any subsidiary is a party or by which it or any of
its properties is bound; or (c) to the best of such counsel's
knowledge, any material order, rule, regulation, writ,
injunction, or decree of any government, governmental
instrumentality or court, domestic or foreign;
(7) the Registration Statement has become
effective under the Act, and to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement is in effect, and no proceedings for
that purpose have been instituted or are pending before, or
threatened by, the Commission; the Registration Statement and
the Prospectus (except for the financial statements and other
financial data contained therein, or omitted therefrom, as to
which such counsel
19
need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the
Rules and Regulations; and
(8) no authorization, approval, consent, or
license of any governmental or regulatory authority or agency
is necessary in connection with the authorization, issuance,
transfer, sale or delivery of the Securities by the Company,
in connection with the execution, delivery and performance of
this Agreement by the Company or in connection with the taking
of any action contemplated herein, or the issuance of the
Representative's Warrants or the Securities underlying the
Representative's Warrants, other than registrations or
qualifications of the Securities under applicable state or
foreign securities or Blue Sky laws and registration under the
Act.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law, upon opinions of
counsel satisfactory to you and counsel to the Underwriters. The opinion of
such counsel to the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Representatives
and they are justified in relying thereon.
Such counsel shall also include a statement to the effect that
such counsel has participated in the preparation of the Registration
Statement and the Prospectus and nothing has come to the attention of
such counsel to lead such counsel to believe that the Registration
Statement or any amendment thereto at the time it became effective
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
are made, not misleading or that the Prospectus or any supplement
thereto contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in
order to make statements therein, in light of the circumstances under
which they are made, not misleading (except, in the case of both the
Registration Statement and any amendment thereto and the Prospectus
and any supplement thereto, for the financial statements, notes
thereto and other financial information and statistical data contained
therein, as to which such counsel need express no opinion).
(6) You and the several Underwriters shall have received on each
Closing Date a certificate dated as of each Closing Date, signed by the Chief
Executive Officer and the Chief Financial officer of the Company and such other
officers of the Company as the Underwriters may request, certifying that:
(1) No order suspending the effectiveness of the
Registration Statement or stop order regarding the sale of the
Securities in effect and no proceedings for such purpose are pending
or are, to their knowledge, threatened by the Commission;
(2) To their knowledge there is no litigation instituted
or threatened against the Company or any subsidiary or any officer or
director of the Company or any subsidiary of a character required to
be disclosed in the Registration Statement which is not disclosed
therein; to their knowledge there are no contracts which are required
to be summarized in the
20
Prospectus which are not so summarized; and to their knowledge there
are no material contracts required to be filed as exhibits to the
Registration Statement which are not so filed;
(3) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any
amendment or supplement to either of the foregoing contains an untrue
statement of any material fact or omits to state any material fact
required to be stated therein or necessary to make the statement
therein, in light of the circumstances under which they are made, not
misleading; and since the Effective Date, to the best of their
knowledge, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
(4) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition of the Company or
any subsidiary, financial or otherwise, or in the results of its
operations, except as reflected in or contemplated by the Registration
Statement and the Prospectus and except as so reflected or
contemplated since such date, there has not been any material
transaction entered into by the Company or any subsidiary;
(5) The representations and warranties set forth in this
Agreement are true and correct in all material respects and the
Company has complied with all of its agreements herein contained;
(6) Neither the Company nor any subsidiary is delinquent
in the filing of any federal, state and municipal tax return or the
payment of any federal, state or municipal taxes; they know of no
proposed re-determination or reassessment of taxes, adverse to the
Company or any subsidiary, and the Company and each subsidiary has
paid or provided by adequate reserves for all known tax liabilities
except such delinquency that will not have a material adverse affect
on the Company;
(7) They know of no material obligation or liability of
the Company or any subsidiary, contingent or otherwise, not disclosed
in the Registration Statement and Prospectus;
(8) This Agreement, the Representative's Warrant
Agreement and the Warrant Agreement, the consummation of the
transactions herein of therein contemplated, and the fulfillment of
the terms hereof or thereof, will not result in a breach by the
Company of any terms of, or constitute a default under, its Articles
of Incorporation or By-Laws, any indenture, mortgage, lease, deed or
trust, bank loan or credit agreement or any other material agreement
or undertaking of the Company or any subsidiary including, by way of
specification but not by way of limitation, any agreement or
instrument to which the Company or any subsidiary is now a party or
pursuant to which the Company or any subsidiary has acquired any right
and/or obligations by succession or otherwise;
(9) The financial statements and schedules filed with and
as part of the Registration Statement present fairly the financial
position of the Company as of the dates
21
thereof all in conformity with generally accepted principles of
accounting applied on a consistent basis throughout the periods
involved. Since the respective dates of such financial statements,
there have been no material adverse change in the condition or general
affairs of the Company, financial or otherwise, other than as referred
to in the Prospectus;
(10) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
except as may otherwise be indicated therein, neither the Company nor
any subsidiary has, prior to the Closing Date, either (i) issued any
securities or incurred any material liability or obligation, direct or
contingent, for borrowed money, or (ii) entered into any material
transaction other than in the ordinary course of business. The
Company has not declared, paid or made any dividend or distribution of
any kind on its capital stock;
(11) Based upon written representation from the offices
and directors of the Company and each subsidiary they have reviewed
the sections in the Prospectus relating to their biographical data and
equity ownership position in the Company, and all information
contained therein is true and accurate; and
(12) Based upon written representation from the offices
and directors of the Company and each subsidiary except as disclosed
in the Prospectus, during the past five years, they have not been:
(1) Subject of a petition under the Federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which either or them was a general
partner at or within two years before the time of such filing,
or any corporation or business association of which either of
them was an executive officer at or within two years before
the time of such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) The subject of any order, judgment, or decree
not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily
enjoining either of them from, or otherwise limiting, any of
the following activities:
(1) acting as a futures commission
merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person
regulated by the Commodity Futures Trading
Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated
person, director or employee of any investment
company, bank, savings and loan association or
insurance company, or engaging in or continuing any
conduct or practice in connection with any such
activity;
22
(2) engaging in any type of business
practice; or
(3) engaging in any activity in
connection with the purchase or sale of any security
or commodity or in connection with any violation of
Federal or State securities law or Federal Commodity
laws.
(4) The subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated of any Federal
or State authority barring, suspending or otherwise limiting
for more than sixty (60) days either of their right to engage
in any activity described in paragraph (3) (i) above, or be
associated with persons engaged in any such activity;
(5) Found by any court of competent jurisdiction
in a civil action or by the Securities and Exchange Commission
to have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in
a civil action or by the Commodity Futures Trading Commission
to have violated any Federal Commodities Law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.
(7) The Underwriters shall have received from ▇▇▇▇▇▇, ▇▇▇▇▇ &
Company, LLP, independent auditors to the Company, certificates or letters, one
dated and delivered on the Effective Date and one dated and delivered on the
Closing Date, in form and substance satisfactory to the Underwriters, stating,
that:
23
(1) they are independent certified public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(2) the financial statements and the schedules included
in the Registration Statement and the Prospectus were examined by them
and, in their opinion, comply as to form in all material respects with
the applicable accounting requirements of the Act, the Rules and
Regulations and instructions of the Commission with respect to
Registration Statements on Form SB-2;
(3) on the basis of inquiries and procedures conducted by
them (not constituting an examination in accordance with generally
accepted auditing standards), including a reading of the latest
available unaudited interim financial statements or other financial
information of the Company (with an indication of the date of the
latest available unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for financial and
accounting matters, review of minutes of all meetings of the
shareholders and the Board of Directors of the Company and other
specified inquiries and procedures, nothing has come to their
attention as a result of the foregoing inquiries and procedures that
causes them to believe that:
(1) during the period from (and including) the
date of the financial statements in the Registration Statement
and the Prospectus to a specified date not more than five days
prior to the date of such letters, there has been any change
in the Common Stock, long-term debt or other securities of the
Company (except as specifically contemplated in the
Registration Statement and Prospectus) or any material
decreases in net current assets, net assets, shareholder's
equity, working capital or in any other item appearing in the
Company's financial statements as to which the Underwriters
may request advice, in each case as compared with amounts
shown in the balance sheet as of the date of the financial
statement in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or will occur;
(2) during the period from (and including) the
date of the financial statements in the Registration Statement
and the Prospectus to such specified date there was any
material decrease in revenues or in the total or per share
amounts of income or loss before extraordinary items or net
income or loss, or any other material change in such other
items appearing in the Company's financial statements as to
which the Underwriters may request advice, in each case as
compared with the corresponding period in the preceding year,
except in each case for increases, changes or decreases which
the Prospectus discloses have occurred or will occur;
(4) they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and
excluding any questions requiring an
24
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in
the letter and found them to be in agreement.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriters. Any changes, increases or decreases
in the items set forth in such letters which, in the judgment of the several
Underwriters, are materially adverse with respect to the financial position or
results of operations of the Company shall be deemed to constitute a failure of
the Company to comply with the conditions of the obligations to the several
Underwriters hereunder.
(8) Upon exercise of the Option provided for in Section 2(b)
hereof, the obligation of the several Underwriters (or, at its option, the
Representatives, individually) to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(1) The Registration Statement shall remain effective at
the Option Closing Date, and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for
that purpose shall have been instituted or shall be pending, or, to
your knowledge or the knowledge of the Company, shall be contemplated
by the Commission, and any reasonable request on the part of the
Commission for additional information shall have been complied with to
the satisfaction of counsel to the Underwriters.
(2) At the Option Closing Date, there shall have been
delivered to you the signed opinion from ▇▇▇▇▇ & Staples, P.C.,
counsel for the Company, dated as of the Option Closing Date, in form
and substance satisfactory to counsel to the Underwriters, which
opinion shall be substantially the same in scope and substance as the
opinion furnished to you at the Closing Date pursuant to Section 4 (e)
hereof, except that such opinion, where appropriate, shall cover the
Option Securities.
(3) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company, dated the Option Closing Date,
in form and substance satisfactory to counsel to the Underwriters,
substantially the same in scope and substance as the certificate
furnished to you at the Closing Date pursuant to Section 4(f) hereof.
(4) At the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you
from ▇▇▇▇▇▇, ▇▇▇▇▇ & Company, LLP, independent auditors to the
Company, dated the Option Closing Date and addressed to the several
Underwriters confirming the information in their letter referred to in
Section 4(g) hereof and stating that nothing has come to their
attention during the period from the ending date of their review
referred to in said letter to a date not more than five business days
prior to the Option Closing Date, which would require any change in
said letter if it were required to be dated the Option Closing Date.
25
(5) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the Option
Securities shall be satisfactory in form and substance to the
Underwriters, and the Underwriters and counsel to the Underwriters
shall have been furnished with all such documents, certificates, and
opinions as you may request in connection with this transaction in
order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained herein.
(9) No action shall have been taken by the Commission or the NASD,
the effect of which would make it improper, at any time prior to the Closing
Date, for members of the NASD to execute transactions (as principal or agent)
in the Common Stock and no proceedings for the taking of such action shall have
been instituted or shall be pending, or, to the knowledge of the several
Underwriters or the Company, shall be contemplated by the Commission or the
NASD. The Company represents that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD. The
Company shall advise the Representatives of any NASD affiliations of any of its
officers, directors, or stockholders or their affiliates in accordance with
paragraph 1(y) of this Agreement.
(10) At the Effective Date, you shall have received from counsel to
the Company, dated as of the Effective Date, in form and substance satisfactory
to counsel for the Underwriter, a written Secondary Market Trading Opinion
detailing those states in which the Shares and Warrants may be traded in
non-issuer transactions under the Blue Sky laws of the fifty (50) states after
the Effective Date, in accordance with paragraph 3(ab) of this Agreement.
(11) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the several Underwriters, and such counsel shall be furnished with such
documents, certificates and opinions as they may reasonably request to enable
them to pass upon the matters referred to in this sub-paragraph.
(12) Prior to the Effective Date, the Representatives shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Representatives, as described in the Registration Statement.
(13) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the several Underwriters under this Agreement may be canceled
at, or at any time prior to, the Closing Date and/or the Option Closing Date by
the Representatives and/or the Underwriters notifying the Company of such
cancellation in writing or by telegram at or prior to the applicable Closing
Date. Any such cancellation shall be without liability of the several
Underwriters to the Company.
5. Conditions of the Obligations of the Company. The obligation
of the Company to sell and deliver the Securities is subject to the following
conditions:
26
(1) The Registration Statement shall have become
effective not later than 5:00 p.m., Eastern Time, on the date
of this Agreement, or on such later time or date as the
Company and the Representatives may agree in writing; and
(2) At the Closing Date and the Option Closing
Date, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued under the Act or
any proceedings therefore initiated or threatened by the
Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the Closing Date but are not fulfilled
after the Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Securities on exercise of the
Option provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds
harmless each Underwriter and each person, if any, who controls the Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include but not be limited to, all reasonable costs of defense and
investigation and all attorneys' fees), to which the Underwriter or such
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (i) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(ii) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by
the Company and filed in any state or other jurisdiction in order to qualify
any or all of the Securities under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such cases to the extent, but only to the extent, that any
such losses, claim, damages or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriters specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto. Notwithstanding
the foregoing, the Company shall have no liability under this section if such
untrue statement or omission made in a Preliminary Prospectus is cured in the
Prospectus and the Prospectus is not delivered to the person or persons
alleging the liability upon which indemnification is being sought. This
indemnity will be in addition to any liability which the Company may otherwise
have.
(b) Each Underwriter, severally, but not jointly, indemnifies and
holds harmless the Company, each of its directors, each nominee (if any) for
director named in the Prospectus, each of its officers who have signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages or
liabilities (which
27
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees) to which the
Company or any such director, nominee, officer or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statements or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by you or by any Underwriter
through you specifically for use in the preparation thereof. Notwithstanding
the foregoing, the Underwriters shall have no liability under this Section if
such untrue statement or omission made in a Preliminary Prospectus is cured in
the Prospectus and the Prospectus is not delivered to the person or persons
alleging the liability upon which indemnification is being sought through no
fault of the Underwriter. This indemnity agreement will be in addition to any
liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify in writing the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action (including any impleaded
parties) include both the Underwriter or such controlling person and the
indemnifying party and in the reasonable judgment of the Representatives, it is
advisable for the Representatives or such Underwriters or controlling persons
to be represented by separate counsel (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
Underwriter or such controlling person, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same
28
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for all such Underwriters
and controlling persons, which firm shall be designated in writing by you). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnifying party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnifying party.
7. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) each Underwriter makes
claim for indemnification pursuant to Section 6 hereof but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case,
notwithstanding the fact that the express provisions of Section 6 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of any Underwriter, then the Company and each person who
controls the Company, in the aggregate, and any such Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (which shall, for all purposes of this Agreement, include,
but not be limited to, all reasonable costs of defense and investigation and
all reasonable attorneys, fees) in either such case (after contribution from
others) in such proportions that all such Underwriters are responsible in the
aggregate for that portion of such losses, claims, damages or liabilities
represented by the percentage that the underwriting discount per Share
appearing on the cover page of the Prospectus bears to the public offering
price appearing thereon, and the Company shall be responsible for the remaining
portion, provided, however, that (a) if such allocation is not permitted by
applicable law then the relative fault of the Company and the Underwriter and
controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an
untrue statement of a material fact or the omission to state a material fact,
such statement or omission relates to information supplied by the Company, or
the Underwriter and the parties, relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriters to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriters and their
controlling persons in the aggregate were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the first sentence of this Section; and
(b) that the contribution of each contributing Underwriter shall not be in
excess of its proportionate share (based on the ratio of the number of
Securities purchased by such Underwriter to the number of Securities purchased
by all contributing Underwriters) of the portion of such losses, claims,
damages or liabilities for which the Underwriters are responsible. No person
ultimately determined to be guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who is nor ultimately determined to be guilty of such fraudulent
misrepresentation. As used in this paragraph, the term "Underwriter" includes
any officer, director, or other person who controls the Underwriter within the
meaning of Section 15 of the Act, and the word "Company" includes any officer,
director, or person who controls the Company within the meaning of Section 15
of the Act. If the full amount of the contribution specified in this paragraph
is not permitted by law, then the Underwriter and each person who controls the
Underwriter shall be entitled to contribution from the Company, its officers,
directors and controlling persons to the
29
full extent permitted by law. This foregoing agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11
of the Act other than the Company and the Underwriter. No contribution shall
be requested with regard to the settlement of any matter from any party who did
not consent to the settlement; provided, however, that such consent shall not
be unreasonably withheld in light of all factors of importance to such party.
8. Costs and Expenses. (a) Whether or not this Agreement becomes
effective or the sale of the Securities to the Underwriters is consummated, the
Company will pay all costs and expenses incident to the performance of this
Agreement by the Company including but not limited to the fees and expenses of
the counsel to the Company or of the Company's accountants; the costs and
expenses incident to the preparation, printing, filing and distribution under
the Act of the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), Preliminary Prospectus and
the Prospectus, as amended or supplemented; the fee of the NASD in connection
with the filing required by the NASD relating to the offering of the Securities
contemplated hereby; all state filing fees, expenses and disbursements and
legal fees of counsel to the Company who shall serve as Blue Sky counsel to the
Company in connection with the filing of applications to register the
Securities under the state securities or blue sky laws; the cost of printing
and furnishing to the several Underwriters copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selected Dealers Agreement, the Agreement Among Underwriters, Underwriters
Questionnaire, Underwriters Power of Attorney and the Blue Sky Memorandum; the
cost of printing the certificates evidencing the securities comprising the
Securities; the cost of preparing and delivering to the Underwriters and its
counsel bound volumes containing copies of all documents and appropriate
correspondence filed with or received from the Commission and the NASD and all
closing documents; and the fees and disbursements of the transfer agent for the
Company's securities. The Company shall pay any and all taxes (including any
original issue, transfer, franchise, capital stock or other tax imposed by any
jurisdiction) on sales to the Underwriters hereunder. The Company will also
pay all costs and expenses incident to the furnishing of any amended Prospectus
or of any supplement to be attached to the Prospectus. The Company shall also
engage the Company's counsel to provide the Representatives with a written
Secondary Market Trading Opinion in accordance with paragraphs 3(ab) and 4(j)
of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at
the Closing Date pay to the Representatives a non-accountable expense allowance
equal to two percent (2%) of the gross proceeds received from the sale of the
Securities, of which an advance of $50,000 has been paid to date. In the event
the over allotment option is exercised, the Company shall pay to the
Representatives at the Option Closing Date an additional amount equal to two
percent (2%) of the gross proceeds received upon exercise of the over allotment
option.
(c) Other than as disclosed in the Registration Statement, no
person is entitled either directly or indirectly to compensation from the
Company, from the Representatives or from any other person for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Representatives and the other Underwriters
against any losses, claims, damages or liabilities, joint or several which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys, fees, to which the
Representatives or such other Underwriter may become subject insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon the claim of any
30
person (other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the proposed offering
by reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. Substitution of Underwriters. If any of the Underwriters
shall for any reason not permitted hereunder cancel their obligations to
purchase the Securities hereunder, or shall fail to take up and pay for the
number of Securities set forth opposite their respective names in Schedule A
hereto upon tender of such Securities in accordance with the terms hereof,
then:
(1) if the aggregate number of Securities which such Underwriter
or Underwriters agreed but failed to purchase does not exceed ten percent (10%)
of the total number of Securities, the other Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Securities which such defaulting Underwriter or Underwriters agreed but
failed to purchase.
(2) If any Underwriter or Underwriters so default and the agreed
number of Securities with respect to which such default or defaults occurs is
more than ten percent (10%) of the total number of Securities, the remaining
Underwriters shall have the right to take up and pay for (in such proportion as
may be agreed upon among them) the Securities which the defaulting Underwriter
or Underwriters agreed but failed to purchase. If such remaining Underwriters
do not, at the Closing Date, take up and pay for the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase, the time
for delivery of the Securities shall be extended to the next business day to
allow the several Underwriters the privilege of substituting within twenty-four
hours (including non- business hours) another Underwriter or Underwriters
satisfactory to the Company. If no such Underwriter or Underwriters shall have
been substituted as aforesaid, within such twenty-four period, the time of
delivery of the Securities may, at the option of the Company, be again extended
to the next following business day, if necessary, to allow the Company the
privilege of finding within twenty-four hours (including non-business hours)
another Underwriter or Underwriters to purchase the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted Underwriters to
take up the Securities of the defaulting Underwriter or Underwriters as
provided in this Section, (i) the Company or the Representatives shall have the
right to postpone the time of delivery for a period of not more than seven (7)
business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary; and (ii) the respective numbers of Securities to
be purchased by the remaining Underwriters or substituted Underwriters shall be
taken at the basis of the underwriting obligation for all purposes of this
Agreement.
If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the Securities agreed
to be purchased by the defaulting Underwriters or substitute another
Underwriter or Underwriters as aforesaid, and the Company shall not find or
shall not elect to seek another Underwriter or Underwriters for such Securities
as aforesaid, then this Agreement shall terminate.
31
If, following exercise of the Option provided in Section 2(b) hereof,
any Underwriter or Underwriters shall for any reason not permitted hereunder
cancel their obligations to purchase Option Securities at the Option Closing
Date, or shall fail to take up and pay for the number of Option Securities,
which they become obligated to purchase at the Option Closing Date upon tender
of such Option Securities in accordance with the terms hereof, then the
remaining Underwriters or substituted Underwriters may take up and pay for the
Option Securities of the defaulting Underwriters in the manner provided in
Section 9(b) hereof. If the remaining Underwriters or substituted Underwriters
shall not take up and pay for all Option Securities, the Underwriters shall be
entitled to purchase the number of Option Securities for which there is no
default or, at their election, the option shall terminate, the exercise thereof
shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any non-defaulting
Underwriter to the Company, provided that the provisions of this Section 9
shall not in any event affect the liability of any defaulting Underwriter to
the Company arising out of such default.
10. Effective Date. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness until
11:00 a.m., Eastern time, on the first full business day following the
effective date of the Registration Statement, or at such earlier time after the
effective date of the Registration Statement as you in your discretion shall
first commence the public offering by the Underwriters of any of the
Securities. The time of the public offering shall mean the time after the
effectiveness of the Registration Statement when the Securities are first
generally offered by you to the other Underwriters and Selected Dealers. This
Agreement may be terminated by you at any time before it becomes effective as
provided above, except that Sections 3(c), 6, 7, 8, 13, 14, 15, 16, 17 and 18
shall remain in effect notwithstanding such termination.
11. Termination. (a) This Agreement, except for Sections 3(c), 6,
7, 8, 13, 14, 15, 16, 17, and 18 hereof, may be terminated at any time prior to
the Closing Date, and the Option referred to in Section 2(b) hereof, if
exercised, may be canceled at any time prior to the Option Closing Date, by you
if in your judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriters for the resale of the Securities agreed to
be purchased hereunder by reason of: (i) the Company having sustained a
material adverse loss, whether or not insured, by reason of fire, earthquake,
flood, accident or other calamity, or from any labor dispute or court or
government action, order or decree; (ii) trading in securities on the New York
Stock Exchange or the American Stock Exchange having been suspended or limited;
(iii) material governmental restrictions having been imposed on trading in
securities generally (not in force and effect on the date hereof); (iv) a
banking moratorium having been declared by Federal or New York or Texas state
authorities; (v) an outbreak of major international hostilities or other
national or international calamity having occurred which is reasonably believed
likely by the Representatives to have a material adverse impact on the
business, financial condition or financial statements of the Company or the
market for the securities offered hereby; (vi) the passage by the Congress of
the United States or by any state legislative body of similar impact, of any
act or measure, or the adoption of any orders, rules or regulations by any
governmental body or any authoritative accounting institute or board, or any
governmental executive; (vii) any material adverse change in the financial or
securities markets beyond normal market fluctuations having occurred since the
date of this Agreement; (viii) a
32
pending or threatened legal or governmental proceeding or action relating
generally to the Company's business, or a notification having been received by
the Company of the threat of any such proceeding or action, which could, in the
reasonable judgment of the Representatives, materially adversely affect the
Company; (ix) except as contemplated by the Prospectus, the Company is merged
or consolidated into or acquired by another company or group or there exists a
binding legal commitment for the foregoing or any other material change of
ownership or control occurs; or (x) the Company shall not have complied in all
material respects with any term, condition or provisions on their part to be
performed, complied with or fulfilled (including but not limited to those set
forth in this Agreement) within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section, the Company shall
be promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
12. Representative's Warrant Agreement. At the Closing Date, the
Company will issue to the Representatives and/or persons related to the
Representatives, for an aggregate purchase price of $100, and upon the terms
and conditions set forth in the form of Representative's Warrant Agreement
annexed as an exhibit to the Registration Statement, Representative's Warrants
to purchase up to an aggregate of Units, in such denominations as the
Representatives shall designate. In the event of conflict in the terms of this
Agreement and the Representative's Warrant Agreement, the language of the form
of Representative's Warrant Agreement shall control.
13. Representations, Warranties and Agreements to Survive
Delivery. The respective indemnities, agreements, representations, warranties
and other statements of the Company and its principal officers, where
appropriate, and the Underwriters set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriters, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment
for the Securities and the termination of this Agreement.
14. Notice. All communications hereunder will be in writing and,
except as otherwise expressly provided herein, will be mailed, delivered or
telegraphed and confirmed:
If to the Underwriters: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
First London Securities Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
33
If to the Company: ▇▇▇▇ ▇. ▇▇▇▇▇, CEO
Performance Printing Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇▇, P.C.
5420 LBJ Freeway
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
15. Parties in Interest. This Agreement herein set forth is made
solely for the benefit of the several Underwriters, the Company and, to the
extent expressed, any person controlling the Company or of the Underwriters,
and directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser of the Securities, as
such purchaser, from the several Underwriters. All of the obligations of the
Underwriters hereunder are several and not joint.
16. Applicable Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas applicable to
contracts made and to be performed entirely within the State of Texas. The
parties agree that any action brought by any party against another party in
connection with any rights or obligations arising out of this Agreement shall
be instituted properly in a federal or state court of competent jurisdiction
with venue only in the State District Court of Dallas, County, Texas or the
United States District Court for the Northern District of Texas. A party to
this Agreement named as a Defendant in any action brought in connection with
this Agreement in any court outside of the above named designated county or
district shall have the right to have the venue of said action changed to the
above designated county or district or, if necessary, have the case dismissed,
requiring the other party to re- file such action in an appropriate court in
the above designated county or federal district.
17. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counter-parts shall together constitute but one and
the same instrument.
18. Entire Agreement. This Agreement and the agreements referred
to within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreement, understanding, negotiations and discussions,
whether written or oral, of the parties hereto.
19. Representatives as Underwriter. In the event the
Representatives act as the sole Underwriter ("Underwriter") in connection with
the underwriting of the securities being offered pursuant to the Registration
Statement, all references to the Representatives in this Agreement shall be
replaced by reference to the "Underwriter", and (i) any consents required to be
obtained from the Representatives shall be required to be obtained solely from
the Underwriter; (ii) all compensation
34
to be received by the Representatives shall instead be received by the
Underwriter; and (iii) the provisions of section nine (9) of this Agreement
shall not apply.
[Signature page to follow]
35
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the several Underwriters in
accordance with its terms.
Very truly yours,
Performance Printing Corporation
By:
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
FIRST LONDON SECURITIES CORPORATION
By:
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
For itself and as Representative of
the several Underwriters
36
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
UNDERWRITER UNITS
----------- -----
First London Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000
UNDERWRITER UNITS
----------- -----
First London Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000