METEOR INDUSTRIES, INC.
600,000 Shares
of Common Stock
and
600,000 Redeemable Warrants
UNDERWRITING AGREEMENT
Westport Resources Investment Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
, 1997
DEAR SIRS:
Meteor Industries, Inc. a Colorado corporation (the "Company"), pro-
poses to issue and sell to the several Underwriters named in Schedule I here-
to (the "Underwriters"), up to 600,000 shares of common stock of the Company
and up to 600,000 redeemable warrants (the "Securities"). The Company hereby
confirms the agreement made by it with respect to the purchase of the
Securities by the Underwriter, which Securities are more fully described in
the Registration Statement referred to below. Westport Resources Investment
Services, Inc. is referred to herein as the "Underwriter" or the "Represen-
tative."
You have advised the Company that the Underwriters desire to act on a
firm commitment basis to publicly offer and sell the Securities for the
Company and that you are authorized to execute this Agreement. The Company
confirms the agreement made by it with respect to the relationship with the
Underwriters as follows:
1. FILING OF REGISTRATION STATEMENT WITH S.E.C. AND DEFINITIONS. A
Registration Statement and Prospectus on Form S-1 (File No.333- ) with
respect to the Securities has been carefully and accurately prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the published rules and regulations (the "Rules and
Regulations") thereunder or under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and has been filed with the Securities and
Exchange Commission (the "Commission") and such other states that the
Underwriter deems necessary in its discretion to so file to permit a public
offering and trading thereunder. Such registration statement, including the
prospectus, Part II, and all financial schedules and exhibits thereto, as
amended at the time when it shall become effective, is herein referred to as
the "Registration Statement," and the prospectus included as part of the
Registration Statement on file with the Commission that discloses all the
information that was omitted from the prospectus on the effective date
pursuant to Rule 430 A of the Rules and Regulations with any changes contained
in any prospectus filed with the commission by the Company with the
Underwriters consent after the effective date of the Registration Statement,
is herein referred to as the "Final Prospectus." The prospectus included as
part of the Registration Statement of the Company and in any amendments
thereto prior to the effective date of the Registration Statement is referred
to herein as a "Preliminary Prospectus."
2. DISCOUNT, DELIVERY, AND SALE OF THE SECURITIES
(a) Subject to the terms and conditions of this Agreement, and
on the basis of the representations, warranties, and agreements herein
contained, the Company agrees to sell to, and the Underwriters agree to buy
from the Company at a purchase price of $ per share and $0.10 per
Redeemable Warrant before any underwriter expense allowances, up to 600,000
shares of Common Stock, and
up to 600,000 Redeemable Warrants on a firm commitment basis the "Initial
Securities".
It is understood that the 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 becomes
effective.
(b) Delivery of the Securities against payment of the purchase
price therefor by certified or official bank check or checks or wire transfer
in next-day funds, payable to the order of the Company shall take place at the
offices of the clearing broker for the Underwriter at New York City, within
three (3) business days after the Securities are first traded (or such other
place as may be designated by agreement between you and the Company) at 11:00
A.M., New York time or such time and date as you and the Company may agree
upon in writing, such time and date of payment and delivery for the Securities
being herein called the "Initial Closing Date."
The Company will make the certificates for the shares of Common Stock
and Redeemable Warrants to be purchased by the Underwriters hereunder
available to the Underwriter for inspection and packaging at least two (2)
full business days prior to the Initial Closing Date. The certificates shall
be in such names and denominations as the Underwriter may request to the
Company in writing at least two (2) full business days prior to any Closing
Date.
(c) In addition, subject to the terms and conditions of this
Agreement and on the basis of the representations, warranties and agreements
herein contained, the Company grants an option to the Underwriters to purchase
up to an additional 90,000 shares of Common Stock and/or up to 90,000
additional Warrants as the case may be ("Option Securities") at the same terms
as the Underwriters shall pay for the Initial Securities being sold by the
Company pursuant to the provisions of Section 2(a) hereof. This option may be
exercised from time to time, for the purpose of covering overallotments,
within forty-five (45) days after (i) the effective date of the Registration
Statement if the Company has elected not to rely on Rule 430A under the Rules
and Regulations or (ii) the date of this Agreement if the Company has elected
to rely upon Rule 430A under the Rules and Regulations, upon written notice by
the Underwriter setting forth the number of Option Securities as to which the
Underwriter is exercising the option and the time and date at which such
certificates are to be delivered. Such time and date shall be determined by
the Underwriter but shall not be earlier than four (4) nor later than ten (10)
full business days after the date of the exercise of said option. Nothing
herein shall obligate the Underwriter to make any overallotment.
(d) Definitive certificates in negotiable form for the
Securities to be purchased by the Underwriter hereunder will be delivered at
the closing by the Company to the Underwriters against payment of the purchase
price by the Underwriters by certified or bank cashier's checks or wire
transfer in next day funds payable to the order of the Company.
(e) The information set forth under "Underwriting" in any
preliminary prospectus and Prospectus relating to the Securities and the
information set forth in the last paragraph on the front cover page, under the
last paragraph on page 2 concerning stabilization and over-allotment by the
Underwriters, and (insofar as such information relates to the Underwriters)
constitutes the only information furnished by the Underwriter to the Company
for inclusion therein, and you represent and warrant to the Company that the
statements made therein are correct.
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(f) On the Initial Closing Date, the Company shall issue and
sell to the Representative, warrants (the "Representative's Warrants") at a
purchase price of $.001 per Representative's Warrant, which shall entitle the
holders thereof to purchase up to 60,000 shares of Common Stock and up to
60,000 Redeemable Warrants. The shares of common stock and redeemable
warrants issuable upon the exercise of the Representative's Warrants are
hereafter referred to as the "Representative's Securities" or
"Representative's Warrants." The shares of common stock issuable upon exercise
of the redeemable warrants are hereinafter referred to collectively as the
"Warrant Shares". The Representative's Warrants shall be exercisable for a
period of four (4) years commencing one (1) year from the effective date of
the Registration Statement at a price equaling one hundred twenty-five percent
(125%) of the initial public offering price of the Securities. The form of
Representative's Warrant Certificate shall be substantially in the form filed
as an Exhibit to the Registration Statement. Payment for the Representative's
Warrants shall be made on the Initial Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to you as follows:
(i) The Company has prepared and filed with the Commission
a registration statement, and an amendment or amendments thereto, on Form S-1
(No.333- ), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities, the Representative s
Warrant and the Warrant Shares (sometimes referred to herein collectively as
the "Registered Securities"), under the Act, which registration statement and
amendment or amendments have been prepared by the Company in conformity with
the requirements of the Act, and the Rules and Regulations. The Company will
promptly file a further amendment to said registration statement in the form
heretofore delivered to the Underwriter and will not file any other amendment
thereto to which the Underwriter shall have objected verbally or in writing
after having been furnished with a copy thereof. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, any schedules, exhibits and all other
documents filed as a part thereof or that may be incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Rules and Regulations),
is hereinafter called the "Registration Statement," and the form of prospectus
in the form first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations, is hereinafter called the "Prospectus."
(ii) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of any
Prospectus or the Registration Statement and no proceeding for an order
suspending the effectiveness of the Registration Statement or any of the
Company's securities has been instituted or is pending or threatened. Each
such Prospectus and/or any supplement thereto has conformed in all material
respects with the requirements of the Act and the Rules and Regulations and on
its date 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,
in light of the circumstances under which they were made; and when the
Prospectus becomes legally effective and for twenty-five (25) days subsequent
thereto (i) the Prospectus and/or any supplement thereto will contain all
statements which are required to be stated therein by the Act and Rules and
Regulations, and (ii) the Prospectus and/or any supplement thereto will not
include any untrue statement of a material fact or
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omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, in light of the circumstances
under which they were made; provided, however, that no representations,
warranties or agreements are made hereunder as to information contained in or
omitted from the Prospectus in reliance upon, and in conformity with, the
written information furnished to the Company by you as set forth in Section
2(e) above.
(iii) The Company has been duly incorporated and is
val-
idly existing as a corporation in good standing under the laws of the state of
its incorporation, with full power and authority (corporate and other) to own
its properties and conduct its businesses as described in the Prospectus and
is duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which the nature of its business or the charac-
ter or location of its properties requires such qualification, except where
the
failure to so qualify would not have a material adverse effect on the
business, properties or operations of the Company and the subsidiaries as a
whole.
(iv) The Company has full legal right, power and authority
to authorize, issue, deliver and sell the Securities, the Option Securities
and the Representative's Securities and to enter into this Agreement, the
Representative's Warrant dated as of the initial closing date to be exercised
and delivered by the Company to the Representative (the "Representative's
Warrant Agreement"), and to consummate the transactions provided for in such
agreements, and each of such agreements has been duly and properly authorized,
and on the Initial Closing Date will be duly and properly executed and
delivered by the Company. This Agreement constitutes and on the Initial
Closing Date the Representative's Warrant Agreement will then constitute a
valid and binding agreement, enforceable in accordance with its respective
terms (except as the enforceability thereof may be limited by bankruptcy or
other similar laws affecting the rights of creditors generally or by general
equitable principles and except as the enforcement of indemnification
provisions may be limited by federal or state securities laws).
(v) Except as disclosed in the Prospectus, the Company is
not in violation of its respective certificate or articles of incorporation or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness or in any material contract,
indenture, mortgage, loan agreement, lease, joint venture, partnership or
other agreement or instrument to which the Company is a party or by which it
may be bound or is not in material violation of any law, order, rule,
regulation, writ, injunction or decree of any governmental instrumentality or
court, domestic or foreign; and the execution and delivery of this Agreement,
the Representative's Warrant Agreement, and the consummation of the
transactions contemplated therein and in the Prospectus and compliance with
the terms of each such agreement will not conflict with, or result in a
material breach of any of the terms, conditions or provisions of, or
constitute a material default under, or result in the imposition of any
material lien, charge or encumbrance upon any of the property or assets of the
Company pursuant to, any material bond, debenture, note or other evidence of
indebtedness or any material contract, indenture, mortgage, loan agreement,
lease, joint venture, partnership or other agreement or instrument to which
the Company is a party nor will such action result in the material violation
by the Company of any of the provisions of its respective certificate or
articles of incorporation or bylaws or any law, order, rule, regulation, writ,
injunction, decree of any government, governmental instrumentality or court,
domestic or foreign, except where such violation will not have a material
adverse effect on the financial condition of the Company.
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(vi) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus and the Company will have the
adjusted capitalization set forth therein on the Initial Closing Date; all of
the shares of issued and outstanding capital stock of the Company set forth
therein have been duly authorized, validly issued and are fully paid and
nonassessable; the holders thereof do not have any rights of rescission with
respect therefor and are not subject to personal liability for any obligations
of the Company by reason of being stockholders under the laws of the State in
which the Company is incorporated; none of such outstanding capital stock is
subject to or was issued in violation of any preemptive or similar rights of
any stockholder of the Company; and such capital stock (including the
Securities, the Option Securities and the Representative's Securities)
conforms in all material respects to all statements relating thereto contained
in the Prospectus.
(vii) The Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for this
Agreement or as described in the Prospectus. The Securities, the Option
Securities and the Representative's Securities are not and will not be subject
to any preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and will
conform to the respective descriptions thereof contained in the Prospectus;
except for payment of the applicable purchase price paid upon exercise of the
options or warrants, as the case may be the holders thereof will not be
subject to any liability solely as such holders; all corporate action required
to be taken for the authorization, issue and sale of the Securities, the
Option Securities and the Representative's Securities has been duly and
validly taken; and the certificates representing the Securities, the Option
Securities and the Representative's Securities will be in due and proper form.
Upon the issuance and delivery pursuant to the terms hereof of the Securities,
the Option Securities and the Representative's Securities to be sold by the
Company hereunder, the Underwriter will acquire good and marketable title to
such Securities, Option Securities and Representative's Securities free and
clear of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction of any kind whatsoever other than restrictions as
may be imposed under the securities laws.
(viii)The Company has good and marketable title to all
properties and assets described in the Prospectus as owned by it, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
described or referred to in the Prospectus or which are not materially
significant or important in relation to its business or which have been
incurred in the ordinary course of business; except as described in the
Prospectus all of the leases and subleases under which the Company holds
properties or assets as lessee or sublessee as described in the Prospectus are
in full force and effect, and the Company is not in material default in
respect of any of the terms or provisions of any of such leases or subleases,
and no claim has been asserted by anyone adverse to the Company's rights as
lessor, sublessor, lessee or sublessee under any of the leases or subleases
mentioned above or affecting or questioning the Company's right to the
continued possession of the leased or subleased premises or assets under any
such lease or sublease; and the Company owns or leases all such properties as
are necessary to its operations as now conducted and as contemplated to be
conducted, except as otherwise stated in the Prospectus.
(ix) The financial statements, together with related notes,
set forth in the Prospectus fairly present the financial position and results
of operations of the Company at the respective dates and for the respective
periods to which they apply. Said statements and related notes have been
prepared in
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accordance with generally accepted accounting principles applied on a basis
which is consistent in all material respects during the periods involved but
any stub period has not been audited by an independent accounting firm. There
has been no material adverse change or material development involving a
prospective change in the condition, financial or otherwise, or in the
prospects, value, operation, properties, business or results of operations of
the Company whether or not arising in the ordinary course of business, since
the date of the financial statements included in the Registration Statement
and the Prospectus.
(x) Subsequent to the respective dates as of which
information is given in the Prospectus as it may be amended or supplemented,
and except as described in the Prospectus, the Company has not, directly or
indirectly, incurred any liabilities or obligations, direct or contingent, not
in the ordinary course of business or entered into any transactions not in the
ordinary course of business, which are material to the business of the Company
as a whole and there has not been any change in the capital stock of, or any
incurrence of long term debts by, the Company or any issuance of options,
warrants or rights to purchase the capital stock of the Company or declaration
or payment of any dividend on the capital stock of the Company or any material
adverse change in the condition (financial or other), net worth or results of
operations of the Company as a whole and the Company has not become a party
to, any material litigation whether or not in the ordinary course of business.
(xi) To the knowledge of the Company, there is no pending
or threatened, action, suit or proceeding to which the Company is a party
before or by any court or governmental agency or body, which might result in
any material adverse change in the condition (financial or other), business or
prospects of the Company as a whole or might materially and adversely affect
the properties or assets of the Company as a whole nor are there any actions,
suits or proceedings against the Company related to environmental matters or
related to discrimination on the basis of age, sex, religion or race which
might be expected to materially and adversely affect the conduct of the
business, property, operations, financial condition or earnings of the Company
as a whole; and no labor disturbance by the employees of the Company
individually exists or is, to the knowledge of the Company, imminent which
might be expected to materially and adversely affect the conduct of the
business, property, operations, financial condition or earnings of the Company
as a whole.
(xii) Except as may be disclosed in the Prospectus, the
Company has properly prepared and filed all necessary federal, state, local
and foreign income and franchise tax returns, has paid all taxes shown as due
thereon, has established adequate reserves for such taxes which are not yet
due and payable, and does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(xiii)The Company has sufficient licenses, permits, right
to
use trade or service marks and other governmental authorizations currently
required for the conduct of its business as now being conducted and as
contemplated to be conducted and the Company is in all material respects
complying therewith. Except as set forth in the Prospectus, the expiration of
any such licenses, permits, or other governmental authorizations would not
materially affect the Company's operations. To its knowledge, none of the
activities or businesses of the Company are in material violation of, or cause
the Company to materially violate any law, rule, regulations, or order of the
United States, any state, county or locality, or of any agency or body of the
United States or of any state, county or locality.
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(xiv) The Company has not at any time (i) made any
contributions to any candidate for political office in violation of law, or
failed to disclose fully any such contribution, or (ii) made any payment to
any state, federal or foreign governmental officer or official, or other
person charged with similar public or quasipublic duties, other than payments
required or allowed by applicable law.
(xv) Except as set forth in the Prospectus the Company
knows of no outstanding claims for services either in the nature of a finder's
fee, brokerage fee or otherwise with respect to this financing for which the
Company or the Underwriters may be responsible, or which may affect the
Underwriter's compensation as determined by the National Association of
Securities Dealers, Inc. ("NASD") except as otherwise disclosed in the
Prospectus or known by the Underwriters.
(xvi) The Company has its property adequately insured
against loss or damage by fire and maintains such other insurance as is
customarily maintained by companies in the same or similar business.
The Representative's Warrants herein described are duly and validly
authorized and upon delivery to the Representative in accordance herewith will
be duly issued and legal, valid and binding obligations of the Company, except
as the enforceability thereof may be limited by bankruptcy or other similar
laws affecting the rights of creditors generally or by equitable principles,
and except as the enforcement of indemnification provisions may be limited by
federal or state securities laws.
(xvii)The Representative's Securities issuable upon
exercise
of any of the Representative's Warrants have been duly authorized, and when
issued upon payment of the exercise price therefor, will be validly issued,
fully paid and nonassessable.
(xviii)Except as set forth in the Prospectus, no default
exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, installment
sale agreement, lease, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement, purchase order, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a party or by
which the Company may be bound or to which the property or assets (tangible or
intangible) of the Company is subject or affected.
(xix) To the best of the Company s knowledge it has
generally enjoyed a satisfactory employer-employee relationship with its
employees and, to the best of its knowledge, is in substantial compliance in
all material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. To the best of the Company s
knowledge, there are no pending investigations involving the Company, by the
U.S. Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
To the best of the Company s knowledge, there is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or to its knowledge involving the
Company, or any predecessor entity, and none has ever occurred. To the best
of the Company s knowledge, no representation question is pending respecting
the employees of the Company, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company. To the
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best of the Company s knowledge, no grievance or arbitration proceeding is
pending or to its knowledge threatened under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company is pending, or, to its knowledge is imminent; and the
Company is not aware of any pending or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors
which may result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company.
(xx) Except as may be set forth in the Registration
Statement, the Company does not maintain, sponsor or contribute to any program
or arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan," or a "multiemployer plan" as such terms are defined in
Sections 3(2), 3(l) and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does
not maintain or contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any
trust created thereunder) has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code
(the "Code"), which could subject the Company to any tax penalty on prohibited
transactions and which has not adequately been corrected. Each ERISA Plan is
in compliance with all material reporting, disclosure and other requirements
of the Code and ERISA as they relate to any such ERISA Plan. Determination
letters have been received from the Internal Revenue Service with respect to
each ERISA Plan which is intended to comply with Code Section 401 (a), stating
that such ERISA Plan and the attendant trust are qualified thereunder. The
Company has never completely or partially withdrawn from a "multiemployer
plan."
(xxi) None of the Company, or any of its employees,
directors, stockholders, or affiliates (within the meaning of the Rules and
Regulations) has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale
of the Securities, Option Securities, Representative's Securities or
otherwise.
(xxii)None of the patents, patent applications, trademarks,
service marks, trade names, copyrights, and licenses and rights to the
foregoing presently owned or held by the Company, are in dispute or, to the
best knowledge of the Company's management are in any conflict with the right
of any other person or entity. The Company (i) except as disclosed in the
Prospectus owns or has the right to use, all patents, trademarks, service
marks, trade names and copyrights, technology and licenses and rights with
respect to the foregoing, used in the conduct of its business as now conducted
or proposed to be conducted without infringing upon or otherwise acting
adversely to the right or claimed right of any person, corporation or other
entity under or with respect to any of the foregoing, and except as set forth
in the Prospectus or otherwise disclosed to the Underwriter in writing, to the
best knowledge of the Company's management is not obligated or under any
liability whatsoever to make any material payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service ▇▇▇▇, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(xxiii)Except as disclosed in the Prospectus the Company
owns and has adequate right to use to the best knowledge of the Company's
management all trade secrets, know-how (including all other unpatented and/or
unpatentable proprietary
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or confidential information, systems or procedures), inventions, designs,
processes, works of authorship, computer programs and technical data and
information (collectively herein "intellectual property") required for or
incident to the development, manufacture, operation and sale of all products
and services sold or proposed to be sold by the Company. The Company is not
aware of any such development of similar or identical trade secrets or
technical information by others. The Company has valid and binding
confidentiality agreements with all of its officers, covering its intellectual
property (subject to the equitable powers of any court), which agreements have
remaining terms of at least two years from the effective date of the
Registration Statement except where the failure to have such agreements would
not materially and adversely effect the Company's business taken as a whole.
The Company has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property stated in the
Prospectus, to be owned or leased by it free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those referred to
in the Prospectus and liens for taxes not yet due and payable.
(xxiv)▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, whose reports are filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(xxv) The Company has agreed to execute and has also
caused to be duly executed agreements pursuant to which each of the Company's
officers and directors and shareholders and any person or entity deemed to be
an affiliate of the Company pursuant to the Rules and Regulations, except for
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, has agreed not to, directly or indirectly, sell, assign,
transfer, or otherwise dispose of more than 5000 shares of Common Stock or
securities convertible into, exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) for a period of not
less than eighteen (18) months following such effective date without the prior
written consent of the Underwriter. The Company will cause the Transfer Agent,
as defined below, to ▇▇▇▇ an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop transfer"
orders on the Company's stock ledgers.
(xxvi)The Registered Securities have been approved for
listing on NASDAQ or an Exchange.
(xxvii)Except as set forth in the Prospectus or disclosed
in
writing to the Underwriter (which writing specifically refers to this
Section), no officer or director of the Company, holder of 5% or more of
securities of the Company or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any of
the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or
sells services or products which are furnished or sold or are proposed to be
furnished or sold by the Company, or (B) purchases from or sells or furnishes
to the Company any goods or services, or (ii) a beneficiary interest in any
contract or agreement to which the Company is a party or by which it may be
bound or affected. Except as set forth in the Prospectus under "Certain
Transactions" or disclosed in writing to the Underwriter (which writing
specifically refers to this Section) there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company,
and any officer, director, principal stockholder of the Company, or any
partner, affiliate or associate of any of the foregoing persons or entities.
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(xxviii)Any certificate signed by any officer of the
Company, and delivered to the Underwriter or to the Underwriter's counsel (as
defined herein) shall be deemed a representation and warranty by the Company
to the Underwriter as to the matters covered thereby.
(xxix)Each of the minute books of the Company has been made
available to the Underwriter and contains a complete summary of all meetings
and actions of the directors and stockholders of the Company, since the time
of its incorporation and reflect all transactions referred to in such minutes
accurately in all respects.
(xxx)Intentionally left blank.
(xxxi)Except and only to the extent described in the
Prospectus or disclosed in writing to the Underwriter (which writing
specifically refers to this Section), no holders of any securities of the
Company or of any options, warrants or other convertible or exchangeable
securities of the Company have the right to include any securities issued by
the Company in the Registration Statement or any registration statement to be
filed by the Company or to require the Company to file a registration
statement under the Act and no person or entity holds any anti-dilution rights
with respect to any securities of the Company. Except as disclosed in the
Prospectus, all rights so described or disclosed have been waived or have not
been triggered with respect to the transactions contemplated by this Agreement
and the Representative's Warrant Agreement (including the warrants issuable
thereunder).
(xxxii)The Company has not entered into any employment
agreements with its executive officers, except as disclosed in the Prospectus.
(xxxiii)No consent, approval, authorization or order of,
and
no filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Registered Securities
pursuant to the Prospectus and the Registration Statement, the issuance of the
Underwriter's Warrants, the performance of this Agreement, the
Representative's Warrant Agreement and the transactions contemplated hereby
and thereby, including without limitation, any waiver of any preemptive, first
refusal or other rights that any entity or person may have for the issue
and/or sale of any of the Securities, the Option Securities and the
Underwriter's Securities, except such as have been or may be obtained under
the Act, otherwise or may be required under state securities or blue sky laws
in connection with the Underwriter's purchase and distribution of the
Securities, the Option Securities, the Representative's Securities and the
Underwriter's Warrants to be sold by the Company hereunder or may be required
by the Rules of the National Association of Securities Dealer, Inc. ("NASD").
(xxxiv)All executed agreements, contracts or other
documents
or copies of executed agreements, contracts or other documents filed as
exhibits to the Registration Statement to which the Company is a party or by
which it may be bound or to which its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company,
enforceable against the Company, in accordance with their respective terms.
The descriptions in the Registration Statement of agreements, contracts and
other documents are accurate and fairly present the information required to be
shown with respect thereto by Form S-1, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be
copies.
-10-
(xxxv)Within the past five (5) years, none of the Company's
independent public accountants has brought to the attention of the Company's
management any "material weakness" as defined in the Statement of Auditing
Standard No. 60 in any of the Company's internal controls.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with
you that:
(a) It will cooperate in all respects in making the Prospectus
effective and will not at any time, whether before or after the effective
date, file any amendment to or supplement to the Prospectus of which you shall
not previously have been advised and furnished with a copy or to which you or
your counsel shall have reasonably objected or which is not in material
compliance with the Act and the Rules and Regulations or applicable state law.
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 or any state securities department, when the Registration Statement
becomes effective if the provisions of Rule 430A promulgated under the Act
will be relied upon, when the Prospectus has been filed in accordance with
said Rule 430A, of the effectiveness of any posteffective amendment to the
Registration Statement or Prospectus, or the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission or
any state securities department for amendment of the Prospectus or for
supplementing of the Prospectus or for additional information with respect
thereto, of the issuance of any stop order suspending the effectiveness of the
Prospectus or any order preventing or suspending the use of any Prospectus or
any order suspending trading in the Common Stock of the Company, or of the
suspension of the qualification of the Securities, the Option Securities or
the Representatives Securities for offering in any jurisdiction, or of the
institution of any proceedings for any 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 or dismissal thereof.
The Company has caused to be delivered to you copies of such Pros-
pectus, and the Company has consented and hereby consents to the use of such
copies for the purposes permitted by law. The Company authorizes you and the
dealers to use the Prospectus and such copies of the Prospectus in connection
with the sale of the Securities, the Option Securities and the
Representative's
Securities for such period as in the opinion of your counsel and our counsel
the use thereof is required to comply with the applicable provisions of the
Act and the Rules and Regulations. The Company will prepare and file with the
states, promptly upon your request, any such amendments or supplements to the
Prospectus, and take any other action, as, in the opinion of your counsel, may
be necessary or advisable in connection with the initial sale of the
Securities, the Option Securities and the Underwriter's Securities and will
use its best efforts to cause the same to become effective as promptly as
possible.
The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to rule
424(b)(1) or pursuant to Rule 424(b)(3) not later than the Commission's close
of business on the earlier of (i) the second business day following the
execution and delivery of this Agreement, and (ii) the fifth business day
after the effective date of the Registration Statement.
In case of the happening, at any time within such period as a Pros-
pectus is required under the Act to be delivered in connection with the
initial sale of the Securities, the Option Securities and the Representative's
Securities of any
-11-
event of which the Company has knowledge and which materially affects the
Company, or the securities thereof, and which should be set forth in an
amendment of 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 under the Act to be delivered, or in case it
shall be necessary to amend or supplement the Prospectus to comply with the
Act, the Rules and Regulations or any other law, the Company will 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 fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under
which they are made. The preparation and furnishing of any such amendment or
supplement to the Prospectus or supplement to be attached to the Prospectus
shall be without expense to you.
The Company will to the best of its ability comply with the Act, the
Exchange Act and applicable state securities laws so as to permit the initial
offer and sales of the Securities, the Option Securities and the
Representatives Securities under the Act, the Rules and Regulations, and
applicable state securities laws.
(b) It will cooperate to qualify the Securities and the Option
Securities and the Representative's Securities for initial sale under the
securities laws of such jurisdictions as you may designate and will make such
applications and furnish such information as may be required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in 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 as the Underwriter may reasonably request.
(c) So long as any of the Securities, the Option Securities or
the Representative's Securities remain outstanding in the hands of the public,
the Company, at its expense, will annually furnish to its shareholders a
report of its operations to include financial statements audited by
independent public accountants, and will furnish to the Underwriter as soon as
practicable after the end of each fiscal year, a balance sheet of the Company
as at the end of such fiscal year, together with statements of operations,
shareholders' equity, and changes in cash flow of the Company for such fiscal
year, all in reasonable detail and accompanied by a copy of the certificate or
report thereon of independent public accountants.
(d) It will deliver to you at or before the Initial Closing
Date
two signed copies of the Registration Statement including all financial
statements and exhibits filed therewith, whether or not incorporated by
reference. The Company will deliver to you, from time to time until the
effective date of the Prospectus, as many copies of the Prospectus as you may
reasonably request. The Company will deliver to you on the effective date of
the Prospectus and thereafter for so long as a Prospectus is required to be
delivered under the Act and the Rules and Regulations as many copies of the
Prospectus, in final form, or as thereafter amended or supplemented, as you
may from time to time reasonably request.
(e) The Company will apply the net proceeds from the sale of
the
Securities and the Option Securities substantially in the manner set forth
under "Use of Proceeds" in the Prospectus. No portion of the proceeds shall
be used, directly or indirectly, to acquire any securities issued by the
Company, without the prior written consent of the Underwriter.
-12-
(f) As soon as it is practicable, but in any event not later
than the first (lst) day of the fifteenth (15th) full calendar month following
the effective date of the Registration Statement, the Company will make
available to its security holders and the Underwriter an earnings statement
(which need not be audited) covering a period of at least twelve (12)
consecutive months beginning after the effective date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the Act
and Rule 158(a) of the Rules and Regulations.
g. COSTS AND EXPENSES. The Company shall pay to the
Underwriter at each closing date, and to be deducted from the purchase price
for the Securities and the Option Securities, an amount equal to three percent
(3%) of the gross proceeds received by the Company from the sale of the
Securities and the Option Securities at such closing date less in the case of
the Initial Closing Date, the sum of $15,000 previously paid by the Company.
If the sale of the Securities by the Underwriter is not consummated for any
reason not attributable to the Underwriter, or if (i) the Company withdraws
the Registration Statement from the Commission or does not proceed with the
public offering, or (ii) the representations in Section 3 hereof are not
correct or the covenants cannot be complied with, or (iii) there has been a
materially adverse change in the condition, prospects or obligations of the
Company or a materially adverse change in stock market conditions from current
conditions, all as determined by the Underwriter, then the Company shall
reimburse the Underwriter for its out of pocket expenses including without
limitation, its legal fees and disbursements all on an accountable basis but
not to exceed $25,000 (less the $15,000 previously paid by the Company), and
if any excess remains from the advance previously paid, such excess will be
returned to the Company.
Subject to the provisions above 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 counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the
Registration Statement and Prospectus (including the fee of the Commission,
any securities exchange and the NASD in connection with the filing required by
the NASD relating to the offering of the Securities contemplated hereby); all
expenses, including fees of counsel, which shall be due and payable on the
Closing Date in connection with the qualification of the Securities under the
state securities or blue sky laws; the cost of furnishing to you copies of the
Prospectus, this Agreement, the cost of printing the certificates representing
the Securities and of preparing and photocopying the Underwriting Agreement
and related Underwriting documents, the cost of two underwriter's bound
volumes, any advertising costs and expenses, including but not limited to the
Company s expenses on "road show" information meetings and presentations,
prospectus memorabilia, issue and transfer taxes, if any. The Company will
also pay all costs and expenses incident to the furnishing of any amended
Prospectus of or any supplement to be attached to the Prospectus.
(h) The Company shall not, without the Underwriter's prior
written consent which shall not be unreasonably withheld, issue, sell or
otherwise dispose of any of its equity or long-term debt securities for
twelve (12) months from the effective date including other equity securities
or warrants or options to purchase any shares of Common Stock (except for
Common Stock issuable upon existing conversion rights, options or warrants or
in connection with acquisitions) or any warrants, options or other rights to
purchase Common Stock without the Underwriter s prior written consent to any
officer, director, or holder of 5% or more of the Company s Common Stock or to
any affiliate or associate thereof, except pursuant to an employee benefit
plan approved by the Underwriter or subsequent options issued to employees of
the Company's
-13-
subsidiaries pursuant to incentive stock option plans. The Company will obtain
prior to the effective date, from each officer and director, each person
related to an officer or director, and each person (except ▇▇▇▇▇▇ ▇▇▇▇▇▇) or
entity who owns 5% or more of the Company s Common Stock or any right to
acquire 5% or more of the Company s Common Stock, a written agreement with the
Underwriter that such person will not sell in open market transactions more
than 5000 shares of the Company s Common Stock owned directly or indirectly by
him or beneficially by him ( as defined by the 1934 Act and rules promulgated
thereunder) on the effective date of the Registration Statement, for a period
of twelve (12) months from such date without the Underwriter s prior written
consent and will cause the transfer agent for the Company to note such
restriction on the certificates representing his shares of Common Stock and on
the transfer books and records of the Company, provided that the aggregate
number of shares sold in such open market transactions shall not exceed
25,000.
It is also understood that later in 1997, the Company intends to
register restricted shares of shareholders who own less than 5% of the
Company, so that such shares may be sold into the marketplace. The Underwriter
has no objection to the filing of such registration statement.
(i) During a date five years after the date hereof, the Company
will make available to its shareholders, as soon as practicable, and deliver
to the Underwriter:
(1) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders;
(2) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission, the NASD
or any securities exchange;
(3) every press release and every material news item or
article of interest to the financial community in respect of the Company or
its affairs which was prepared and released by or on behalf of the Company;
and
(4) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its businesses which
the Underwriter may request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are consolidated,
and will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(j) The Company will maintain a Transfer Agent and, if
necessary
under the jurisdiction of incorporation of the Company, a Registrar (which may
be the same entity as the Transfer Agent) for its Common Stock.
(k) The Company will furnish to the Underwriter or on the
Underwriter's order, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Final Prospectus the
Registration Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include all financial
statements and exhibits), the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such
quantities as the Underwriter may request.
-14-
(1) Neither the Company nor any of its officers, directors,
stockholders or any of its affiliates will take, directly or indirectly, any
action designed to, or which might in the future reasonably be expected to
cause or result in stabilization or manipulation of the price of any of the
Company's securities.
(m) The Company shall timely file all such reports, forms or
other documents as may be required, from time to time, under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall cause the Securities to be listed on
the
American Stock Exchange for a period of five (5) years from the date hereof,
use its best efforts to maintain the listing of the Securities to the extent
they are outstanding.
(o) As soon as practicable, (i) before the effective date of
the
Registration Statement, file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities and (ii) but in no event
more than 30 days from the effective date of the Registration Statement, take
all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and/or ▇▇▇▇▇'▇ OTC Manual and to continue such
inclusion for a period of not less than five years if the securities are not
listed on the AMEX.
(p) Until the completion of the distribution of the Securities,
the Company shall not without the prior written consent of the Underwriter and
its counsel which consent shall not be unreasonably withheld or delayed,
issue, directly or indirectly, any press release or other communication or
hold any press conference with respect to the Company or its activities or the
offering contemplated hereby, other than trade releases issued in 'the
ordinary course of the Company's business consistent with past practices with
respect to the Company's operations.
(q) Until the earlier of (i) five (5) years from the date
hereof
or (ii) the sale to the public of the Warrant Shares, the Company will not
take any action or actions which may prevent or disqualify the Company s use
of Form S-1 (or other appropriate form) for the registration under the Act of
the Warrant Shares.
(r) Commencing one year from the effective date of the
Registration Statement, the Company agrees to pay the Underwriter a 3%
solicitation fee for the exercise of the publicly-held warrants solicited by
the Underwriter such solicitation being subject to applicable SEC and NASD
rules.
5. CONDITIONS OF THE UNDERWRITER S OBLIGATIONS. The obligation of
the Underwriters to offer and sell the Securities and the Option Securities is
subject to the accuracy (as of the date hereof, and as of the Closing Dates)
of and compliance with the representations and warranties of the Company to
the performance by it of its agreement and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective as
and when cleared by the Commission, and you shall have received notice
thereof, on or prior to any closing date no stop order suspending the
effectiveness of the Prospectus shall have been issued and no proceedings for
that or similar purpose shall have been instituted or shall be pending, or, to
your knowledge or to the
-15-
knowledge of the Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the Underwriter;
and qualification, under the securities laws of such states as you may
designate, of the issue and sale of the Securities upon the terms and
conditions herein set forth or contemplated and containing no provision
unacceptable to you shall have been secured, and no stop order shall be in
effect denying or suspending effectiveness of such qualification nor shall any
stop order proceedings with respect thereto be instituted or pending or
threatened under such law.
(b) On any closing date and, with respect to the letter re-
ferred to in subparagraph (iii), as of the date hereof, you shall have
received:
(i) the opinion, together with such number of signed or
photostatic copies of such opinion as you may reasonably request, addressed to
you by Krys, Boyle, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, PC counsel for the Company, in
form and substance reasonably satisfactory to the Underwriter and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq., counsel to the Underwriter, dated each such closing date, to the
effect that:
(A) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the
jurisdiction in which it is incorporated and has all necessary corporate power
and authority to carry on its business as described in the Prospectus.
(B) The Company is qualified to do business in each
jurisdiction in which conducting its business requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on the Company's business or assets.
(C) The Company has the full corporate power and
authority to enter into this Agreement, and the Representative's Warrant
Agreement and to consummate the transactions provided for therein and each
such Agreement has been duly and validly authorized, executed and delivered by
the Company. Each of this Agreement, and the Representative's Warrant
Agreement, assuming due authorization, execution and delivery by each other
party thereto, constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency or similar laws governing the rights of creditors and
to general equitable principles, and provided that no opinion need be given as
to the enforceability of any indemnification or contribution provisions, and
none of the Company's execution or delivery of this Agreement, the or the
Representative's Warrant Agreement, its performance hereunder or thereunder,
its consummation of the transactions contemplated herein or therein, or the
conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any material breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
material default under, or result in the creation or imposition of any
material lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of (A) the
articles of incorporation or by-laws of the Company, (B) to the knowledge of
such counsel, any material license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which it is or may be bound, or (C) to the knowledge of such counsel,
any statute, judgment, decree, order, rule or regulation applicable to the
Company, whether domestic or foreign.
-16-
(D) The Company had authorized and outstanding
capital stock as set forth in the Prospectus as of the date set forth therein,
and all of such issued and outstanding shares of capital stock have been duly
and validly authorized and issued, and to the knowledge of such counsel are
fully paid and nonassessable, and to the knowledge of such counsel no
stockholder of the Company is entitled to any preemptive rights to subscribe
for, or purchase shares of the capital stock and to the knowledge of such
counsel none of such securities were issued in violation of the preemptive
rights of any holders of any securities of the Company.
(E) To the knowledge of such counsel, the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or
other securities, except for this Agreement, the Representative's Warrant
Agreement, and except as described in the Prospectus. The Units, the Common
Stock, the Warrants and the Representative s Warrants each conforms in all
material respects to the respective descriptions thereof contained in the
Prospectus. The outstanding shares of Common Stock and the Warrants, the
Warrant Stock and the Representative s Warrant Stock, upon issuance and
delivery and payment therefore in the manner described herein, the Warrant
Agreement and the Representative Agreement, as the case may be, will be, duly
authorized, validly issued, fully paid and nonassessable. There are no
preemptive or other rights to subscribe for or to purchase, or any restriction
upon the voting or transfer of, any shares of Common Stock pursuant to the
Company s articles of incorporation, by-laws, other governing documents or any
agreement or other instrument known to such counsel to which the Company is a
party or by which it is bound.
(F) The certificates representing the Securities are
in due and proper form and each of the Warrant Stock and the Representative's
Warrant Stock has been duly authorized and reserved for issuance and when
issued and delivered in accordance with the respective terms of the Warrant
Agreement and Representative s Warrant Agreement, respectively, will duly and
validly issued, fully paid and nonassessable.
(G) To the knowledge of such counsel, there are no
claims, suits or other legal proceedings pending or threatened against the
Company in any court or before or by any governmental body which might
materially affect the business of the Company or the financial condition of
the Company as a whole, except as set forth in or contemplated by the
Prospectus.
(H) Based on oral and/or written advice from the
staff of the Commission, the Registration Statement has become effective and,
to the knowledge of such counsel, no stop order suspending the effectiveness
of the Prospectus is in effect and no proceedings for that purpose are pending
before, or threatened by, federal or by a state securities administrator.
(I) To the knowledge of such counsel, there are no
legal or governmental proceedings, actions, arbitrations, investigations,
inquiries or the like pending or threatened against the Company of a character
required to be disclosed in the Prospectus which have not been so disclosed,
questions the validity of the capital stock of the Company or this Agreement
or the Representative's Warrant Agreement or might adversely affect the
condition, financial or otherwise, or the prospects of the Company or which
could adversely affect the Company's ability to perform any of its obligations
under this Agreement or the Representative's Warrant Agreement.
(J) To such counsel's knowledge, there are no
material agreements, contracts or other documents known to such counsel
required by the
-17-
Act to be described in the Registration Statement and the Prospectus and filed
as exhibits to the Registration Statement other than those described in the
Registration Statement and the Prospectus and filed as exhibits thereto, and
to such counsel's knowledge (A) the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to which the
Company is a party or by which it is bound, including any document to which
the Company is a party or by which it is bound incorporated by reference into
the Prospectus and any supplement or amendment thereto, are accurate in all
material respects and fairly represent the information required to be shown by
Form S-1.
(K) No consent, approval, order or authorization
from any regulatory board, agency or instrumentality having jurisdiction over
the Company, or its properties (other than registration under the Act or
qualification under state or foreign securities law or approval by the NASD)
is required for the valid authorization, issuance, sale and delivery of the
Securities, the Option Securities or the Representative s Warrant.
(L) The statements in the Prospectus under "Risk
Factors-Control by Existing Stockholders," "Management-Limitation of
Liability" "Description of the Securities," and "Shares Eligible For Future
Sale" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters
were discussed, and although they have not certified the accuracy or com-
pleteness of the statements contained in the Registration Statement or the
Prospectus, nothing has come to the attention of such counsel which leads
them to believe that, at the time the Registration Statement became effective
and at all times subsequent thereto up to and on the Closing Date and on any
later date on which Option Shares are to be purchased, the Registration State-
ment and any amendment or supplement, when such documents became effective or
were filed with the Commission (other than the financial statements including
the notes thereto and supporting schedules and other financial and statistical
information derived therefrom, as to which such counsel need express no
comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the Closing Date or any later date on
which the Option Shares are to be purchased, as the case may be, the
Prospectus and any amendment or supplement thereto (other than the financial
statements including the notes thereto and other financial and statistical
information derived therefrom, as to which such counsel need express no
comment) contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Such opinion shall also cover such other matters incident to the
transactions contemplated hereby and the offering Prospectus as you or counsel
to the Underwriter shall reasonably request. In rendering such opinion, to
the extent deemed reasonable by them, such counsel may rely upon certificates
of any officer of the Company or public officials as to matters of fact of
which the maker of such certificate has knowledge.
-18-
(ii) a certificate, signed by the Chief Executive Officer
and the Principal Financial or Accounting Officer of the Company dated the
Closing Date, to the effect that with regard to the Company, each of the
conditions set forth in Section 5(d) have been satisfied.
(iii) a letter, addressed to the Underwriter and in
form and substance satisfactory to the Underwriter in all respects (including
the nonmaterial nature of the changes or decreases, if any, referred to in
clause (D) below), from Coopers & ▇▇▇▇▇▇▇, dated, respectively, as of the
effective date of the Registration Statement and as of the Closing Date, as
the case may be:
(A) Confirming that they are independent public
accountants with respect to the Company and its consolidated subsidiaries, if
any, within the meaning of the Act and the applicable published Rules and
Regulations.
(B) Stating that, in their opinion, the financial
statements, related notes and schedules of the Company and its consolidated
subsidiaries, if any, included in the Registration Statement examined by them
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published Rules and Regulations thereunder.
(C) Stating that, with respect to the period from
December 31, 1996, to a specified date (the "specified date") not earlier than
five (5) business days prior to the date of such letter, they have read the
minutes of meetings of the stockholders and board of directors (and various
committees thereof) of the Company and its consolidated subsidiaries, if any,
for the period from December 31, 1996 through the specified date, and made
inquiries of officers of the Company and its consolidated subsidiaries, if
any, responsible for financial and accounting matters and, especially as to
whether there was any decrease in sales, income before extraordinary items or
net income as compared with the corresponding period in the preceding year; or
any change in the capital stock of the Company or any change in the longterm
debt or any increase in the short-term bank borrowings or any decrease in net
current assets or net assets of the Company or of any of its consolidated
subsidiaries, if any, and further stating that while such procedures and
inquiries do not constitute an examination made in accordance with generally
accepted auditing standards, nothing came to their attention which caused them
to believe that during the period from December 31, 1996, through the
specified date there were any decreases as compared with the corresponding
period in the preceding year in sales, income before extraordinary items or
net income; or any change in the capital stock of the Company or consolidated
subsidiary, if any, or any change in the longterm debt or any increase in the
short-term bank borrowings (other than any increase in short-term bank
borrowings in the ordinary course of business) of the Company or any
consolidated subsidiary, if any, or any decrease in the net current assets or
net assets of the Company or any consolidated subsidiary, if any; and
(D) Stating that they have carried out certain
specified procedures (specifically set forth in such letter or letters) as
specified by the Underwriter (after consultations with Coopers & ▇▇▇▇▇▇▇,
relating to such procedures), not constituting an audit, with respect to
certain tables, statistics and other financial data in the Prospectus
specified by the Underwriter and such financial data not included in the
Prospectus but from which information in the Prospectus is derived, and which
have been obtained from the general accounting records of the Company or
consolidated subsidiaries, if any, or from such accounting records by analysis
or computation, and having compared such financial data with the accounting
records of the Company or the consolidated subsidiaries, if any, stating that
they have found such financial data to agree with the accounting records of
the Company.
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(c) All corporate proceedings and other legal matters relating
to this Agreement, the Prospectus and other related matters shall be
satisfactory to or approved by counsel to the Underwriter and you shall have
received from Krys, Boyle, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, PC, a signed opinion
dated as of each closing date, with respect to the incorporation of the
Company, the validity of the Securities, the form of the Prospectus, (other
than the financial statements together with related notes and other financial
and statistical data contained in the Prospectus or omitted therefrom, as to
which such counsel need express no opinion), the execution of this Agreement
and other related matters as you may reasonably require.
(d) At each closing date, (i) the representations and
warranties
of the Company contained in this Agreement shall be true and correct in all
material respects with the same effect as if made on and as of such closing
date; (ii) 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 in all material respects
conform to the requirements thereof, and neither 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, in light of the circumstances under which they were made, in
order to make the statements therein not misleading; (iii) there shall have
been since the respective dates as of which information is given no material
adverse change in the business, properties or condition (financial or
otherwise), results of operations, capital stock, longterm debt or general
affairs of the Company from that set forth in the Prospectus, except changes
which the Prospectus indicates might occur after the effective date of the
Prospectus, and the Company shall not have incurred any material liabilities
or material obligations, direct or contingent, or entered into any material
transaction, contract or agreement not in the ordinary course of business
other than as referred to in the Prospectus and which would be required to be
set forth in the Prospectus; and (iv) except as set forth in the Prospectus,
no action, suit or proceeding at law or in equity shall be pending or
threatened against the Company which would be required to be set forth in the
Prospectus, and no proceedings shall be pending or threatened against the
Company or any subsidiary before or by any commission, board or administrative
agency in the United States or elsewhere, wherein an unfavorable decision,
ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company.
(e) On the Initial Closing Date, the Company shall have
executed and delivered to the Underwriter, (i) the Representatives' Warrant
Agreement substantially in the form filed as an Exhibit to the Registration
Statement in final form and substance satisfactory to the Underwriter, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(f) On or before the Initial Closing Date, the Securities shall
have been duly approved for listing on the American Stock Exchange, any other
Exchange or on NASDAQ.
(g) On or before the Initial Closing Date, there shall have
been
delivered to the Underwriter all of the Lock-up Agreements required to be
delivered pursuant to Section 3(a)(xxv) and 4(h), in form and substance
satisfactory to the Underwriter and Underwriter's counsel.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case
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may be, is not so fulfilled, the Underwriter may terminate this Agreement or,
if the Underwriter so elects, it may waive any such conditions which have not
been fulfilled or extend the time for their fulfillment.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS. The obligation of the
Company to sell and deliver the Securities is subject to the following:
(a) The provisions regarding the effective date, as described
in
Section 10.
(b) At the Initial Closing Date, no stop order suspending the
effectiveness of the Prospectus shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission or by any state
securities department.
(c) Tender of payment by the Underwriter in accord with Section
2 hereof.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and its employees and each person, if any, who controls you within
the meaning of the Act, against any losses, claims, damages or liabilities,
joint or several (which shall, for any purposes of this Agreement, include,
but not be limited to, all costs of defense and investigation and all
attorneys' fees), to which each 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 the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission made in the
Prospectus, or such amendment or supplement to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, which is in reliance upon and in conformity with written
information furnished by the Company to you specifically for use in the
preparation thereof, and provided further that the indemnity agreement
contained in this subsection (a) shall not inure to the benefit of you with
respect to any person asserting any such loss, claim, damage or liability who
has purchased the Securities which are the subject thereof if you or any
participants failed to send or give a copy of the Prospectus to such person at
or prior to the written confirmation of the sale of such Securities to such
person and except that, with respect to any untrue statement or omission or
any alleged untrue statement or omission, made in any Pre-Effective
Prospectus, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Underwriter ( or to any person controlling any
such underwriter) from whom the person asserting any such loss, claim, damage
or liability purchased the securities concerned to the extent that such untrue
statement or omission, or alleged untrue statement or omission, has been
corrected in a later Pre-Effective Prospectus or in the Final Prospectus
unless the Underwriter circulated a later Pre-Effective Prospectus or the
Final Prospectus to such person
(b) Each Underwriter will indemnify and hold harmless the
Company, each of its directors, each of its officers, each person, if any, who
controls the Company 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 costs of defense and
investigation and all attorneys' fees) to which the Company or any such
director, officer or controlling person may become subject under the Act or
otherwise, insofar as such
-21-
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 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 statement or alleged untrue
statement or omission was made in the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by you specifically for use in the preparation
thereof. This indemnity will be in addition to any liability which any
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 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 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 you or a person who controls you, 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 you or such controlling person and the indemnifying
party and you or such controlling person shall have been advised by such
counsel that there is a conflict of interest which would prevent counsel for
the indemnifying party from representing the indemnifying party and you or
such controlling person (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of you 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 or which are
consolidated into the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys for you and all such 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 indemnified party, which shall not be unreasonably withheld in light of
all factors of importance to such indemnified party.
8. CONTRIBUTION. In order to provide for just and equitable
contribution under the Act in any case in which (i) the indemnifying party
makes a claim for indemnification pursuant to Section 7 hereof but it is
judicially determined (by the entry of a final judgment or decree by a court
of competent
-22-
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 7 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of the Underwriters, then the Company and the
Underwriters in the aggregate 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 costs of
defense and investigation and all attorneys' fees) in either such case (after
contribution from others) in such proportions that the Underwriters are
responsible in the aggregate for that portion of such losses, claims, damages
or liabilities determined by multiplying the total amount of such losses,
claims, damages or liabilities times the difference between the public
offering price and the commission to the Underwriter and dividing the product
thereof by the public offering price, and the Company, if applicable, shall be
responsible for that portion of such losses, claims, damages or liabilities
times the commission to the Underwriters and dividing the product thereof by
the public offering price; provided, however, that the Underwriters shall not
be required to so contribute any amount in excess of the underwriting discount
applicable to the Securities purchased by the Underwriters hereunder if such
allocation is not permitted by applicable law, then the relative fault of the
Company and the Underwriters in connection with the statements or omissions
which resulted in such damages and other relevant equitable considerations
shall also be considered. No person guilty of a fraudulent misrepresentation
(within the meaning of Section 12(2) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The foregoing contribution agreement shall in no way
affect the contribution liabilities of any person having liability under
Section 12 of the Act other than the Company and the Underwriter. As used in
this paragraph, the term "Underwriters" includes any person who controls the
Underwriters 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
any Underwriter and each person who controls any Underwriter shall be entitled
to contribution from the Company, to the full extent permitted by law.
9. EFFECTIVE DATE. This Agreement shall become effective at 10:00
a.m. New York time on the next full business day following the effective date
of the Registration Statement, or at such other time after the effective date
of the Prospectus as you in your discretion shall first commence the public
offering of any of the Securities covered thereby, provided, however, that at
all times the provisions of Sections 7, 8, 9 and 11 shall be effective.
10. TERMINATION.
(a) This Agreement, may be terminated at any time prior to the
Closing Date by you if in your judgment it is impracticable to offer for sale
or to enforce contracts made by you for the sale of the Securities agreed to
be sold hereunder by reason of (i) the Company as a whole having sustained a
material 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 of the Company having been
suspended by a state securities administrator or by the Commission, (iii)
material governmental restrictions having been imposed on trading in
securities generally (not in force and effect on the date hereof) or trading
on the New York Stock Exchange, American Stock Exchange, or in the over-the-
counter market shall have been suspended, (iv) a banking moratorium having
been declared by federal or New York State authorities, (v) an outbreak or
escalation of hostilities or other national or international calamity having
occurred, (vi) the passage by the Congress of the United States or by any
state legislative body, of any act or measure, or the adoption of any orders,
rules or regulations by any governmental body or any
-23-
authoritative accounting institute or board, or any governmental executive,
which is believed likely by you to have a material impact on the business,
financial condition or financial statements of the Company; or (vii) any
material adverse change having occurred, since the respective dates as of
which information is given in the Prospectus, in the condition, financial or
otherwise, of the Company as a whole, whether or not arising in the ordinary
course of business, (viii) ▇▇▇▇▇▇ Names ceases to be employed by the Company
in his present capacity; (ix) the Securities are not listed the American
Stock Exchange or on NASDAQ.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 11 or in
Section 10, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
11. REPRESENTATIONS, WARRANTS AND AGREEMENTS TO SURVIVE DELIVERY.
The
respective indemnities, agreements, representations, warranties and other
statements of the Company (or its officers) and the Underwriter 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 Underwriter, the
Company, or any of their officers or directors and will survive delivery of
and payment for the Securities.
12. NOTICES. All communications hereunder will be in writing and,
except as otherwise expressly provided herein, if sent to you, will be mailed,
delivered or telephoned and confirmed to you at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇, Senior Vice President; to the Company at ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. Names,
President.
13. PARTIES IN INTEREST. This Agreement is made solely for the
benefit of the Underwriter(s), and the Company, and their respective
controlling persons, directors and officers, and their respective successors,
assigns, executors and administrators. No other person shall acquire or have
any right under or by virtue of this Agreement.
14. HEADINGS. The Section headings in this Agreement have been
inserted as a matter of convenience of reference and are not a part of this
Agreement.
15. APPLICABLE LAW. This Agreement shall be governed by and
construed
in accordance with the laws of the State of Connecticut, without giving effect
to conflict of law principles.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
instrument.
If the foregoing correctly sets forth the understanding between the
Company and you, as Representative of the several underwriters, please so
indicate in the space provided below for such purpose, whereupon this letter
and your acceptance shall constitute a binding agreement between us.
Very truly yours,
METEOR INDUSTRIES, INC.
By:______________________________________
(Authorized Officer)
▇▇▇▇▇▇ ▇. Names, President
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Accepted as of the date first above written:
Westport Resources Investment Services, Inc.
As Representative of the several Underwriters
By:_______________________________________
(Authorized Officer)
▇▇▇▇ ▇▇▇▇, Senior Vice President
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EXHIBIT A
SCHEDULE I
UNDERWRITERS
600,000 shares of 600,000
Underwriter Common Stock Redeemable Warrants
----------------------------- ----------------- -------------------
Westport Resources Investment
Services, Inc.
TOTAL